It's Saturday evening, so you've got a choice to make: do you cook, get takeout, or sit down at a restaurant? Cooking may be the affordable option, but you find yourself calling in a reservation instead.
Every day, consumers choose to pay "extra" over insisting on the cheapest path. Understanding why is the first step towards finding the customers who will invest more towards your offerings.
Consumer expectations around pricing may come from past purchases, online research, the advice of others, or intuition alone. Demand too much and you've priced yourself out; expect too little and call your quality into question.
The more frequent, affordable, or commonplace the purchase, the more reliable someone's pricing assumptions will be. For large, infrequent purchases, unfamiliarity promotes shopping around. But consumers don't look to minimize cost. When comparing three options at three different prices, the middle option is chosen most often, a principle called contextual pricing in Predictably Irrational by Dan Ariely.
Practical utility, derived from features, benefits, and functionality, is only the foundation of value. Convenience, which saves time and effort, follows close behind. These two factors are readily described or quantified, so they become overrepresented in business and marketing.
Emotional utility is not just the realm of lifestyle and recreation. Humor, playfulness, delight, or kindness could all lend additional value and therefore justify higher prices. To borrow the restaurant example again, a smile and a thoughtful gesture from your server could transform an evening out from mundane to worthwhile. It's all too easy to overlook the value of joy.
We also find value in identity. How we spend money demonstrates our personalities or morals, weaving into our life narratives. Impressing our friends is motivation enough, and we even tell stories to ourselves, by ourselves, about ourselves. The same dreamer investing their first paycheck in a handmade guitar may balk at much lower costs for a set of home repair tools.
Because it's subjective, value can take as many forms as there are humans on earth. Sociocultural influence spreads yet more stories about money. How do those families talk about frugality? What do their friends believe about this product or that service? Do these narratives confirm or contrast against our individual personalities?
Demographics are not destiny. Facts and figures may predict group behavior on average, but understanding why fuels trust. People don't calculate price ceilings, they fantasize about their futures-- combining cultural narratives with personal ones to justify their purchasing decisions.
Overreliance on "rational messaging," or selling the practical utility of your product, encourages your audience to shop around. But don't ditch the facts altogether. Instead, blending emotion and reason in your marketing-- while leading with emotion first-- keeps your brand "sticky" and reduces your risk of losing out entirely.
Take advantage of a psychological principle called the halo effect, where viewing part of a subject favorably casts a positive glow across our entire opinion of it. Building on the principle of leading with emotionally-driven stories, if you focus on telling one distinct, memorable story, your audience will favor your entire brand-- more than if faced with a laundry list of benefits, soon forgotten.
Brand is not just about your business, branding encompasses your audience as well. The more relevant and personal your marketing feels to someone, the higher they will perceive the value you provide to them in particular. Customer interviews provide messaging that will resonate with your audience, sometimes down to the word.
The one factor that precedes any purchase decision is trust-- whether that be in a recommendation from a friend, a review found online, or in the company's online presentation. Some brands we would trust with our lives (the Mayo Clinic, perhaps?), while some we wouldn't trust with even a few bucks.
Branding builds trust in your audience, communicating with them that you understand them and want to help solve their problems. Many brands fail because they don't prioritize their customers despite claiming to in their marketing. But if you have true value to back up your message, branding helps justify a premium price by tapping in to the motivations of your audience.
