Customer Value and Value Map
Customer Value
Customer value is in many cases defined as the perceived benefits less the perceived price. The perceived benefits are by Tony Cram split into perceived products benefits and perceived emotional associations. Perceived product benefits are based on actual product (or service) benefits or the prception of the product benefits. The perceived emotional associations are based on building emotional associations to the product or service (e.g. Champagne is linked to celebration). By increasing the perception of any of these factors the customer value increase. An other option to increase customer perceived value is to lower the actual price or the perception of the price.
Customer value is in many cases defined as the perceived benefits less the perceived price. The perceived benefits are by Tony Cram split into perceived products benefits and perceived emotional associations. Perceived product benefits are based on actual product (or service) benefits or the prception of the product benefits. The perceived emotional associations are based on building emotional associations to the product or service (e.g. Champagne is linked to celebration). By increasing the perception of any of these factors the customer value increase. An other option to increase customer perceived value is to lower the actual price or the perception of the price.
Value Map
By a value map (diagram with Perceived Benefits on 1 axis and Perceived price on the other) the relative difference in Perceived Customer Value can be mapped. High benefits and high price is normally referred to as premium products and low benefits and low price is entry products. As long as there is a balance between benefits and price (i.e. customer value is constant) the status queue in the market remains. This line of equilibrium is referred to as the Value Equivalence line. However, if the equilibrium is changed by a certain products/company by improving the benefits or lowering the price the competitors also needs to make the same proportional change to maintain the equilibrium else the company that has improved the benefits or lowered the price will gain market share.
By a value map (diagram with Perceived Benefits on 1 axis and Perceived price on the other) the relative difference in Perceived Customer Value can be mapped. High benefits and high price is normally referred to as premium products and low benefits and low price is entry products. As long as there is a balance between benefits and price (i.e. customer value is constant) the status queue in the market remains. This line of equilibrium is referred to as the Value Equivalence line. However, if the equilibrium is changed by a certain products/company by improving the benefits or lowering the price the competitors also needs to make the same proportional change to maintain the equilibrium else the company that has improved the benefits or lowered the price will gain market share.
Source:
Michael V. Marm, Eric V. Roegner, Craig C. Zawada, The Price Advantage, 2004, New Jersey
Tony Cram, Smarter Pricing - How to capture more value in your market, 2006, Harlow
Michael V. Marm, Eric V. Roegner, Craig C. Zawada, The Price Advantage, 2004, New Jersey
Tony Cram, Smarter Pricing - How to capture more value in your market, 2006, Harlow
