Defining Value
For the purposes of this book, we define Value as a measure of all of the benefits (tangible and intangible) that a customer receives from a product or service.
With this definition, we imply that the value for customers doesn’t change when we raise or lower prices, but what changes instead is the customer’s willingness to buy the product.
Our theory here, which may differ from conventional models, is that when we lower prices customers still get the same benefits from the product, however, they will be more inclined to buy because the value they get back for every dollar spent is higher.
When making buying decisions, customers compare their incentive to buy (i.e. the difference between the perceived value of the offer and its price) across the different alternatives under consideration.
These alternatives, however, may or may not belong to the same marketplace. For example, if taking a short trip, customers may be evaluating whether to rent a car or take a cheap flight.
At the end, all this means that the only two ways you have to influence customers’ incentive to buy your products are by increasing their perceived value, lowering their price, or striking some combination of the two.
Another distinction to be made here is that benefits and value, although related, are not the same thing. A Porsche 918 Spyder, for example, accelerates from 0 to 60 miles an hour in a little bit over 2 seconds.
That is a fact and a tangible benefit, but its “value” is different for an 18-year-old single college student, than it is for a middle-class, 40-year-old female accountant with four kids.
While the quick acceleration of the Porsche will be appreciated (and noted) by the accountant, it is probably not an important feature for her, and she probably values the space and safety of a minivan more.
For those reasons, value is therefore a relative term and depends on who is on the receiving end of the product’s benefits, and the alternative solutions that are available to the buyers. That’s why we sometimes refer to it as perceived value.
In other words, while benefits refer to what a solution offers to potential customers,
Breaking Down Customer Value:
Customer Value is created along three different dimensions: Functionality (the job that the solution does and how well it does it), Reliability (how consistent the solution is at doing the job well) and Convenience (how accessible the solution is to customers and how easy it is to use).
Sophisticated buyers, like those found in business-to-business (B2B) transactions, will tend to pay more attention to quantitative factors such as price-cost benefits, performance and efficiency, while more emotional customers, like those for consumer products, will pay more attention to features that are more difficult to measure quantitatively such as brand, form factor
