Every day, we are reminded that providing value to customers is a surefire route to success.
The concept of customer value has been around for over 20 years, and many books and articles have been written about it. Yet its growth in popularity has also been accompanied by frequent misunderstandings and spotty application. This article revisits the customer value concept, reviews a common misunderstanding about customer value, and presents a comprehensive definition that both synthesizes existing research and serves as a model for delivering higher levels of value to your customers.
Let's start with a misunderstanding.
Value Does Not Always Equal Low Price
The most prevalent misunderstanding of the customer value concept is that value means low price. For example, companies like Wal-Mart, Hyundai, and Marshalls are identified as providing high value to their target customers by offering their products at the lowest prices.
While these discount merchandisers and low-price manufacturers may provide high levels of value in terms of product cost versus competitor pricing... luxury, premium-priced products and services also provide extraordinary levels of value to customers.
Even the highest-priced products provide high levels of value to their customers. For example, Porsche recently introduced the $400,000 Carrera GTâ€”a vehicle that is racecar fast, superbly engineered, and elegantly styled. While many people would argue that the Carrera GT does not provide a high level of value (i.e., its high cost compared with other vehicles'), those who purchase it might argue otherwise. So much so that Porsche expects to easily sell out the Carrera GT's limited annual production.
This example demonstrates that value is a subjective idea, depending on the consumer, and that the functionality or utility of a product is just one component of its perceived customer value.