Value in marketing is a customer’s subjective assessment of benefits in relation to costs in determining the worth of the product. A simple formula for value is Customer value = customer benefits – customer costs. In other words, customer’s receive value based on the benefits for the customer minus the cost to the customer.
Further Discussion on Value:
When it comes to managing long-term customer relationships and implementing the marketing concept, the value is an important part of marketing. Customers develop perceptions of what value means to them through their perceptions of product quality and financial sacrifices they make to acquire the product or service.
Value is also relevant to a company. A company works to manage a trade-off between increasing the value customers receive and maximizing profits from transactions when customers buy a company’s product.
Customer Benefits and Costs:
The benefit a customer receives from a product or service includes anything the buyer receives in an exchange. As an example, some car rental companies offer only the vehicle as part of the base rental price. Additional services, such as GPS navigation or unlimited mileage are additional costs to the customer. On the other hand, other car rental companies may offer GPS navigation and unlimited miles as part of the base rental price, increasing the value to the customer.
The cost a customer pays for the value exchange includes anything the buyer gives up to receive the benefit the product provides. An obvious cost is monetary. However, non-monetary costs can include:
Companies can shorten the time and effort for customers by providing more product and convenient locations, thus reducing the time and effort customer spend locating products to buy.
Additionally, a company can eliminate risk for customers by offering a money-back guarantee, try-before-you-buy offers, and samples.« Back to Glossary Index