Tag Archives: marketing

Customer Value : Realities and the Value of Perception

     “We don’t see things as they are. We see them as we are” – Anais Nin

A study by Stanford and Caltech found that increasing the perceived price of a bottle of wine increased the ‘actual’ and perceived enjoyment that tasters derived from drinking the wine: According to researchers at the Stanford Graduate School of Business and the California Institute of Technology, if a person is told he or she is tasting two different wines—and that one costs $5 and the other $45 when they are, in fact, the same wine—the part of the brain that experiences pleasure will become more active when the drinker thinks he or she is enjoying the more expensive vintage…

The researchers recruited 11 male Caltech graduate students who said they liked and occasionally drank red wine. The subjects were told that they would be trying five different Cabernet Sauvignon wines, identified by price, to study the flavor. But in fact, only three wines were used—two were given twice. The first wine was identified by its real bottle price of $5 and by a fake $45 price tag. The second wine was marked with its actual $90 price and by a fictitious $10 tag. The third wine, which was used to distract the participants, was marked with its correct $35 price.

A tasteless water was also given in between wine samples to rinse the subjects’ mouths. The wines were given in random order, and the students were asked to focus on flavor and how much they enjoyed each sample. In the study, the participants said they could actually taste five different wines, even though there were only three, and added that the wines identified as more expensive tasted better. The researchers found that with an increase in the perceived price of a wine that it lead to increased activity in the  mOFC (medial OrbitoFrontal Corte) of the brain, which was due to an associated increase in taste expectation.

The ability of “framing” to impact perceived value is consistent with the signalling function of digital virtual goods… basic point of the study is that there are physiological reasons for peoples perceptions (e.g., high price can be perceived as higher value, whether it true or not)…

  “What is madness? To have erroneous perceptions and to reason correctly from them.” – Voltaire

Part of our job as sales professionals revolves around our ability to understand how customers think. The more we can understand the way customers perceive value, the better we can position our solutions to help them derive the value that they seek. It is important for us to remember that… customers don’t choose one vendor over another accidentally; they choose for specific reasons that they value. Like an investigative reporter, or a detective trying to solve a complex mystery, we (as salespeople) endeavor to understand what causes customers to see the world the way they do.

The better we can understand the way customers think the more influence we can have on what they think about. Customers see the world through their perception and the way they interpret value (e.g., higher price could mean higher value). This creates a perception of the world and everything in it that customers accept as reality. Their perception seems to be the truth to them, and in fact, it is the truth to them. But what we think is truth, and what they (customers) think is truth could be two different realities.

Therefore, when an enterprise enters the marketplace; its business, people, and solutions have unique characteristics (differentiation) that distinguish them from other competitors. But every customer or decision-maker who might be asked to evaluate your enterprise; its business, people, and solutions could see a completely different picture, filtered by his or her own perception…it’s critical that both perceptions (customers & enterprise) are completely aligned with each other or the enterprise will not survive…

  “Often we color perception with other people’s pencils” – Tim Winter

In an article by Steven Bradley he writes: “Why do people buy your products? Why do they purchase any product or service? One thing is for certain, it’s not about the price. It’s a common fallacy that people buy based on price alone. Well some do, but most people buy based on value or rather their perception of value. Many small business owners begin their business life with the thought that they will enter their market and simply offer what they have at a slightly lower price, and all will be good. In truth it’s not the best or even a good idea, instead you should compete on value.

Everything about your enterprise should be about increasing the perceived value of your products and services in the eyes of your potential customers”. People don’t buy on price. They buy on value or more correctly their perceived value in a product of service. People buy brand name foods in the supermarket, because they believe the brand is better in some way and offers a better value. Two people can argue over which of the exact same television set is the better bargain because each perceives the set they are buying offers a better value.

There will always be some other business that can charge less than you can. A better option is to charge what you will and offer more value for that price. Give customers the perception that your products and services are a better value than the competition, and you have a good chance of selling to them. Then, back that up with real value to sustain that perception, and you’ll create loyal customers who buy again, and again….

