Value Trade Offs in the Mind of the Customer

The limiting factor on price is the differential value the customer perceives. By definition, that perception takes place in the customer’s head. Research by Marketing Professor Alexander Chernev of Northwestern University’s Kellogg School of Management and cited in Forbes suggests that focusing the value message more tightly increases the perception of value, at least for the highlighted benefit:

It stands to reason that a product that does two or three useful things is more desirable than a product that does just one, right?

Not necessarily. A study to be published next month in the Journal of Consumer Research found that consumers perceive products that emphasize a single attribute–like, say, a laundry detergent’s “powerful stain removal”–as superior on that attribute to all-in-one alternatives. A product promising both “powerful stain removal” and another attribute, like “protection against fading,” is seen as inferior if priced the same as the specialty product.

Simply put, the customers don’t believe in a free lunch. If you make more promises at the same price, customers believe each promise is less powerful. If you insist that your promises are just as ironclad as a single promise, you may create cognitive dissonance in the mind of the buyer. They just can’t believe the story. If your product does offer multiple benefits, it helps to target messages for those benefits at the customer segments that value them most. Alternatively, the research suggests, you can raise the price of “all-in-one” offerings.

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