What is Value? Five Types of Value To Deliver to Customers
It is essential to recognize that value is not just price. Value is a much richer concept. Fundamentally, the notion of customer value is fairly basic and relatively simple to understand; however, implementing this concept can prove to be tremendously challenging. It is a challenge because customer value is highly dynamic and can change for a variety of reasons, including the following: the business may change elements that are important to the customer value calculation, customers’ preferences and perceptions may change over time, and competitors may change what they offer to customers. One author states that the challenge is to “understand the ever changing customer needs and innovate to gratify those needs. The simple version of the concept of customer value is that individuals evaluate the perceived benefits of some product or service and then compare that with their perceived cost of acquiring that product or service. If the benefits outweigh the cost, the product or the service is then seen as attractive. This concept is often expressed as a straightforward equation that measures the difference between these two values: customer value = perceived benefits − perceived cost. Firms that provide greater customer value relative to their competitors should expect to see higher revenues and superior returns. There are five types of value a firm can deliver. It is critical to emphasize that a business should not intend to compete on only one type of value. It must consider the mix of values that it will offer its customers.
Five Types of Value:
Functional value relates to the product’s or the service’s ability to perform its utilitarian purpose.
Social value involves a sense of relationship with other groups by using images or symbols. This may appear to be a rather abstract concept, but it is used by many businesses in many ways.
Emotional value is derived from the ability to evoke an emotional or an affective response.This can cover a wide range of emotional responses.
Epistemic value is generated by a sense of novelty or simple fun, which can be derived by inducing curiosity or a desire to learn more about a product or a service.
Conditional value6 is derived from a particular context or a sociocultural setting. Many businesses learn to draw on shared traditions, such as holidays.
It should be readily seen that these five sources of value benefits are not rigorously distinct from each other. A notion of aesthetics might be applied, in different ways, across several of these value benefits. It also should be obvious that no business should plan to compete on the basis of only one source of value benefits. Likewise, it may be impossible for many businesses, particularly start-ups, to attempt to use all five dimensions. Each business, after identifying its customer base, must determine its own mix of these value benefits.