 “It is one of the commonest of mistakes to consider that the limit of our power of perception is also the limit of all there is to perceive” – C.W. Leadbeater

In the article “More Expensive Placebos Bring More Relief” by Benedict Carey writes: In marketing, as in medicine, perception can be everything. A higher price can create the impression of higher value, just as placebo pill can reduce pain.  Now researchers have combined the two effects. A $2.50 placebo, they have found, works better than one that costs 10 cents.  The finding may explain the popularity of some high-cost drugs over cheaper alternatives, the authors conclude. It may also help account for patients’ reports that generic drugs are less effective than brand-name ones, though their active ingredients are identical.

The research was published in The Journal of the American Medical Association. The investigators had 82 men and women rate the pain caused by electric shocks applied to their wrist, before and after taking a pill. Half the participants had read that the pill, described as a newly approved prescription pain reliever, was regularly priced at $2.50 per dose.

The other half read that it had been discounted to 10 cents. In fact, both were dummy pills. The pills had a strong placebo effect in both groups. But 85 percent of those using the expensive pills reported significant pain relief, compared with 61 percent on the cheaper pills. The investigators corrected for each person’s individual level of pain tolerance.

“It’s a great finding,” said Guy H. Montgomery, an associate professor of cancer prevention at the Mount Sinai School of Medicine who was not involved in the research. “Their manipulation of price affected expectancies of drug benefit, and pain is the ultimate mind-body phenomenon.” Previous studies have shown that pill size and color also affect people’s perceptions of effectiveness. In one, people rated black and red capsules as “strongest” and white ones as “weakest.”

Other information like the country where the drugs were manufactured can also affect perceptions. “It’s all about expectations,” said the lead researcher, Dan Ariely, a behavioral economist at Duke and the author of a new book, “Predictably Irrational: The Hidden Forces That Shape Our Decisions” (HarperCollins). His co-authors on the report were Rebecca Waber, Baba Shiv and Ziv Carmon. “When you’re expecting pain relief, you’re secreting your own opioids,” Dr. Ariely added. “And when you get it on discount, you doubt it, and your body doesn’t react as well.

 “Don’t try to give your customers the best price; give them the best customer value for the price.” – “But only as the customer perceives value & price; not as you perceive value & price.”

Social Media: What is the ROI?

Social media measurement is one of those topics about which everyone has an opinion, but nobody agrees on the solution. The question about how to measure the return on investment (ROI) for social media participation, as definitive, statistic-based metrics seem to be the primary way communicators feel they can secure approval and budget for these programs from their management teams.

 The ROI (return on investment) is how much profit or cost saving is realized, for a given use of money in an enterprise,. An ROI calculation is sometimes used along with other approaches to develop a business case for a given proposal. The overall ROI for an enterprise is sometimes used as a way to grade how well a company is managed.

Return on investment (ROI) measures how effectively a business uses its capital to generate profit; the higher the ROI, the better. ROI is arguably the most popular metric to use when comparing the attractiveness of one investment to another.

Since “Social Media & ROI” is a topic of much discussion it should be interesting to read a few expert commentaries:


Aaron Uhrmacher, a Social Media Consultant, writes: “If you’re waiting for someone to provide that magic bean, then put away your watering can. It ain’t gonna happen. That’s one of the reasons why I tend to think that social media (by which I mean actual conversations and relationship building exercises, not widgets and Facebook) is more aligned with the goals of a PR program than it is with marketing.

In the absence of any accepted metrics, businesses still need to be able to determine whether or not a social media program is moving the needle, moving product or otherwise making an impact. This largely depends on the company’s social media objectives. Because these dramatically differ based on the organization, it’s impossible to agree upon standards. That doesn’t mean we can’t measure ROI at the company level, regardless of how your company chooses to measure engagement, is that you have a success metric in mind before you begin. Without some sort of benchmark, it’s impossible to determine your ROI.”


“The Rocket Blog” writes: “It’s all about the relationships, baby! When we are trying to convince people to do social media, the first question they will ask is, “What is the Return on Investment? As in dollars?” Well that is pretty difficult to measure.  “The problem with trying to determine ROI for social media is you are trying to put numeric quantities around human interactions and conversations, which are not quantifiable,” says Jason Falls from Social Media Explorer.

In social media it is much easier to measure how many people are following you, linking to you and befriending you. The companies that are well known for successful Social Media Marketing (SMM) campaigns will be the first to tell you there is value in SMM but it’s not always measured in dollars. The value is in the relationships that you create with your customers and community”.  

