by Kenneth Rudich
My dog Reddi constantly burdens me with costs in terms of time and money. I have to walk him, feed him, train him, bathe him, and play when he gets restless. There are vet bills and licensing fees, plus squeaky toys and special treats. And then, too, there’s that perennial chore of having to tidy up in the wake of his path, if you get what I mean.
Every single day he’ll exact a price, but never once have I resented it. The truth is, when he looks up at me with those adoring eyes and wags that slender tail, or greets me with a splendid show of canine jubilation, or curls up beside me just to be nearby, I am rewarded with a sense of satisfaction that far exceeds the costs of keeping him. At moments like these, he is, in every way, the very definition of a marketing concept called value.
the concept of value
Economists define value as the perceived benefits relative to the price or cost, as shown in the formula: Value = Perceived Benefits/Price or Cost.
The perceived benefits are usually traceable to some underlying set of human motives, which may be social, functional, physiological, or psychological in origin.
Sometimes these motives are of equal priority; but more often they will vary in importance, such as divided into primary and secondary ones. Thus a person may agree, albeit reluctantly, to forgo one or more secondary motives if the primary motives are met. For example, a financially strapped individual may settle for an economy car even though a luxury car is preferred. In this case, the primary motive of securing transportation (functional) outweighs the secondary motive of prestige (psychological).
The price or cost represents what someone is willing, able, or authorized to give up in exchange for the perceived benefits.
It too may have motives attached to it, such as the amount of money, time, or energy a person is willing or able to invest. For instance, some people will gladly pay a premium for convenience or prestige. Others would rather exert extra time and energy to hunt for a bargain. Economists refer to this as price elasticity, and it can help with establishing the optimal price people will pay in exchange for a product or service.
Ultimately, the satisfaction of motives, not just needs, is at the heart of delivering value. If the price or cost exceeds the perceived benefits [a key motive (or motives) is under-served or not served], then value is decreased or non-existent. If the perceived benefits equal or outweigh the costs, then value exists and is perhaps even maximized, which produces a level of satisfaction known as value fulfillment.
Ipso facto, my dog Reddi delivers value fulfillment for me because the perceived benefits of having him around clearly overshadow the costs (bear in mind that he’s fortunate I’m not counting on functionality as a primary benefit, given his gross negligence with matters like housecleaning, doing laundry, or picking up after himself).
create value, build brand
In the last post, “As the Marketing World Turns,” I touched on the idea of building a memorable brand from the customer perspective. If you follow where I’m now going with this post, then you’ll recognize that value is the foundation upon which such a brand rests.
The better you know and understand the people you serve, the better the foundation you’ll be able to build for your brand. Here is a short list of questions you might want to deliberate when assessing the value of your product or service:
- what value creating attributes or activities can enhance the connection with your brand?
- what underlying motives seem to be at work, and how do they get prioritized?
- what role does cost or price play in the perceived value of your product or service?
- how can value creation help to position your product or service in other people’s minds?
- how does your value proposition stack up against that of your competition or of other substitute products and services?
This article titled “Marketing Strategies by World Hotels for Customer Retention” is an illustration of value creation from the perspective of the lodging industry. Notice the attention to detail for identifying, and then catering to, specific motives.
Brand management and marketing must rigorously entertain questions about delivering value on a regular basis, and then tweak the value proposition accordingly. To do anything less will result in the equivalent of trying to climb up a waterfall. No matter how hard you work, you’re not likely to get very far with making your brand stand out.
In future posts, and with a hopefully generous amount of input from others interested in the same topic, I would like to explore in-depth some of the better tools, techniques, and ideas for managing and marketing value across time — whether for realizing individual goals or helping an organization to meet its objectives. My vision is that the eventual pooling of insights will lead to a rich form of creative cross fertilization, in which we not only inspire one another, but also achieve greater success because of it.
Insofar as the usability of this blog is also important to me, I would like to invite suggestions along those lines as well.
Welcome everyone. And may we all deliver value with dexterity and skill!