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.
The customers get benefits and assume costs. Value is thus subjective (i.e., a function of consumers' estimation) and relational (i.e., both benefits and cost must be positive values).
There are cultural expectations and customer expectations involved in it. Let's take an example of well known brand Nike (to understand customer expectations); it comes up with special line of shoes called Air Jordan for the professional NBA players with commercials Michael Jordan doing 'impossibles'. In addition Air Jordan releases a limited edition with set amount available for which Nike charges a high amount compared to other products. In the end all the hype about the line of Air Jordan and its limited edition are customer perceived value. To understand cultural expectations lets take an example of Pizzas sold in Japan & United States. The pizza in Japan might be topped with tuna rather than pepperoni, as pizza might be in the United States; the value in the marketplace varies from place to place as well as from market to market.
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 individual to deliver value, one has to grow his or her knowledge and skill sets to showcase benefits delivered in a transaction (e.g., getting paid for a job).
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 changes 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.