I wanted to write a longer post that explores the idea of "Actual Value" vs "Perceived Value" as introduced in this Knowledge Project podcast with Rory Sutherland. I think this is a great axis to divide brand value and equity into two core areas. Most brand strategies would adopt aspects of both. However, a definitive call on which type of value you want your consumer to recognise would aid marketers in delivering clear and simple messages.
Actual Value holds a product centric focus. Potential customers examine the utility, design and inherent characteristics of the item itself. It naturally follows that in strategic terms, companies should aim to build the best products possible. The product itself will gain customers and support by being the best in the market. Sutherland in the Knowledge Project podcast refers to this as the "Engineer's Mind-set" and it is one that was a driving mantra in the early days of Silicon Valley that massively emphasised the importance of engineering while discounting the importance of sales and marketing in building a successful tech company. (This philosophy has declined in popularity in recent years). It is viewed as more honest and authentic than "perceived value" marketing.
In recent years, a lot of marketing messaging has shifted from the mouth of the marketer to the consumer. From my own experience, consumer reviews of products are now part of the norm before I'm willing to purchase. Review sites help us determine the actual value of services like restaurants and hotels, products, and even jobs by trusting the opinions of a mass of users rather than relying on the singular message of one marketer through an advertisement or other means. In addition, word-of-mouth works really well for "Actual Value" marketed products. People are more likely to recommend products that they highly rate.
Tesla CEO, Elon Musk, is a great example of Actual Value marketing. He does not spend any money on advertising Tesla cars to the public. Instead he claims that all of this budget is instead ploughed into the design and engineering of the cars (the product) to make the very best car possible. You could probably argue that Elon Musk gets enough free publicity on his own to promote his products without any need to buy more. However, it is a clever strategy that works well. Aiming to be the very best or own the market is a strategy that increasingly works in the modern world.
Personally, I think for products like cars, this is the best strategy. This strategy was used by Volkswagen in the 1960s to break into the US market and by Honda in the 1990s - promising the highest quality vehicle possible. It is generally very effective where the value is tangible and easy to measure.
However, Perceived Value is also a highly effective strategy for building brands. This is a marketer's real bread and butter and Perceived Value marketing is where we are often likely to cite marketing genius where creativity and intellect can transfer huge meaning into a product. For products and services marketed this way, it is not usually the attributes of the product itself that is the focus of the message. Instead, they will link themselves to bigger, often more abstract things that moves the attention away from the product itself. Behavioural psychology is deployed to condition our brains, in a similar manner to Pavlov and his dog. We are conditioned to associate the characteristics of the things we feel emotional towards (love, admiration) with the products being advertised. This has been an incredibly effective method of advertising.
Luxury brands are a great example of this. Clothing brands such as Gucci and Prada sell very fashionable and good quality clothing. However, the primary reasons we buy items such as these are for the story they tell. By wearing a pair of Gucci loafers you are sending a message about what type of person you want to be. This works as everyone associates Gucci with quality and luxury so you are in affect associating yourself with the qualities that Gucci does. This idea of conspicuous consumption is very interesting in its own right, and is worthy of a separate post in itself.
Many of these brands act as props and cues for a certain lifestyle which brings a central appeal. The value and status comes outside of the product itself. In America, lifestyle brands can be attached to different parts of the country. People enjoy the idea of a beach and surfing lifestyle and Corona beer has paid a lot of money to ensure they are strongly associated with that lifestyle. The outdoors lifestyle is another popular consumer value which brands such as Patagonia have become the face of.
History is another characteristic that can add a lot of perceived value to a brand. Consumer are often attracted to brands with a great story behind them. I have worked with alcohol brands such as Cuervo and Bushmills that share rich histories that people enjoy learning about. In these instances, experiential marketing can play a massive role with distillery tours and tastings bringing these stories to life for consumers and building strong affiliations.
Building a strong sense of community is also a great way to build tons of perceived value. Brands such as Tough Mudder have a strong group of patrons who believe in the product and do the marketing for Tough Mudder. These groups often have a cult-like status with people holding strong beliefs that are usually not in line with convention.
Demand Generation is employed by engaging tactics such as reducing supply and limiting access which can drive up the perceived value of certain products. Supreme famously limit the number of people in their store. Franklin BBQ in Texas makes people wait up to 4 hours in line to receive their food. These lines are now part of the experience of these products, they make it more challenging to receive the food which in turn drives up its perceived value and creates a story around the brand.
Both of these strategies where executed well can be very effective. For the future, I believe that Actual Value marketing will triumph over Perceived Value marketing.
First, as identified above, technology has transferred the messaging power away from the marketer and towards the consumer. It is hard to see how perceived value marketing continues to work in a world of infinite options where the loudspeaker is no longer in the hands of the marketer. The consumer rates and reviews all products and if they do not meet the reasonable expectations or are sub-par, they are going to fall down into irrelevance. Our viewing habits have adapted to skip the advertisements we used to sit through. Ad blockers can be installed on devices to block out messaging this way. Technology seems to be adapting in a way that is diminishing the power of advertising rather than enhancing it.
Secondly, I think we as consumers are becoming more cynical and wary of the intentions of advertisers. This recent study ranked advertising executives as the least trusted profession in Britain whereas "makers" such as engineers scored amongst the highest. People are increasingly coy to the messaging of advertisers over the valued opinions of peers. This makes perceived value marketing a more challenging strategy to execute on.
Finally, for millennials in particular, I would predict a large drop in numerous luxury brands as illustrated above. I think millennials value authenticity and realness as the number 1 predictor of trust for brands. Experiences are also valued more than goods. It is harder to convenience a young person today that a designer item is worth the cost.
Many of the current trends suggest that things are going to become harder for perceived valued marketers in the future with the gains going to marketers who are dedicated to building the best products that delight their fanbase.