Inference

So I’ve been thinking about the idea of how our perceived value of things shapes our lives and habits. It all started when my co-founder and I were out getting lunch. Over the course of working on our startup we have tried several places (mostly cheap ones) for food. And we are always looking for a good deal that fits our taste and choice. But after trying so many different ones we have grown tired of pretty much all of them. So inevitably around lunch time we need to answer the question; what should we get for lunch? And most of the time we just delay the question till we are so hungry that it doesn’t matter what we get anymore. But recently we went to this place that gives you one of those little cards with ten squares that they mark off every time you buy something from them. And when you fill up all the squares you get a free lunch. And now we suddenly have a preference when it comes to getting lunch. This place gets a slight advantage when we need to decide where to go.

This got me thinking and so I was trying to figure out why this is so. Now the initial response would be; well they give you a free lunch for every ten purchases which gives it a slightly higher value. But there is more to it; if we could change the price of the lunches so that buying 10 (and getting 1 free) from them would be equivalent to buying 11 from any other place; this place would still get a slight advantage. And that is the idea of the perceived value. The real value of the two cases might be the same but the perceived value is not.

Marketers have been doing this really well over the years [1]. A strong brand can create a greater perceived value. A star using a certain product can create it. A fashion trend can create it as well; nerdy glasses are suddenly all the rage. As people living in society it is hard for us the clearly distinguish between real and perceived value. Marketers use this to their advantage and work on increasing the perceived value rather than the real value of a product or service.

I found that the increase in perceived value can be traced to two factors that matter to our daily lives. If the usage of a product or service aids in self improvement (real or otherwise), its perceived value increases. The “buy 10 lunches get 1 free” is an example of that. It gives me the feeling that it is a better deal and if I’ve just bought my fifth lunch, I am that much closer to bettering myself. The second factor is how well we are doing when compared to our peers as a result of using that product of service. We can see examples of this all around us. And so, many products are considered status symbols as a result of this.

Now if we apply these ideas together we are really able to increase the perceived value of a product. So imagine if I could not only get a free lunch but also if I could see how well I am doing when compared to my friends. You can really tap into this with the help of social media. Great examples of this are the social gaming space [2]. Where we are able to show our friends what games we play, how well we are doing with respect to each other and our achievements in them. The games also do a great job of giving you the feeling that the real cost of playing the game is almost negligible but the perceived value of doing well at it is really high. They also ensure that the perceived value rises as you continue to play the game. We also see examples of perceived value in social networks where we want to show our peers how many friends/followers/fans we have, how many different books we have read, the number of movies we have watched, etc. The social networks are fine tuned to make it really easy to show this off as well. A great example of this are those Foursqare Twitter updates that keep filling up our stream.

With social media we have found a way to bring our everyday lives online and make it far more accessible to people around us (and the world). Now more than ever it is easier to let others know about the great benefits of using a certain product or the high score on your game. It is easier to participate, easier to voice your opinion, easier to show off your unique tastes and hence from a brand’s perspective easier to increase the perceived value of their product or service.

[1] There is a talk about this by Rory Sutherland – Life lessons from an ad man

[2] Jesse Schell on the Facebook games era – DICE 2010: “Design Outside the Box” Presentation