How Marketing Creates Value
– the marketing process
– the difference between price, cost and value
– how to create value using the Value Proposition Canvas
What is the goal of every single business ?
But what does this mean exactly and how?
2) Create Value
3) Deliver Value
4) Capture Value
Do you remember the Value Proposition Canvas from the Entrepreneurship module?
Building the customer profile and value map helps the organization understand how value should be created, which is the very first step. A correct mapping and prioritization of customer jobs, pains and gains is the key to creating value through your product or service.
Creating value doesn’t focus only on functional jobs, but also social and emotional customer jobs. Also, it doesn’t necessarily mean creating a product or service yourself from scratch but includes supporting jobs that make “life easier” for the customer: help customers dispose of a product, resell it, take better decisions by helping them compare offers or help deliver an existing product or service.
To understand how marketing can help create value, let’s first see what the differences are between price, cost and value.
Price: amount of money paid by the buyer to the seller in exchange for any product or service.
Cost: amount incurred on the inputs like land, labour, capital, enterprise etc. for producing any product or service.
Value: usefulness of any product or service to a customer. It can never be determined in terms of money and varies from customer to customer.
Marketing doesn’t talk about objective value but about perceived value for the public. This is one of the reasons why we have different brands of bottled mineral water. For example, Evian, but also local low-cost brands co-exist and the mineral composition of water is not sufficient by itself to explain the difference of perceived value.
Most purchases involve an emotional component in the decision-making process.
The perceived value of a product or service depends on its perceived benefits, perceived costs or risks and the substitutes or alternatives.
The value perception changes with the experience (buying process, perceived quality of the product/service, …).
– Too high expectations will create dissatisfaction among customers
– Too low expectations will make it harder to sell
#1 Increase Benefits
– by increasing performance and specifications
– by improving the feeling of the product (design, smell, taste, packaging, perceived quality, convenience etc.)
– by adding services
– by increasing the perceived quality
– by improving the brand
#2 Decrease Costs
– by lowering the price
– by changing the perception of price: help-yourself, do it yourself (Ikea), low-price initial equipment with high-cost complementary products (Nespresso machine + capsules, Gillette blades + razors)
– by reducing other costs for the client: maintenance, add certifications/warranty to reduce risk perception etc.
#3 Do Both
Example: The Airbus A320 Neo has higher benefits (longer range) + a more efficient engine that reduces running costs.