1.

Comparative Performance Scorecard - A table comparing the performance of the various
products in a category. The table lists the product attributes that are most important to
customers. Each attribute is assigned a performance metric, and the comparative metrics are
arrayed in the table for each product.

2. Customer Value Management (CVM) —the art and science of measuring, analyzing, and
managing value.  A product’s relative value is the customer-perceived performance-for-price
relative to rival brands. Executives leading product divisions and their teams working in
product-line strategy (on product positioning, product improvements, new product
development and launches, value propositions, value pricing, branding, marketing
communications, value selling, and key account selling) use the techniques and tools for
managing customer value to coordinate and execute their strategies to outperform
competitors.

3. Customer Surplus –  a measure of the value of a particular deal to the customer. Surplus is
the difference between the fair price and the price actually paid. If the price the customer pays
is less than a fair price, the surplus is positive; if more than the fair price, negative; if equal to
fair price, zero.

4. Differential Worth — The difference in the worth (economic value) of benefits delivered by
one product versus a reference product. It is equivalent to the monetary difference between
the two products’ positions on the fair-value line. The reference product can be the average
product (in the category or consideration set) or a specific competing product.

5. Dimensions of Customer-Perceived Value — CVI’s customer-value tree identifies six

generic dimensions of customer-perceived value:

a) Product – relating to the good or core service being sold,

b) Customer service – customer care activities that support the delivery of the product or core
service,
c) Relationship – customized connections and knowledge related to individual customers and
key accounts,
d) Brand affinity – KBFs relating to the authority the brand holds with customers, how well
customers identify with the brand and its promise, and peer-group approval associated with
using the brand,
e) Price – the transactions price that the customer pays for the product; and
f) Other costs – that the customer incurs in addition to the transactions price not necessarily
paid to the supplier.

Although the key buying factors will be different for different market categories, they can always be
classified into these dimensions.

6. Economic Value — the worth (monetary value to the customer) of the benefits of an offering.

7. Equity Engine — the brand name of a market research technique offered by the firm
Research International that has been used to provide data for a customer-perceived-value
analysis. The Equity Engine approach gathers data on the performance of each brand in a
market category on the key buying factors. RI splits the key buying factors into two main
categories, functional and emotional. They have developed a unique battery of questions to
measure nine attributes in the emotional category, which they label brand affinity.

8. Fair-Value Line — A reference line on a value map that reflects how much customers are
willing to pay, on average, for different levels of performance. The fair-value line passes
through the intersection of the average price and average benefit lines – a point of, by
definition, average value. All of the points on the fair-value line represent average value. See
slope of fair-value line.
9. Fair Price — The price for a product that customers are willing to pay, on average, for a
specific level of performance. It is equivalent to the economic value of the offer. To determine
 the fair price for a product, locate its performance score on the horizontal axis of a value map,
move up vertically to the fair-value line, and move horizontally to the price on the vertical axis.

10. Fair-Value Zone — A zone on a value map representing customer value close to and spaced
equally above and below the fair-value line. The width of the zone can be set as a percentage
of the average price in the category or as a monetary amount. The default setting in the
Value-Strategy Toolkit™ places roughly half of the products within the fair-value zone, one-
quarter in the good-deal zone, and one-quarter in the bad-deal zone.

11. Frontier Price — The price for a product that would offer value to customers comparable to
products selling at the lowest price in their performance range. To determine the frontier price
for a product not on the frontier line, locate its performance score on the horizontal axis of a
value map, move up vertically to the frontier line, and move horizontally to the price on the
vertical axis.

12. Frontier Offerings — Products and bundled services that sell at the lowest price in their
performance range. If an offering provides both the lowest price and best performance, it
dominates every other offering in the category.

13. Goodness of the deal – an evaluation of whether or not the customer paid a fair price for a
product. A good deal is where the customer pays a price that is less than the fair price (as
determined by the product’s relative performance.)

14. Head-to-Head Value Comparison — A report or graph comparing the attribute

performances and relative values for a target model versus a reference model.

