Lecture 5- The Value Concept of Marketing

Session Objectives
• Explain the value concept of Marketing, Perceived value
• Components of Customer Value

Tajamul Islam-Symbiosis Institute of Management Studies-

Pune
1)Which of the following is a characteristic
of customer-driven marketing?
A) Companies understand customer needs even better than customers
themselves do.
B) Customers are unaware of their needs.
C) Products are created that meet both existing and latent needs, now
and in the future.
D) Customers know what they want.
E) Customers don't know what is possible.

Answer: D

Tajamul Islam-Symbiosis Institute of Management Studies-

Pune
2) Which of the following is a component of a firm's
microenvironment?
A) customer demographics
B) economic recessions
C) population shifts
D) marketing intermediaries
E) technological changes
Answer: D
3) Which of the following is NOT an element of the marketing mix?
A) place
B) purchase
C) product
D) price
E) promotion
Answer: B
4) In the marketing mix, design, packaging, services, and variety can be
categorized under ________.
A) product
B) price
C) promotion
D) place
E) position
Answer: A
5) In the context of a company's marketing mix, ________ includes
company activities that make the product available to target
consumers.
A) position
B) place
C) price
D) promotion
E) branding
Answer: B
6) ________ refers to activities that communicate the merits of the
product and persuade target customers to buy it.
A) Position
B) Promotion
C) Pricing
D) Segmentation
E) Prospecting
Answer: B
Customers do not buy the physical product, they are buying the benefit that they are getting
from the physical product
The Value Concept Of Marketing
• The Value Concept Of Marketing- delivering value is fundamental to
marketing

• ‘Customer orientation’ Is Not the Same as ‘Value Delivery’

• The value concept holds that satisfaction can be accomplished only by

delivering value to the customers.
The Value Concept Of Marketing
• Delivering Value is fundamental to marketing
• Every business is in ‘the business of creating value for the customers’
• Competing in the market is to be viewed as the art of delivering
superior value to the customers
 Meaning of Value in the Marketing context
• Bundle of benefits = utility + several other things

• Tangible (functional utility) or intangible benefits (experience/prestige/brand image)

• People do not buy products; They buy ‘Value’

• Total Customer Benefits and Total Customer Cost(Economic/Non-
economic)
All ‘Value’ is Just ‘Perceived value’
• There is nothing like totally objective customer value
or absolute customer value.
• Perceived value is outcome of Buyer’s Mental
Evaluations
• The value and cost assessment done by the buyer does
not amount to an exact or objective calculation.
• Opinions, expectations and surmises play a role.

• However, it is not completely devoid of data and measures.

• Subjective/Objective, quantifiable/non-quantifiable,
tangible/intangible
“Value lies in the eyes of the consumer” 🙄
A porche car at ₹1 crore
A Maruti Alto 800 at ₹3 lakh,

both mean value to the respective buyers !

Defining Value Customer-
perceived value

Customer- perceived value (CPV)- Total customer

The difference between the prospective Total customer cost
benefit
customer’s evaluation of all the benefits
and costs of an offering and the
perceived alternatives Monetary
Product benefit
cost

Services Time
benefit cost
‘Benefits relative to cost’
Energy
Personal benefit
cost

Image Psychological
benefit cost
Delivering Value to customers
 Perceived value is subjective and individual, and therefore varies
among consumers.
Different personal values, needs and preferences as well as the
financial resources of consumers
Establishing what value the customer is actually seeking from the
firm’s offering is a starting point for being able to deliver the correct
value‐providing benefits
identify what a customer is trying to do with the firm’s offering
Two facets of Customer Value
• Initially Perceived Value: Assessment of the value to be gained and the cost
to be incurred in the ‘Consideration stage’ of the purchase.
• Expectations, personal estimates of the value and cost
• Only If the initially perceived value is attractive , the buyer will proceed further
with his purchase plan

• Finally Perceived Value: Customer’s actual experience with the product.

Assessment of final situation
 Customer Satisfaction A person’s feelings of pleasure or
disappointment that result from comparing a
• When the finally perceived value is product’s perceived performance to (or
outcome) to expectations.
positive.
• The customer must find that the
value received exceeded the cost.
• The value received matches the Expectations
value initially perceived

• Bridging the gap between initially perceived value and

finally perceived value.
• ‘Deliver what you promise and promise only what you can
deliver’
Components of Customer Value
Tangible Values Intangible Values

• Functional value • Social value

• Economic value • Prestige/Status value
• Convenience value • Sentiment value
• Sensory/aesthetic value • Experience value
• Service value • Belief value
Laddering
• Moderator, “What do you like best about your phone?”
• Respondent, “Getting real-time sports scores” [feature]
• Moderator, “What is important about that?”
• Respondent, “I know what’s happening right away.” [functional benefit]
• Moderator, “What does that do for you?”
• Respondent, “I can tell my friends, as soon as I know.” [higher benefit]
• Moderator, “What does telling your friends right away do for you?”
• Respondent, “I am the go-to guy for sports. My friends expect me to
know. It is what we talk about.” [emotional benefit]
Total customer benefits vs Total customer
cost
Two alternatives for a seller

• Increase total customer benefit- economical, functional, psychological

• Decrease total customer cost- price, simplifying ordering/ delivery,
warranty