Most business advisors, coaches, consultants and marketing experts will tell you that to run a successful business you must provide value to your customers. Understanding the perception of value and how that impacts on prospects and customers is as important as the value itself. Prospects and customers may perceive value very differently to you, the business owner.
Different people have different value systems and opinions when it comes to judging a product or service, but there is a secret quality that almost always increases your prospect’s perception of value: scarcity.
As businesses we can increase the perceived value of our product or service by tapping into this common human behaviour. When something is believed to be scarce or in limited supply, we tend to want it more and believe it to be more valuable.
Case study: A company is about to introduce a new widget to the market. Their marketing department puts the word out that the company is about to launch a hot new product in a few days. They anticipate the demand and crank up production to make sure there is enough of the product for everyone, and assure the public that if they want their widget, there will be plenty in supply.
In the above example, the company seems to be going along the right path, right? Wrong! In order to create a sense of scarcity and increase the demand for the widget they should be presenting it as a limited supply, in fact, the company should promote the idea that they might not be able to fill the demand. This can often become a self-fulfilling prophecy.
Tip: If you present your product or service as limited, its popularity will increase.
We don’t ever suggest lying to your prospects or customers, honesty should be a value held by every business. However, you should consider that perhaps producing a limited number will not only increase the desire for your widgets, but will also decrease the risk associated with producing large volumes. This needs to be assessed depending on what your product or service is because there may be economies of scale that you need to consider.
It is clear scarcity was a strategy used during the launch of the iPhone that led to people standing in long lines just to be one of the first to get their hands on the product. Some have suggested that Apple hired people to form lines and create a buzz around the product. We can’t be sure if they did hire people, but we know a buzz certainly was created.
The concept of scarcity and value applies to both products and information. When people perceive that information may be hard to come by they consider it to be valuable. Compare the reports that are available freely online to those reports which require a paid subscription. More often than not, people will take the paid reports more seriously than those that are freely available.
Scarcity can be an effective tool for driving sales online or in brochures and catalogues. Products are perceived to be more valuable if they are available only for a limited time or in a limited quantity. Including these messages prominently in the design of your marketing material can dramatically increase your sales, particularly if your product or service is unique. If your competitors sell the exact same product and have them stacked to the roof in the store, you may need to think a little more laterally to get the law of scarcity working for you. Maybe it’s the hands-on advice and your time that is scarce, maybe it’s the way you deliver the product, or maybe it’s what you package the product with. In every situation in business you must be unique to stand out from the crowd. Without this unique point of difference you will compete on price alone.
According to human behaviour, price is directly connected to the perceived value of an object.
If people pay for a product, or believe they should have paid for it, they consider the product as valuable. The same is true of information. If your website requires visitors to pay a membership fee to obtain information, people will consider it valuable. If a consumer invests in information, then the chances they will follow through and read the content and apply it is greatly increased. This can be a great way to start building a business relationship and create customer loyalty.
Getting the price right is important in producing the maximum profit for your business. If the price is too low, the perceived value will be low. If it’s too high, affordability may become an issue. The more expensive a product becomes, the harder it may be for some prospects to acquire. This doesn’t necessarily work against your profitability. Charging higher than your competitors can create a scarcity effect. Not surprisingly, people consciously equate expensive product or services with better quality.
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