15. Key Buying Factors (KBFs) — The list of important benefit and cost attributes that
customers evaluate and value when choosing among competing brands. The list of KBFs will
differ by product category, for example: computers – connectivity; retail banking – short
queues; aircraft engines – spare parts availability; candy and nuts – freshness; outsourcing –
contract flexibility.
16. Market Leaders : Brand, product, or firm that has the largest percentage of total sales
revenue (the market share) of a market. A market leader often dominates
its competitors in customer loyalty, distribution coverage, image, perceived value, price, profit,
and promotional spending.

17. Market Niche: Small but profitable segment of a market suitable for focused attention by

a marketer. Market niches do not exist by themselves, but are created by
identifying needs or wants that are not being addressed by competitors, and
by offering products that satisfy them. See also market segmentation.

18. Most Valuable Customers — Customers, or customer segments, providing the largest
stream of profits over the relevant time horizon. Marketers target customers that can provide
the greatest discounted present value of future profits.

19. Market-share Strategy — Activities associated with deciding whether to build, hold, or
harvest market share and related decisions about positioning your products’ performance and
whether to price for margin or growth. Pricing above your product’s fair price will typically lead
to market-share loss. Pricing on or near the best-value frontier will typically lead to market-
share gain. Changing performance opens up many other options for changing market share.

20. Neutral Price — The price for a product at which its market share will hold at the current
level. Setting a price above the neutral price is a tactic for increasing unit profit margin, at the
 expense of causing market-share erosion; setting price below the neutral price is a tactic for
gaining share.

21. Performance-Evaluations-and-Standards Table — a table in the Value Strategy toolkit

software that lets the user specify how to transform any performance metric into a
performance index on a 1-to-10 scale. This is a key intermediate step in the process of
condensing a set of performance metrics on different attributes into a single index of overall
performance.
22. PIMS (Profit Impact of Market Strategy) — an ongoing research and consulting activity
focused on competitive marketing strategy and benchmarking using a business-unit
database. The research and benchmarking activity focuses on measuring metrics that track a
business’s competitive position (relative overall quality/performance, market share, and
capital intensity) and relating competitive position and market attractiveness metrics to
measures of business results (profitability and growth).

23. Price Customization — Setting different prices for different market sub-segments,
pricing higher in sub-segments that perceive the most differential worth in your product, and
reducing price to appeal to other sub-segments according less worth to your product.

24. Price Differential — The difference between the price of an offering and the price of a
reference offering. Products that perform better than average are often priced higher than the
average price. Products that perform worse than average are often priced lower than
average.

25. Price-Performance Profile — A table showing customer-perceived performance scores,

attribute relative importance, and prices of major offerings in a category for the major
competitors in the market.

26. Price Premium — The selling price of the vendor's product minus the selling price of a
reference product. It is the opposite of the price advantage a vendor enjoys when selling at a
price below the price of the reference product.

27. Product Appraisal and Product Appraisal Table– Product appraisal is the process of
evaluating how much a product is worth. This is done by comparing the performance of the
product against comparable products on the market. The justified price for, say, product A will
be the price of the competing products adjusted up or down based on the value of product A’s
performance advantages or disadvantages relative to those products. The Product Appraisal
Table is a standardized layout for doing this comparison.

28. Relative Value — The amount of value captured by customers, calculated as the fair price of
an offering minus its selling price. Products on the frontier of a value map offer the greatest
value to customers in their performance range.

29. Slope of Fair-Value Line — The amount of change in fair-value price per point of overall
performance.

30. Strategy — "Strategy is the direction and scope of an organisation over the long-term: which

achieves advantage for the organisation through its configuration of resources within a
challenging environment, to meet the needs of markets and to fulfil stakeholder expectations".

i) Corporate Strategy - is concerned with the overall purpose and scope of the business to
meet stakeholder expectations. This is a crucial level since it is heavily influenced by
investors in the business and acts to guide strategic decision-making throughout the
business. Corporate strategy is often stated explicitly in a "mission statement".
 ii) Business Unit Strategy - is concerned more with how a business competes successfully
in a particular market. It concerns strategic decisions about choice of products, meeting
needs of customers, gaining advantage over competitors, exploiting or creating new
opportunities etc.
iii) Operational Strategy - is concerned with how each part of the business is organised to
deliver the corporate and business-unit level strategic direction. Operational strategy
therefore focuses on issues of resources, processes, people etc.

