From Roy H. Williams Classic Book The Wizard of Ads

VALUE.” NOW, THERE’S A WORD that defies explanation.

My little dictionary gives a fuzzy definition, then offers several examples of the word in use, such as“What is its market value?”

“Sold it below its value.”

“Got good value for his money.”

What is value?

If your goal as a merchant is to deliver good value, you must first have an understanding of how value is measured and what constitutes good and poor value in the eyes of the customer, right? How, exactly, is value perceived and measured? Having pondered this question for a few decades, I think I’m finally ready to attempt a definition:

Value, in the eyes of the customer, is simply the difference between the anticipated price and the marked price.

If the price anticipated in the customer’s mind is higher than the price marked on the item, the customer perceives it to be a good value: “I would have thought it more expensive!” Yet if the asking price is higher than the anticipated price, the customer perceives the value to be poor: “This is highway robbery!”

The secret, then, is to control the anticipated price. In the past, the merchant’s control of the anticipated price was accomplished by simply “marking it up to mark it down.” In essence, if the goal was to sell an item for $20, he would first mark it $40, then label it “Half Off.” Today’s customer is not so easily duped. Elevation of the anticipated price is readily accomplished byproduct reputation, product presentation, interior lighting, and store decor. People expect things to cost more in prettier stores.

When they cost less than anticipated, the public perceives them to be a good value.We expect food eaten by soft candlelight to cost more than food under harsh electric light. We expect a meal served by a waiter to cost more than the same meal in a cafeteria. But the cost of ingredients is the same at both restaurants. The difference in our perception of value is caused by reputation, presentation, lighting, and decor. Advertising can help build your reputation, but don’t expect your ads to change your presentation, lighting, and decor. You’ve got to do that on your own.!

Chapter 56 Wizard of Ads by: Roy H. Williams

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