POM: Session7 Value Proposition

“The marketer’s watchwords are quality, service and value” – Philip Kotler

Success of Amazons, Snapdeals and Flipkarts lies heavily on the principle of creating and enhancing value. Customers are increasing becoming value-maximizers.  They view quality and service as a part of overall value proposition. When they have large number of products and services to choose from, they prefer the products that gives them maximum value. 

The Value Proposition

Value is very subjective term. Value can be anything that provides satisfaction to the customer. Value can be determined as everything else a customer can get besides Utility. It is a bundle of tangible and intangible benefits expected from a product.

The overall customer value is in ACQUISITION, i.e. 

Advertisements and other communication programs from where the customer get to know about the product. Marketers offer set of value in these communication program, these messages decides the expectations of the customer. A low cost airline would define value in flying without frills, while a luxury airline defines value in flying experience.

Cost to the customer. This comprise of the sale price as well as the cost of acquiring the product. Some customers see value in acquiring the product in a convenience of a retail outlet of through online shopping, while some other would see value in getting a deal at a street shop.

Quantification of the benefits. They may be compensatory or non-compensatory. Many times customer do not quantify the benefits, rather they use mental short-cuts to assess the benefits. There are situations when some negatives can be compensated some strong positives (Compensatory) and there are situations when customer do not want to compensate (Non-compensatory).

Utilities, i.e. the functional usefulness of the purchase. Every product has long term value directly proportional to its utility.

Improvements in the product design. Customer feels value addition in case if he is getting improved product from the previous purchased items. This improvement may be in technology (iPhone 4, 4S, 5, 5C, 5S and 6), colour, design, fragrances and so on.

Sales promotion schemes like discounts offers. Customer look for a deal in product purchases. If the product comes with premiums, discounts and offer, customer see more value in it.

Image of the brand. The overall brand personality matters a lot in deciding the value. A customer feels more valued if he gets a discount on a purchase of well-known brand. At times, customer may forego utility factor if the image of the brand is very strong.

Transaction, i.e. the convenience of payment and location. Customer will prefer products that are available to them easily. For many items location matters not just initially but also at the later stage as the product may require after sales support. Customers prefers dealers where the transaction is smooth and all they get all the facilities including finance options.

Involvement of the customer in purchase and usage. That counts in the assessment of value. The customer seek more value in the purchase of high-involvement products and less value in low-involvement products.

Options to choose the product from. If there are more brands, customers will look for an optimal value, else, will seek value in what is available.

Net value which also comprises of after sales service and resale value. This evaluation comes much later. For the low involvement item this may be very less or nil. Also, in some categories where the purchase is more psychological or emotional, resale value may not be an important factor, for example, diamonds.