Understanding Perceived Value and Trend Lines
Let us have a broad understanding of this concept of ‘perceived value’ in explaining the reason behind the emergence of resistance at trend lines. Hypothetically, we have three traders namely X, Y, Z. These traders have been in the same stock at the same time.
- Trader X has purchased and sold out at a small profit. Then, he made another purchase and sold once his stop-loss was triggered for a small loss.
- Trader Y purchased close to the highs and was locked-in once there was a decline in price. This trader is currently holding out in hopes of a reduction in his loss.
- Trader Z was shorted and earns a profit.
The buying and selling reasons along with the positions of these three traders hold are irrelevant; expect to manifest the different perceived stock values. There is no definite reason for these trader’s actions but what we can assure is that each of them regards the stock differently.
- Trader X made two trades which specified a small loss. This trader lacks concern because better times will absolutely come. He went out of the market and was looking for a new trading stock opportunity. He has seen the weakness from the high and he knows that he was left out for a short position. This trader sets expectations that there would be a decrease in prices and patiently be waiting for a buying technology.
- Trader Y is in fear and wants to have increased in price so that he can reduce his losses. If the prices remain to fall, then he will likely be shaken out for a buying opportunity.
- Trader Z has a good position. Moreover, this trader sets expectations about a continuous decline in prices. He made a placement of a stop-loss order above the market in safeguarding his profits.
Remember, the important point here is the different perceived values and the three traders’ expectations.
- Trader X has a thought of a price where he might go long.
- Trader Y reaches a point where he has no option if he can take the pain and will trade at a loss.
- Trader Z is happy about his trade and anticipates to profit.
What is Perceived Value?
This is the worth or merits that a customer assigns to a product or service. In most circumstances, customers are blind to the factors that are involved in pricing a product or service – either actual or estimated costs of production. They depend on the service or product’s emotional appeal along with their assessment on the benefits that they think could be imparted unto them.
The perceived value of the customer interprets the price that they could pay willingly for a good service. Usually, the customer put value depending on the analytical ability of the product to bring out a need and offer satisfaction. Marketing professionals work on shaping and increasing the perceived value of customers for the goods and services they are selling.
How about Perceived Utility Value?
Utility pertains to the benefits and values a customer receives when he or she utilizes the product. The most common demand of consumers is mostly about the useful and other benefits which a product can offer that others can’t. Even though there are numerous products and services which provide similar benefits, their perceived values differ among consumers. High utility equates to increased demand and further high prices. Companies create marketing campaigns to attract consumers based on these five types of utilities.
What are these types of utilities?
- This utility happened when the appeal of the physical design or form of a product attracts consumers or in short if a product has an aesthetic value. An example of this would be the hiring services of an interior decorator to design a room.
- This utility happens when performance – pertaining to delivered services – gives value to the customer. An example of this is when a customer receives car detailing.
- This utility happens when customer values the availability of a service or product. An example of this would be a 24-hour pharmacy.
- This utility happens when a customer values the proximity or convenience of the location. An example of this would be a neighborhood grocery.
- This utility happens when a customer values the easy acquisition of a product. An example of this would be an online shopping platform.
What about the perceived value on brand and luxury goods?
The brand of a company signifies a lot of expectations associated with products and services. A well-known brand is expected to have higher prices compared to other generic brands. The value of the product is dependent on how well the brand meets its customer’s expectations. The demand for a luxury good is parallel to the increasing income of a consumer. People who have more substantial incomes allocate their salary to buying luxury services and goods. Luxury goods make these people have a more enjoyable life with higher regard on their status. The highest value happens when the consumer value of owning these luxury goods instead of their functionality. An example of this would be when a customer values of owning a Rolex watch based solely on the level of prestige it brings whenever he or she wears it.