Pricing of Tata Nexon EV

• Tata Nexon EV, a sub-4 meter hatchback is priced much

higher than the competing sub-4 meter hatchback cars,
e.g., The petrol Nexon (priced between ₹7.5 lacs and
₹14 lacs). The running cost of the EV is ₹ 0.97/km. as
compared to ₹ 6.12/ km. for the petrol car at the
current fuel price. An EV customer is expected to spend
35% less on maintenance. The battery life of the EV is
8 years. At an average running of 15000 km/ year, what
should be the customers’ willingness to pay for the
Tata Nexon EV?

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 Customer Value
Intended learning outcomes
• Having chosen an industry, the horizontal
boundaries and the vertical scope of activities,
which customers should a firm serve?
• Choose customers associated with the
relevant customer value.
 Customer Value

Fit
• Attributes • Criteria
• Customer customers use
relationships • Motivation to
• Image & use criteria
Reputation

• Economic
• Functional
• Experiential
• Social
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 Economic value to customers (EVC)

• Tangible monetary benefit

• Total cost of ownership/ lifecycle cost
• EVC/ WTP = Rival’s price + Savings from using CO’s
Product/ incremental value
Tata Nexon EV
• Reference Value + Savings/ benefits
• ₹7,50,000 + [(15,000X8X6.12)-(15,000X8X0.97)]
• ₹7,50,000 + ₹6,18,000 = ₹13,68,000
• Listed market price = ₹13,99,000

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 Economic Value to Customers

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 Economic Value to Customers

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 Functional value to customers
(FVC)
• More/ new features/ functional benefits
• Multi-attribute model
– Conjoint analysis
– Hedonic pricing
• Illustrations- Laptop, coffee percolator
• Limitations
– Compensatory model
– Feature & benefits
– Feature fatigue/ usability

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 Experiential Value to Customers

• Branding
• Design
• Customer experience
• Customer service
• Emotional benefit
• Illustration – IBM Laser Printer

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 Social Value to Customers

• Network effects
• Preference formation
• Social capital
• Social relationships

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 Next Session

• Analysing resources and capabilities

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