Why, psychologically speaking, has value little to do with price?30th June 2020
Why do brands corner themselves into a high risk price war?
Are they are getting poor advice about what value means?
Value is only tentatively linked to price. It is mostly linked to the psychological appraisal of whether something meets our psychological needs.
Lets say as a customer I have a high need for personal control and a high need to maintain my social status. A bank that says it is going to be smart with my money, challenges both my sense of control (It is the bank’s systems that are in charge of my accounting – not me) and my sense of self worth (I haven’t done anything smart – the bank did). Psychologically speaking that bank has little value for me.
On the other hand a bank that understands I need control as a customer and I want to maintain my social status and ego enables me to achieve those things by giving me the tools and ammunition to ‘do it myself in my own way’. Value achieved.
That is why customers who see no psychological value in a brand price skip between them, constantly flitting between one or the other – creating a volatile customer market.
Value is created by understanding the psychological needs of your target audience. This psychological underpinning of value will also help brands establish loyalty.
Careful, price can be a red herring!