We are living in a world that is most unstable and dynamic. World is not only changing but the rate of change is accelerating. We are experiencing change in our daily life and in marketplace too. Customer needs, wants, expectations are changing more rapidly; customers are increasingly demanding better quality and reliability in products and services; new products and services are coming to market more quickly, competition is getting more intense and global; and technology is changing rapidly.
Businesses are operating in an uncertain, highly competitive, and highly complex environment. Not only small but big players are also facing difficulties and challenges. Top companies are loosing market share and new companies are taking their place. In cell-phone industry Nokia was the market leader, but it is not so today, Samsung took its place.
Today, the leading edge companies are giving importance to customer satisfaction, loyalty, and value. They are providing higher customer value to attract new customers and retain existing customers and it leads to their long term profitability and growth.
Definition of Customer Value
According to Woodruff (1997, p. 142) – “Customer value is a customer’s perceived preference for and evaluation of those product attributes, attribute performances, and consequences arising from use that facilitate (or block) achieving the customer’s goals and purposes in use situations”.
Customer value is the difference between the values the customer gains from owning and using a product and the cost of obtaining the product.
Customer value is the difference between total customer value and total customer cost. Total customer value is the sum of product value, service value, personnel value, and image value. Total customer cost is the sum of monetary cost, time cost, physics cost, and energy cost.
Types of Value
- Functional Value
It is concerned with the extent to which a product is useful, has desired characteristics, and performs a desired function.
- Appropriate features and characteristics – quality, aesthetics, creativity, and customization.
- Appropriate performance – performance quality, reliability, and service-support outcomes.
- Appropriate outcomes – effectiveness, operational benefits, and environmental benefits.
For example – Apple focus mainly on creating appropriate features and attributes. Ford focus on performance and Pfizer focus on appropriate outcomes and consequences.
- Experimental Value
It is concerned with the extent to which a product creates appropriate feelings, experiences and emotions for the customer. For example – most restaurants focus on sensory values like aesthetics, aromas, ambiance, feel or tone. Organizations in travel or entertainment focus on creating emotional values like – pleasure, fun, excitement adventure, or humour.
- Symbolic or Expressive Value
It is concerned with the extent to which customers associate psychological meaning to a product. Some products appeal to customer’s self-concept and self-worth. Branded products like BMW, Rolex, etc are purchased because of their status, prestige, and image.