Value and Value drivers

Introduction

Value in marketing, also known as customer-perceived value, is the difference between a prospective customer's evaluation of the benefits and costs of one product when compared with others. Value may also be expressed as a straightforward relationship between perceived benefits and perceived costs: Value = Benefits / Cost.

As per “Kotler, Keller”, 2006, The value reflects the perceived tangible and intangible benefits and costs of the buyer; it can be represented as a combination of quality, service, and price (CVT – “customer value triad”)

The basic underlying concept of value in marketing is human needs. The basic human needs may include food, shelter, belonging, love, and self expression. Both culture and individual personality shape human needs in what is known as wants. When wants are backed by buying power, they become demands.

With a consumers' wants and resources (financial ability), they demand products and services with benefits that add up to the most value and satisfaction.

The four types of value include: functional value, monetary value, social value, and psychological value. The sources of value are not equally important to all consumers. How important a value is, depends on the consumer and the purchase. Values should always be defined through the "eyes" of the consumer.

Functional Value: This type of value is what an offer does; it's the solution an offer provides to the customer.

Monetary Value: This is where the function of the price paid is relative to offerings perceived worth. This value invites a trade-off between other values and monetary costs.

Social Value: The extent to which owning a product or engaging in a service allows the consumer to connect with others.

Psychological Value: The extent to which a product allows consumers to express themselves or feel better.

For a firm to deliver value to its customers, they must consider what is known as the "total market offering." This includes the reputation of the organization, staff representation, product benefits, and technological characteristics as compared to competitors' market offerings and prices. Value can thus be defined as the relationship of a firm's market offerings to those of its competitors.

Value in marketing can be defined by both qualitative and quantitative measures. On the qualitative side, value is the perceived gain composed of individual's emotional, mental and physical condition plus various social, economic, cultural and environmental factors. On the quantitative side, value is the actual gain measured in terms of financial numbers, percentages, and dollars.

For an organization to deliver value, it has to improve its value: cost ratio. When an organization delivers high value at high price, the perceived value may be low. When it delivers high value at low price, the perceived value may be high. The key to deliver high perceived value is attaching value to each of the individuals or organizations—making them believe that what you are offering is beyond expectation—helping them to solve a problem, offering a solution, giving results, and making them happy.

Value change based on time, place and people in relation to changing environmental factors. It is a creative energy exchange between people and organizations in our marketplace.

Very often managers conduct customer value analysis to reveal the company's strengths and weaknesses compared to other competitors. the steps of which are as followed.

·         To identify the major attributes and benefits that customers value for choosing a product and vendor.

·         Assessment of the quantitative importance of the different attributes and benefits.

·         Assessment of the company's and competitors' performance on each attribute and benefits.

·         Examining how customer in the particular segment rated company against major competitor on each attribute.

·         Monitor customer perceived value over time.

Value drivers

Value drivers are anything that can be added to a product or service that will increase its value to consumers. These differentiate a product or service from those of a competitor and make them more appealing to consumers.

The greatest benefit of a value driver is that it provides a competitive advantage to a business, giving that business an upper hand in its industry.

Value drivers can come in many forms, such as superior brand awareness, Customer care service, Delivery service, extended warranty, revolutionary technology, etc.

Why are value drivers important?

Value drivers will make a company’s products seem better than its competitors’. By creating as many value drivers as possible, a company can boost its leverage on the marketplace. They will further influence consumers to purchase that product. These provide products with distinguishable traits that companies can use to make their respective products more desirable in the eyes of the consumer.

To continuously add value to products and services, businesses should constantly be monitoring the market so that they can be the first to take advantage of changes in demand and consumer behavior. Value driver’s do not have to directly relate to a product. Something such as a reputation of having great customer service can be a value driver for a company.