Perceived Value

It wasn’t me who uttered those words. Went to a Western food diner yesterday in my residential area, which was situated on the 2nd storey of a small shoplot. A co-owner came to sit with us and when asked about his business he lamented, “I have unreasonable and stupid customers!”

“Some of our customers very cheapskate. They want cheap prices but never think our overhead so high - how can? They are willing to pay RM50 for frozen fish downtown, but not for the fresh fish we serve here - so stupid!”

That statement reminded me of how Creative’s Sim Wong Hoo tried to position his Zen MP3 players to compete against Apple’s iPods, i.e. by having a “longer battery life”. Of course he failed eventually.

What is the lesson here?

Customers don’t always pay attention to the “true value” of a product or service. They are willing to pay a premium based on the “perceived value”, and that’s why the Zen player would still lose to an iconic brand like Apple even if it packed in 10x more battery life. Otherwise, why would women pay 1,000x more for a Louis Vuitton handbag compared to a brandless one at the night market? I mean, how complex can a handbag be?

Interestingly, I tried explaining to the owner but he still insisted that “the customers were stupid and they don’t know how to eat good fish”. Guess there’s no point in trying to change the mind of a businessman who doesn’t adhere to the other important business principle - the customer is always right. :)