Augustine Fou writes:  “A year and half ago I wrote the column, “The ROI of Social Media Is Zero”. Today, I assert that the ROI of social media is still zero. Let me explain. A September 2010 survey by ‘Econsultancy’ found nearly half the respondents said they were not able to measure the return on investment of social media activities or even compare it to the return of other marketing activities. This comes on the heels of another study in April 2010 by ‘R2 Integrated’ which showed that the biggest obstacle to using social media is the respondents’ belief that there is not enough data or analytics with which to calculate a return.

Let me introduce a way to think about social media investment which may help to align spending and actions – “social media total value of ownership.” Just like companies shifted to thinking about the total cost of ownership versus the one-time cost of capital purchases (e.g., computer hardware), companies should think of the longer-term “total value of ownership” for social media.

So, if companies start to think of the “social media total value of ownership” or the “lifetime value of social media” they would allocate spending as if it were a longer-term investment to create assets which produce value over time. The short-term, campaign-based ROI of social media will likely still be zero, as the payoff comes in other forms and accrues to the advertiser over time”.


Joe Chernov, Director of Content for Eloqua, a marketing automation software provider, writes “When it comes to social media, tracking ROI may be fool’s gold. A distraction. A red herring. A trap. It’s something your CMO might demand, but chasing it could be your undoing. Why? Two reasons.

First, social content spreads only when it’s “set free.” A form – even a short one – is the fastest way to “cure” content of its virility. Influencers won’t spread even the most share-worthy materials if their followers are required to self-identify before viewing. To them, gates (and the marketers who install them) tear the very fabric of the social Web.

Avoid the ROI trap by looking instead at leading indicators. Ask what behavior is consistent with your best customers? (Do they view your online demos? Maybe they register for your webinars? Are there pages on your website that they visit disproportionately?) Map the lifts in desirable prospect behavior to corresponding spikes in social media activities. Successful social marketing should correlate to purchase-ready indicators.

The second trap is that blind pursuit of ROI is likely to tempt you into applying a campaign model to your social media efforts. As marketing superstar Paul Dunay of Avaya cautioned, “social media is not a campaign, it’s a commitment.”  To reduce relationship-building to one-off promotions is to reduce a friendship to a single interaction. It just doesn’t work that way.

Of course, it is certainly possible to run a social media campaign designed to accomplish a single objective. Depending on the objective, it may even be relatively easy to assign ROI to the program. But don’t confuse a discrete project with a fully integrated program. Integrating social media across marketing, sales, public relations, events, support and recruiting should be your ultimate goal. Not figuring out how many sales a Facebook contest might have triggered.

When put in that context, it is not only daunting to measure the true financial impact of social marketing … it’s also limiting. A more appropriate comparison would be a lighthouse. How many ships reached port safely thanks to the presence of a lighthouse? The answer, while impossible to quantify, is self-evident”.


Denis Pombriant, Managing Principal of the Beagle Research Group, a CRM market research firm, and he writes “We’ve been in the “Gee, isn’t this cool technology?” phase for a while now with social CRM, and perhaps that time has been extended by the recession. Fewer companies are willing to take on something that has little track record when the name of the game is revenue. It has to be able to show an ROI. Massive collaboration leads to unique intellectual property.

Sometimes I feel like we’re “Stuck in the Weeds” with social CRM. I know, there are plenty of examples of analyses that say what a wonderful job social media does in connecting everyone or improving the customer experience, but the discussion tends to stop there. If it went on — which, I admit, it sometimes does — it would talk about the wonderful reasons for caring to connect everyone, namely the opportunity for mass collaboration.

Even more important than figuring this out — I am sure you already did, I am just slow — is that for social CRM to be an important attribute leading us out of the recession, it has to be able to show an ROI, and I think this is how you do it. Massive collaboration leads to unique intellectual property. What could be better?


Dan Robles, Director of The Ingenesist Project, a private think tank in Seattle, writes: “The quick answer is that ROI is indeterminable – get over it. ROI is a static measurement where financial decision makers look into the Crystal Ball to project a future economic outcome which is then be protracted back into the present to arrive at a value of an investment opportunity.  In case you have not noticed, this valuation method is largely bankrupt.

