Value Creation in Marketing – Material Effort vs Perception
Posted in Marketing & Strategy Articles, Total Reads: 2298
, Published on 26 October 2013
This article is the 3rd Prize Winner in the Article Writing Contest October 2013
I had an interesting experience recently. I met a friend of mine who had just come back from a brief stint in Japan for her company. While traveling in Delhi metro she couldn’t hide her feeling of annoyance and said the train was pathetically slow and journey in Delhi metro amounts to “waste of time”. This took me by surprise as earlier she always seemed to enjoy the metro journey and believed it as efficient and convenient one. So what just changed? As I found out what changed was her perception. Human mind does not have absolute scale to judge value of anything, but human mind can perform comparative measures. So a mere experience of travelling by bullet trains of Japan changed the perception of the value derived by Delhi metro train journey. This shows that values are not absolute rather they are perceived. Since they are perceived it could be created just by playing with the perception of people about a product or service rather than putting material effort to enhance the physical attributes of that product or service.
Below are three beautiful examples which strengthen this belief.
Betty Crocker instant cake mix - The first instant cake mix developed and launched by Betty Crocker foods in 1952 did not sell well, people simply did not seem to like them. The product was very good and process was very easy and time efficient. Just put water in the powder, stir, put it in oven and voila! You have cake. So, what could have been the reason of failure? As it turned out, it was the superior efficiency of the product in terms of convenience that was driving away the perception of making a cake. Housewives were not able to derive the satisfaction and pleasure of creation. Just because not enough effort was involved they couldn’t overcome the feeling of “not able to take ownership of making the cake“. The solution: the company took the egg and milk out of the mix and relaunched the product. So now housewives had to break eggs and put it in mix and measure milk and add it. This process of putting human effort and increased involvement gave housewives the perception of creative contribution. The product became a runaway hit. So what made people like the product was not the increase in the quality of any attribute rather the context (Instant solution to creation) in which it was used.
Diamond shreddies - In marketing the first principle is all value is subjective, which means all value is perceptive. Hence value can be created just by changing the perception. A beautiful example in this regard would be that of diamond shreddies which shows – “Things are not what they are rather things are what we think they are”. Kraft foods came to Ogilvy&Mather in 2008 with a unique request to relaunch their “shreddies” brand of breakfast cereal with the constraint that shreddies customers liked the product as it was. Originally the shreddies were in square shape. Ogilvy didn’t change the product but just changed the visual perception of the product by rotating it by 45 degree. So the old square shape became the new diamond shape and the product was relaunched as “diamond shreddies”. It also got the essence of new and improved product. Research showed that consumers found it tastier, crunchier and more flavored and sales increased by as much as 18% in just one month. This example shows that just by a perceived change in one of the senses (visual here) the whole realty of the product can be changed in consumers’ mind.
IKEA effect - IKEA is a Swedish company which designs and sells semi assembled furniture. If you evaluate the quality of the furniture, it’s not superior to that of the competitors. So, what makes IKEA one of the world’s largest furniture retailers? The answer lies in the concept of “love of labour”. The very fact that these semi assembled furniture come with a complex manual, it takes a lot of time, effort and rework in assembling them. So the process is very painful, annoying and confusing and definitely not enjoying in anyways. But when one finishes assembling it, one starts liking it more than any other furniture. The reason being mere investment of our time and effort creates a perceptual bias. This perceptual bias causes us to assess the value of things (in which our labour is invested) more than what their real value are. Now if we put the concept of material effort forward, the competitors would always have tried to make better product by using superior quality. IKEA on the other hand with better understanding of human psychology made people like the existing product.
As per the Austrian school of economics there is no distinction between subjective value and perceived objective value. Take the case of a restaurant. There is no difference in the values one creates by cooking the food and by sweeping the floor. One creates the food and other creates the context in which the food is enjoyed.
Peter drucker had once famously said innovation and marketing are two ways of adding value. Now people’s belief that innovation means creation of new things (material effort) could be vastly wrong. A better understanding of how people behave, how they choose and how they perceive things could generate as much economic value as technological advancements or material effort.