Brain Food: The Ties Between Brand Loyalty and Perceived Value

Understanding "value" in a digital economy
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Posted February 2, 2017

Given the fact that today’s shoppers have more choices than ever and move from shopping channel to shopping channel with greater frequency than any other time in the past, you might assume that they are less loyal. While they may be more distracted, appreciate multiple options and want immediate gratification, they are far from lacking loyalty.

Loyalty, however, is not a prerequisite to all customer-brand relationships. Some relationships may be purely transactional, left-brain processes. They don’t require anything except knowledge of the price of products and the expectation that they will serve the function for which they were bought.

Other relationships engender loyalty, where the exchange between buyer and seller becomes a more right-brain, emotional process. In these cases, a relationship develops that transcends utility at a price. Some brands/retailers, and the products they sell, are imbued with more than the ability to get the job done. They have an emotional component in the mind of the customer that goes deep and acts as the cornerstone to the “to-buy-or-not-to-buy” decision-making process.

While “value” is in part determined by financial considerations, it is not the same as price. We tend to see value and price as being synonymous, if not intimately linked, when in fact they are very different things. When we hear the expression “great value,” it is typically assumed to imply low prices, but this is not necessarily the case.

Let’s instead think of “value” as a proportional relationship between the “function” of some product or service – how it satisfies some need or want – and the “cost” (not to be confused with price to the consumer) of the product or service – the sum of all activities it takes to provide it to the customer.

Now consider a “value equation,” where value equals function, divided by cost.

If we drive costs up through product design, manufacturing, shipping and a host of other factors between a product’s inception and its delivery to the customer, without also increasing its function (the things the product does for the consumer), we decrease its value. Increasing costs also likely increases prices, and with no added attributes to the product’s end-use, consumers spend more and receive less.

Now think of the customer-brand relationship in terms of the value equation. For brands to sustain loyalty in their existing customer base, and grow it among new recruits, retailers have to provide value and increase it over time. The key to increasing perceived value is to either reduce the cost and/or increase the function of the product. Sounds relatively simple, right?

Well, the challenge in seeing value, in terms of a relationship between functions provided at some cost, lies in the way we think about “functions.” We can see functions both in terms of their objective utility – what the thing does from a physical point of view (wash clothes in the case of a washing machine or getting you from point A to point B if talking about a new car). You can also consider functions in terms of subjective emotional experiences (how using this product or service makes the customer feel), like feeling refreshed and presentable in clean clothes or feeling safe if buying new, reliable car, versus an old clunker form a used car lot.

When we think of the value equation from the point of view of functions as a subjective emotional experience (how something makes us feel), we tap into a part of customer experience that transcends price.

I buy fruit smoothies because they are refreshing, great tasting and because I believe they are “health in a cup.” Taste is one thing but, making my life healthier (and presumably longer), is something for which I will pay a little extra. My favorite drink does more than quench my thirst with great taste, it portends to give me a new lease on life. This difference in perceived value is not based on how much I pay for it, but rather, all sorts of ideological attributes I associated with it.

If we look at the idea of cost as part of the equation that determines value to the customer, we need to look at it also in terms of the non-tangible “personal costs,” such as emotional commitment and how much effort the customer needs to put into getting a product or service. If the customer is putting out a lot of effort to satisfy a need or want and not deriving more emotional satisfaction, they are likely to perceive a decrease in value.

When most people shop, they determine their loyalties based on expectations of getting added value. This will not, however, continue to come by way of decreasing prices. As customers find their way to the market by way of the Internet, they have choice beyond reckoning and they are the beneficiaries of increasing price pressure in a global marketplace that continues to provide similar products and services for less. In a digitally driven marketplace, price as a differentiator between brands and retailers becomes less of a key driver in maintaining relationships with customers. While perceived value in the form of discounted prices (as a result of keeping cost low) will likely not go away, price will become less relevant as a differentiator between brands and retailers.

So if determining value based on reduced price is less impactful as shoppers have increased choice at better prices at every swipe or click, what drives profound commitment? Empathic relationship, based on emotional bonds, independent of price-point consideration. New merchandising and selling approaches that promote interaction with real and virtual displays that are innovative, not for their looks, but because they change the way to shop a category of products. And powerful, embodied experiences through immersion in brand experiences that engage the senses and the brain in ways that provide novelty through mindful and relevant integration of digital technologies.

Pablo Picasso put the value equation this way: “Value is not intrinsic; it is not in things. It is within us; it is the way which man reacts to the conditions of his environment.”

Perceptions of value are often not a dollars-and-cents thing, but very much part of our non-tangible emotions and a set of beliefs we have about what the product will do for us. When we consider that customers’ perceptions of value often do not reside in the thing they buy, but instead, in their feelings, we begin to shift our thinking to better address customers’ needs and wants.

This aspect of perceived value is very much the providence of the right brain, where consideration of the larger contextual implications of buying one product over another are more profoundly processed. The right brain thinks of a purchase decision in terms of the big picture, how a purchase fits in a larger whole of more subtle relationships between the products we buy and the meanings they hold for us. Whereas, the left-brain will think about what the product does for us (utility), and the right brain will think about what the product means to us (emotion).

David Kepron is Vice President - Global Design Strategies with Marriott International. His focus is on the creation of compelling customer experiences within a unique group of Marriott brands called the “Lifestyle Collection,” including Autograph, Renaissance and Moxy hotels. As a frequently requested speaker to retailers, hoteliers and design professionals nationally and internationally, David shares his expertise on subjects ranging from consumer behaviors and trends, brain science and buying behavior, store design and visual merchandising as well as creativity and innovation. David is also author of “Retail (r)Evolution: Why Creating Right-Brain Stores will Shape the Future of Shopping in a Digitally Driven World,” published by ST Media Group Intl. and available online from ST Books. @davidkepron; www.retail-r-evolution.com.