31. Value Accounting — The discipline of analyzing a product’s worth to customers on an

attribute-by-attribute basis, and determining how much customers will pay for it versus
competitive offerings.  [See, “How Much Is Your Product Really Worth – Optimize your pricing
with Value Accounting and the Value Scorecard.”]  Customer-perceived value analyses help a
product team to assess its competitive position, nominate alternatives for improving
performance, set prices based on an integrated view of cost, price, and economic value data,
and craft a winning value proposition.

32. Value-Based Pricing — A technique for setting prices that recognizes the relative economic
value, or worth to customers, associated with a brand’s features and performance.  Worth is
calculated by looking at the brand’s comparative strengths and weaknesses on the key
buying factors that customers value when selecting a brand. (See, “How Much Is Your
Product Really Worth – Optimize your pricing with Value Accounting and the Value
Scorecard.”)  The Value Map is a key tool used in Value Pricing.

33. Value-Based Pricing Chart – a visual summary of the key elements of value-based pricing.
The chart shows the development of a fair-price, starting from a reference price (typically a
market average) and adjusted upward or downward by performance differences and
differences in the customers’ economics in using the product relative to the reference product.
The chart also shows current price, costs and margins relative to the product’s estimated
worth.

34. Value Frontier — The value-map reference line connecting products that offer the best
performance in each price range.

35. Value Map — A value map contains a plot of the prices and overall performance scores of
competing offerings in a market category or segment. CVI’s value map contains reference
lines for assessing customer-perceived fair value and the best combinations of performance-
for-price in the category.  CVI’s Value-Strategy Toolkit™ software contains value mapping
tools that make it easy for people working on product positioning and perceived value pricing
to produce visual displays of alternative competitive strategies and scenarios. (See Value
Pricing.)

36. Value Position — How a product compares to competitors, as reported on a value

scorecard, price-performance profile, and value map.

37. Value Proposition — An offering’s performance and price promise to potential buyers.
Product strategy teams can cross check their current value proposition against the
perceptions of customer using product evaluations, market research, and several CPV tools.
For example, if your brand promise is rapid acceleration, but customers perceive other
models as accelerating better, your promoted value proposition won’t connect with customers.
You can craft a new value proposition using CPV tools, building on the competitive strengths
of your brand.
38. Value Selling — an approach to selling that attempts to quantify to a customer the economic
value, or monetary worth, of your product’s performance advantages versus competing
products.

39. Value-Strategy Simulator — The Value-Strategy Toolkit™ Software feature that

automatically updates associated value maps, product appraisal tables, and head-to-head
value comparisons from changes in a price-performance table.

40. Value-Strategy Toolkit Software — Computer software offered by Customer Value, Inc.
used to analyze a product’s price, performance, and value position relative to competitors and
to simulate actions to improve competitiveness. It takes a comparative performance
scorecard as input and creates the associated value map, performance evaluating guidelines,
product appraisal table, and head-to-head value comparisons. The software contains a
variety of analytical tools for managing customer value.

41. Voice of the Customer (VOC) — Is a research technique pioneered by Abbie Griffin and
John R. Hauser. It was developed into a detailed market research analysis of attribute
hierarchy by the research firm Applied Marketing Science, founded by MIT marketing
professor John Hauser and located in Waltham, Massachusetts. Many companies adopting
Six Sigma practices carry out a VOC-type study to gain insights from customers. To provide
the data that you need for a customer-perceived value analysis and value pricing, you need to
expand the typical VOC research to gather data on the performance of competing products.

42. Worth — The economic value of the benefits associated with an offering, as perceived by the
average customer in the category.