The power of perceived value

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By now, most of you probably know I am a bit of an audio nut. I hold a master’s in music technology and spent years studying the effects of instore music on consumer behavior. Interestingly, many things that are happening in the music and audio world are great representations of bigger marketing principles. Take Tidal versus Spotify, which I wrote about a while ago. Another important marketing principle we can address via the audio world, is perceived value. So please don’t mind me writing about audio again. It’s about the underlying principle here! Really!

There are many ways to judge a commodity’s value. You might calculate how much something costs to make, or what it’s market price is. Or you could look at non-monetary value in several ways. From a marketing standpoint, it is extremely interesting to talk about the perceived value of a product though. Something might be worth €10,- in parts, but if people are willing to spend €200,- on it, clearly their perception of its value is much higher than its intrinsic value is.

The audio world serves up a perfect example of high perceived value; Beats by Dre. Only a few years ago, only audiophiles spent more than, say, €100,- on a pair of headphones. These days every self respecting sixteen year old has a €300,- pair of headphones around their neck. They must be some serious hifi aficionados by now! Well, they aren’t. In truth, most of them don’t have a clue about sound quality. And they don’t care!

Beats by Dre have done two things right. First, they decided they were going to spend big on advertising. No audio company has ever put in such budgets before them. Every major artist and athlete would be equipped with a custom pair of Beats by Dre and put on a red carpet somewhere. And as the name implies, the whole thing was endorsed by legendary hiphop producer Dr. Dre. Before you knew it, Beats by Dre was more of a fashion statement being worn around the neck, than an audio tool on the ears.

The other thing Beats got right, was to create value where it matters to the target audience. These kids don’t care about the last word in sonic detail and sound stage width. Serve up some hyped bass and most will be under the impression that they are listening to high end audio gear. And the headphones need to look cool. Funky colors and packaging that is more luxurious than a Qatari hotel.

The end result is a product that isn’t too good at its core business (delivering music), but still has a massive perceived value. Most €50,- headphones sound significantly better than a €300,- pair of BbD’s, but still they had a market share of over 60% of the high end headphone business at the height of their reign. Now that’s some skillful marketing for you!

To some extend, Bose is running a similar game, although they do have an image of high end audio quality experts. Funnily, you will never see any Bose equipment in a true audiophile’s setup, so what’s going on there?

Bose are very good at compromise. That might sound a bit negative, but it is actually a compliment. Bose are great at delivering impressive sound in less-than-perfect situations. Wireless speakers, noise canceling headphones, miniature home theaters, all contexts that compromise true audiophile quality for some form of convenience. A Bose sales rep once told me they targeted families, where the wife wants something visually discrete while the husband wants something sonically impressive. Enter the miniature home cinema speaker systems!

In those compromised situations, their products are actually quite good. They do manage a massive sound from a tiny bluetooth speaker. And they cleverly tune their products to what laymen perceive as being high audio quality. Have a careful listen, you will find that most products have an exaggerated bass and high frequency range, which makes for a “boosted” sound. Such a sound has very little to do with an actual natural representation of audio recordings, but still appeals to many.

There is a lot we can learn from both Beats by Dre and Bose. It pays to analyze what is truly valuable to your target audience. Is it an image (Beats star endorsements and funky looks)? Is it performance (true audiophile sound quality)? Is it a specific part of performance (a nice thick bass)? Specializing in such fields pays off. You can’t be all things to all people. So let’s applaud Beats and Bose for their strategic positioning. My inner music lover might not be a fan, my inner marketeer definitely is!

Thomas van Straaten

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