Is Perceived Value Reputation?

There is a new book by Columbia Business School professor Donald E. Sexton that is well worth reading. Called Value Above Cost, Sexton makes the important observation that the most important function of marketing (and I would also add communications) is to enhance perceived value, which is defined as the "maximum that the customer will pay for your product or service".

This is an important concept. Perception is the same as fact in the marketplace. So, the concept of perceived value means that the job of marketers and communicators should be to enhance the perceived value of the organization with its key stakeholders. What I like most is that Sexton also cautions against the focus on "delighting the customer" that permeated company thinking for too long. Delighting the customer could mean that a company spends more than a customer is worth, leading it also to offer items for free to further delight the customer. When something is free, there is no apparent value. Value is only demonstrated when something is exchanged--money, our time, our relationship, our information, etc. Simply adding more or doing more to make a customer happy is bad business. There must be a balance between what we are willing to spend on the customer and what the customer is willing to pay for the product or service. At some point, it may no longer be worth our investment to make the customer happy, and we can actually gain competitive advantage by allowing our competitor to spend too much on delighting the customer.

Is perceived value the same as reputation? I think that the concepts are very close, if not identical. The greater the perceived value, the more the customer is willing to pay. He/she perceives us as being better than any other offer. Is that not what reputation is--being distinguished from peers as being the best? So, if we extend Sexton's concept, we can see that perceived value not only influences willingness to pay, but also willingness to join, support, invest in, etc.

The concepts contained in Sexton's book are extremely important for anyone who wants to truly understand the role of both marketing and communications.