Fortunately, the true visionaries of the next economic paradigm are increasing in numbers and rapidly moving away from the ROI model into something far more valuable simply by asking the serious questions…… David Bullock and Jay Deragon from the ‘Social Media Connection Network’ are investigating the currency of social media where they astutely ask the tough questions, “What are people trading?” and “what is a Tweet worth?” While these may seem like simple questions, they have many an ROI expert stumped. The value of social media is counted in “options” – not ROI. 

ROI is a future projection brought to the present.  “Options” are collected in the present and projected to the future – there is a fundamental difference between the two that must not be overlooked.  People are doing something, they have a plan, they are cooking up a new trick and the ROI is indeterminable…

“Options” have value and obviously people are willing to pay for them with their time at a keyboard, therefore, they are willing to pay for them through any medium of exchange.  This is what people are doing on social media – collecting “options”. The Next Economic Paradigm will provide a means to cash in those “options”. Hold on to your chips, the social media game is far from over”.


 “What’s the ROI of Social Media?” by Steve Woodruff writes: “I hear that question all the time, and it drives me crazy. What’s the ROI of your cell phone? What’s the ROI of using a computer? What’s the ROI of breathing?

At one point, it was legitimate to think about the ROI of, say, a cell phone. But no more. It’s simply an assumed part of doing business, and living. You might think about the return on a specific model or plan, but you don’t wonder any more if you should use a cell phone or a smartphone. It’s about as much a question mark as getting dressed in the morning.

That’s why it’s silly to ask, “What’s the ROI of Social Media?” Instead, we should ask, “what’s the potential ROI of this or that specific social media tactic or campaign?” Because you don’t measure the ROI of an assumed cost of doing business. You don’t ask for the ROI of a medium. You determine if that medium/channel/approach is going to be a viable and potentially profitable place to be. Then you create a strategy. Then you look at the harder metrics of ROI over time on a tactical level, while also seeking to measure “softer” and, when possible, harder $$ returns on the use of that medium over the long haul.

Social Media/Networked Communications are a fact of life. And, there are some things we do because we know that, in the long run, they make business better. What’s the ROI of honesty and transparency? Don’t look for some short-term dollar figure – look at the long-term reputation value. What’s the ROI of getting closer to your customers, of improving communications, of putting a human face on your business, of being part of the marketplace dialogue, of creating strategic serendipity? What’s the ROI of creating opportunities through people-connections? When something is the right thing to do, you do it, knowing that in the long-term, it’s good for business.

That’s why we should instantly dismiss the question, “What’s the ROI of Social Media?” It’s exactly the wrong question. Should companies be involved in networked communications? In every way that makes sense, yes – because it’s smart, it’s right, it’s where the people are. Now – what specific strategies are best, and what measurable tactics should be employed? That’s when we move into ROI territory. Then again, you can always take comfort in the return on doing nothing…”

Competitive Differentiation: Why its Important?

Buying is an exercise in decision-making. Some buying decisions are made impulsively and almost unconsciously; others are made after long and careful consideration. But all decisions, that is, all logical decisions; are ultimately the end result of a mental selection process by which the buyer converges on a “best” option…

Buyers can perform that selection process in two ways: They can make the selection at random, by throwing dice, drawing straws, or just guessing. Or they can make the selection by differentiating; by acting on a perceived distinction between the available options.

Of these two ways of deciding, differentiation is by far the more “natural” because the more rational process to sort and select one product or service from another. Nobody (well almost nobody) makes a decision, especially a potentially costly buying decision, by random choice unless there is no distinguishable difference between the options.

Think back to the last major purchase you made yourself; your car, an insurance policy, your house. Think about how you came to buy the product or service and the decision-making process that you went through. If you’re like most informed buyers, you did some comparison shopping and researched the options seeking out the distinctive feature or capabilities so that you would make a wise decision. This is typical of intelligent buying.

Now as a sales person you should recognize that this is the exact same process that customers will use to make their buying decisions. In a competitive situation it’s critical that you assist the customer to understand the distinctions between the available options in order to make a decision: This is “differentiation”.  In an article by Dena Waggoner and revised by R. Anthony Inman, they outlined the following:

PRODUCT DIFFERENTIATION: Product differentiation is achieved by offering a valued variation of the physical product. The ability to differentiate a product varies greatly along a continuum depending on the specific product. There are some products that do not lend themselves to much differentiation, on the other hand, many (most) can be highly differentiated. In Principles of Marketing (1999), authors Gary Armstrong and Philip Kotler note that differentiation can occur by manipulating many characteristics, including features, performance, style, design, consistency, durability, reliability, or reparability.

