What is customer value? How do consumers use it to make decisions?

5.1 Customer Value

DEFINED Customer value is the difference between the benefits a customer receives and the total cost incurred from acquiring, using, and disposing of a product.

The number of products that are available to potential buyers has increased dramatically in recent decades. Products are offered with a variety of features,at different levels of quality, and at various prices.With so many different options, how do buyers select which products to purchase? At the most basic level, buyers make a purchase decision based on the value they

perceive a product will deliver. Buyers accomplish this by weighing the differences between the perceived costs of the product and the perceived benefits gained from owning the product.

 

This can be shown with the following formula:

Customer Perceived Value=Perceived Benefits- Perceived Costs

Because each buyer will have different perceptions as to the benefits a product will deliver, as well as different interpretations of the perceived costs, the perceived value that a product will deliver varies between groups of customers.

In most cases,buyers select the brand that they perceive will provide them with the greatest value.Some buyers will therefore select the high-quality, high-priced product that is loaded with features,while other buyers will opt for a product that has fewer features and a lower price.This is one of the principal reasons there are so many different brands available in the market.

 

 

 

Example:

Managers use a value map to track and manage the perceived value customers assign to their brands, as well as to competitors' brands. The value map shown in the upper figure: a market with eight competitors, each of which has various levels of performance and price.Brands B, D, and F all fall to the left of the fair value zone,which indicates low customer perceived value.The low perceptions by customers will translate into low market share for these brands. Brands C, E, and G are rated by customers as having high customer perceived value. Brands A and H are rated as having performance benefits equal to their selling price. In this example, brand C is priced around $200 higher than brand H. Is brand C worth the added cost? One could make the case that because brand C has a much higher performance rating,the additional $200 is acceptable.