Do You Really Get What You Pay For?

“Here’s a good one. It has a pool, tennis court and the room looks nice.” He said to his wife as he was searching for the ideal holiday getaway.room

pool-area

“You call that a pool?! And that room looks dingy.” She responded, as she was looking at other options. “What about this one? It looks like it has a nice room, it’s near the lake and almost the same price.”

nice roomLake

“What amenities does it have? Are we just paying for the room? There’s no pool, no tennis court, just a fancy room. I’m not paying that price just for a room.”


This was the conversation I had recently when my husband and I were looking for a place to stay for our weekend getaway in Bright. His value for our money was about multiple facilities especially a tennis court, while mine was more about a really nice room.

Value can be defined as the perceived benefits compared with the perceived costs (Iacobucci 2012). However, it is not as simple as that. Value lies in the customer’s mind. What is value for me is not necessarily value for my husband. We all weigh up the perceived benefits against the perceived costs differently. When the perceived benefit equals the perceived cost, customers perceive they receive ‘fair value’. Look at the following value map:

Value Map

For businesses, when you understand where your customers’ perceived value (both negative and positive) lies, you can then work on improving these experiences. Ideally, you want to be on or below the line.  This is where perceived cost and perceived benefit are at their highest. If the hotel is prepared to provide more value for money than their competitors, then this will likely increase their market share.

But, any share gains may just be short-lived. Competitors positioned on the value line are confronted with a vital decision. Do they allow this business to take market share or do they respond with a more competitive offering (pricing or benefit changes) that protects their market position?

What would you do?

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10 thoughts on “Do You Really Get What You Pay For?

  1. Hi mccrawfo2015
    Really interesting.
    “Most people would probably spend $200 on a pair of jeans if they knew they were getting better quality,” I notes that people are more than happy to spend that kind of money on a pair of shoes, yet balk at the idea of spending it on a pair of jeans, even if the jeans might be of a higher quality and last longer

    Ultimately, the smart consumer is looking for things like thread counts, quality of materials and how much detail.

    At the end of the day, however, the best thing to do is just try items on. Just like sitting in a car.
    Me says that you can begin to instantly get a feel about whether you’re paying for quality or name.

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  2. Hi. Really interesting blog.
    Even when you said the value is perceived in different ways by consumers, I would say there are certain elements that are a must in order to evaluate which product buy or not to buy.
    For instance, when you are thinking in the room and your husband is more thinking about a courtyard or a pool, I would say both are looking for a space that simply offers quality, availability, reliability and support. Of course there are many other variable that would be added but, just after considering if the products or services have the ´basic´ included.

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    • To understand the value map in my post, you need to remember Maslow’s hierarchy of needs. As mentioned in our text book (Iacobucci 2012), “consumer’s purchase products to fulfill their needs”, for example, if the purchaser is a person who cares about price (like my husband) they will make purchase decisions using value as the motivator, whereas for me, my needs were more around comfort and my perceived “nice looking room”, so price was not my primary motivator. So what is a must for me, is not a must for him. We both evaluate the product based on our needs, which leads to our “perceived” value for money.

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  3. I my opinion, it comes down to understanding your market and STP. There is not right or wrong to this but mere strategy. A product or service can cater to different segments of the market. Some consumers may enjoy budget accommodation and not expect too much (provided the advertising is not deceitful), some consumers may expect more and others a lot for the money they spend. Perceived value vs benefits is subjective and understanding STP strategy can assists in targeting the most likely consumer. It is important for businesses to consider long term sustainability, which produces customer satisfaction and loyalty, and finally, capable of producing long term profits.

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    • You are right when you say “A product or service can cater to different segments of the market. Some consumers may enjoy budget accommodation and not expect too much (provided the advertising is not deceitful), some consumers may expect more and others a lot for the money they spend.” Where perceived cost and perceived benefit are at their highest, you have luxury hotels like the Ritz Carlton. At the other end of the scale are backpacker providers.

      It all comes down to the consumers motivations/needs that leads to their perceived value for money.

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  4. Do You Really Get What You Pay For? <- this is 100% true. What are you looking for when you buy products? E.g. air fares: Jetstar vs Singapore Air. Do you prefer to get a cheap ticket with a very minimal services just to get you into the destination you want (Jetstar: there are many add-ons if you want to enjoy meal, get extra baggage allowance, in-flight entertainment, etc which at the end will be the same price with premium flight fares) or you are willing to pay much more to get the best service you can get during your flying experience? How much you will pay is pretty much what you will get.

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  5. Interesting piece. Whilst there is no one size fits all when it comes to positioning, I believe that innovation can play a key role in differentiating between one product or service versus another. This is especially true in the current competitive and global operating environment. For example, having a unique selling proposition can give both consumers a reason to pay a premium for a product or service, and further to this can deliver enhanced consumer interest and additional margin to the bottom line.

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  6. Hi,

    Thank you for this interesting blog! I like your value map very much.

    ‘Do you really get what you pay for?’ The answer would be ‘it depends on the customer’s perceived value for the purchase.’ Customers are not always aware of the true cost of the products or services they pay. Different people have different attitudes, perceptions and values, etc. Customers think how much the products or services worth in their mind. For example, both customer A and B are planning to buy a new pair of shoes in a famous shoes store. Customer A thinks the shoes are too expensive and he/she is not willing to pay that much money for the brand. Buy customer B thinks the brand means high quality and luxury, and the shoes worth that price. The cost of production for the shoes maybe not much, while customer B’s perceived value of the product is far greater. Therefore, marketers should use STP strategies to create a high perceived value for their products or services and position their brand in customers’ mind.

    Cheers,
    Ivy

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  7. A very important aspect for marketers what wants to understand the consumer psychology and look at things from a consumer’s perspective.
    Perceived cost & value will vary from person to person based on their culture, age, social status, family background, gender, profession, ego, past experience, etc. In certain cases, it can even change depending on the stage you are going through in the purchase cycle/process. How many times we hear people saying “I thought it was real value for money, but now I think I paid bit too much” or “I never thought I will get such good value for what I paid”

    Some businesses score a good value in the pre-purchase or purchase phase by pitching their product/ service in such a way that it will be on or below the line in your value map, but they fail to keep the same position in the post-purchase experience. For some it happens the opposite way. This depends on the market they, how best they market their products and the psychology of the consumer, etc.

    A very personal example I can think of is my Car (Renault), I have never used a Renault before and neither had I seen many on the Australian roads nor got any recommendations from others. I purely bought it because it came with heaps of options packed for a very reasonable price in the medium sized sedan category. Whether that car is actually worth that price, I don’t know. What I know is that I felt it’s worth for that price. But my driving experience has been really good so far and I am more than satisfied with my choice. So my perceived value/cost was on the line, but now it had gone below the line where the value has gone up with my experience with that brand/product.

    But someone else will look at it in a different angle and the outcome could be totally different. This is where understanding your market segments, targeting the selected population and positioning your product(s) in such a way that it falls on or below the line in the value map of the majority of your targets becomes important and very challenging. Also it is very important that you maintain the same value proposition or try to exceed it by making it a pleasant purchase & post purchase experience, in which the satisfied customer will become an unofficial ambassador.

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  8. “Value lies in the customer’s mind” – yes, and it depends on their mood, recent experiences and current bank account balance, too!
    Even your own personal value map can change from day to day.

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