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value chain marketing-product component introduction

product and services marketing

by Kenneth Rudich

The two principal attributes of the product component are quality and value.  Each exerts a separate influence, but the two go hand in hand when it comes to shaping the overall perception of a product or service.

what is quality?

To get a grasp on quality, we’ll need to start with the concept of value.  You may remember the definition of value is the perceived benefits relative to the price or cost (Here’s the video, and here’s the blog post). 

Further, you may recall that the perceived benefits are based on customer motives.  These motives may be social, functional, physiological, or psychological in origin.  The customer may possess some combination of motives or just one by itself.  The customer may also prioritize them into primary or secondary motives.

The value of the product component is built on the contribution it alone makes within the value chain.  It revolves around the question, what customer motive(s) – needs and wants – does it satisfy?  Or, what is their problem and how does your product/service solve it?

It is worth noting that the value of the product component often holds a unique position compared to the other components in the value chain.  Insofar as it probably stands as the main reason why the product and/or service are in demand, the other components of the value chain frequently serve to augment or enhance its value.  Without a demand for the product component, there’s a strong chance the other components would cease to be important.

quality resides within value

Quality refers to the perception of how well the product or service satisfies the customer motives that produced a demand for it.

 A variety of factors can influence the perception of quality, and making a judgment about it depends on the criteria applied.  The evaluation itself may involve subjective feelings or objective facts. 

In a subjective evaluation, each person develops his or her own definition of quality.  The nuances of subjectivity can make it difficult to develop hard and fast measures or rules about quality.  

For instance, someone can experience a service and feel it was an uncommonly good interaction; or use a product and decide it measured up.  Another person can have the same experience and feel entirely different about it. 

Price can also influence the perception of quality.  A product may not be the absolute best quality, but it may be good enough given the cost.  Or conversely, it may fail to meet expectations in light of the cost.

With a subjective evaluation, it may be easier to recognize a lack of quality than to build quality into the product or service from the start.  This is especially true when it involves intangible characteristics, like an artistic endeavor or getting an education. 

For instance, why is one movie storyline more popular with an audience than another?  Why do some universities rank higher than others?  Why does the design of one automobile seem more strikingly stylish than another?  Can the endorsement of a sports superstar change the perception of quality for a pair of running shoes? 

Where possible, a business may test market or pilot a product to identify areas that should be addressed before a full-fledged launch takes place.  This is commonly done with feature length movies, for example.  Another option is to do A/B testing.  Business websites frequently get subjected to A/B testing to see if certain headlines, buttons and images draw a better response than others. 

Quality built around objective facts implies a comparison against a benchmark or standard that is readily accepted as a reflection of proven quality. 

For instance, there may be technical specifications, characteristics or properties that are tangible and can be measured or graded to judge whether something is superior or inferior in quality.
Or there may be some practical achievement or level of excellence that expresses quality.  If an automobile brand has a strong record for dependability, then it will probably be regarded as a quality product for having achieved that level of excellence.

the relationship between quality and value

Whether the evaluation is subjective or objective, quality and value share an important relationship in the product component.  Some appreciable measure of quality is required for there to be any kind of value.  Said another way, quality can be present without value; but value cannot be present without quality. 

At the same time, quality affects value and value can affect quality (or more accurately, the perceived level of it).  While a complete absence of quality prevents any possibility for creating value, it may be possible to develop a strategy where a lower level of quality is acceptable if some redeeming value compensates for it.  Think of the difference between the higher price of a brand name product and the lower price of a generic product or a knockoff.  Or the difference between solid gold and gold-plated. 

product component strategy for the value chain

The strategy for the product component is to find a window where quality and value are optimized to the point of diminishing returns. 

This translates into finding a sweet spot for maximizing profits beyond the break-even point, and it is one reason why marketing strategy often relies on product positioning to create a competitive difference in the eyes of the consumer.


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