SERVICE DIFFERENTIATION: Companies can also differentiate the services that accompany the physical product. Two companies can offer a similar physical product, but the company that offers additional services can charge a premium for the product. A company may offer products that are very similar to those offered by many other companies; but these products are usually accompanied with an informational, instructional training session provided by the consultant. This additional service allows the company to charge more for their product than if they sold the product through more traditional channels.

PEOPLE DIFFERENTIATION: Hiring and training better people than the competitor can become an immeasurable competitive advantage for a company. A company’s employees are often overlooked, but should be given careful consideration. This human resource-based advantage is difficult for a competitor to imitate because the source of the advantage may not be very apparent to an outsider.

As a Money magazine article reported, Herb Kelleher, CEO of Southwest Airlines, explains that the culture, attitudes, beliefs, and actions of his employees constitute his strongest competitive advantage: “The intangibles are more important than the tangibles because you can always imitate the tangibles; you can buy the airplane, you can rent the ticket counter space. But the hardest thing for someone to emulate is the spirit of your people.”

People differentiation is important when customers deal directly with employees. Employees are the frontline defense against waning customer satisfaction. Other companies can differentiate itself by having a recognizable person at the top of the company. A recognizable CEO can make a company stand out. Some CEOs are such charismatic public figures that to the customer, the CEO is the company. If the CEO is considered reputable and is well-liked, it speaks very well for the company, and customers pay attention. National media coverage of CEOs has increased tremendously, jumping 21 percent between 1992 and 1997 (Gaines-Ross).

IMAGE DIFFERENTIATION: Armstrong and Kotler pointed out in Principles of Marketing that when competing products or services are similar, buyers may perceive a difference based on company or brand image. Thus companies should work to establish images that differentiate them from competitors. A favorable brand image takes a significant amount of time to build. Unfortunately, one negative impression can kill the image practically overnight.

QUALITY DIFFERENTIATION: Quality is the idea that something is reliable in the sense that it does the job it is designed to do. When considering competitive advantage, one cannot just view quality as it relates to the product. The quality of the material going into the product and the quality of production operations should also be scrutinized. Materials quality is very important. The manufacturer that can get the best material at a given price will widen the gap between perceived quality and cost. Greater quality materials decrease the number of returns, reworks, and repairs necessary. Quality labor also reduces the costs associated with these three expenses.

INNOVATION DIFFERENTIATION: When people think of innovation, they usually have a narrow view that encompasses only product innovation. Product innovation is very important to remain competitive, but just as important is process innovation. Process innovation is anything new or novel about the way a company operates. Process innovations are important because they often reduce costs, and it may take competitors a significant amount of time to discover and imitate them.

Some process innovations can completely revolutionize the way a product is produced. When the assembly line was first gaining popularity in the early twentieth century, it was an innovation that significantly reduced costs. The first companies to use this innovation had a competitive advantage over the companies that were slow or reluctant to change.

SUSTAINABLE COMPETITIVE ADVANTAGE: The achievement of competitive advantage is not always permanent or even long lasting. Once a firm establishes itself in an area of advantage, other firms will follow suit in an effort to capitalize on their similarities. A firm is said to have a “sustainable” competitive advantage when its competitors are unable to duplicate the benefits of the firm’s strategy. In order for a firm to attain a “sustainable” competitive advantage, its generic strategy must be grounded in an attribute that meets four criteria. It must be:

  • Valuable—it is of value to customers.
  • Rare—it is not commonplace or easily obtained.
  • Inimitable—it cannot be easily imitated or copied by competitors.
  • Non-substitutable—customers cannot or will not substitute another product or attribute for the one providing the firm with competitive advantage.

SELECTING A COMPETITIVE ADVANTAGE: A company may be lucky enough to identify several potential competitive advantages, and it must be able to determine which are worth pursuing. Not all differentiation is important. Some differences are too subtle, too easily mimicked by competitors, and many are too expensive. A company must be sure the customer wants, understands, and appreciates the difference offered.  A competitive advantage can make or break a firm, so it is crucial that all managers are familiar with competitive advantages and how to create, maintain, and benefit from them.