Customer Value , Characteristics and Value

Chain

Customer value is the perceived difference between the benefits a

customer receives from a product or service and the costs associated
with obtaining it. It is the customer's subjective assessment of how
much a product or service is worth to them.

Perceived Benefits
Value= __________________
Price

So value can be increased by either increasing the Perceived Benefits

or by Reducing the Price

Customer value can be influenced/classified by a variety of factors,

including:

• Functional benefits: The primary benefits that the product or service

provides. For example, the functional benefits of a smartphone might
include the ability to make calls, send text messages, browse the
internet, and take photos.
• Monetary benefits: The financial savings or gains that the product or
service provides. For example, a customer might choose to buy a
generic brand of toothpaste instead of a name brand to save money.
• Social benefits: The status or recognition that the product or service
provides. For example, a customer might choose to buy a luxury car
to enhance their social status.
• Psychological benefits: The emotional satisfaction that the product
or service provides. For example, a customer might choose to buy a
book by their favorite author because they enjoy reading their work.

• Epistemic value is the value that comes from gaining knowledge or

understanding. It is the value that we place on true beliefs, justified
beliefs, and other cognitive successes. Epistemic value can be
intrinsic, meaning that it is valuable for its own sake, or it can be
 instrumental, meaning that it is valuable because it helps us to
achieve other goals.

o Learning about the history of the world

o Understanding the principles of physics
o Appreciating a work of art

• Conditional value is the value that something has depending on the

circumstances. It is the value that something has relative to a specific
situation or goal. For example, a raincoat has conditional value
because it is only valuable when it is raining. A lottery ticket has
conditional value because it is only valuable if you win the lottery.

Value Chain:

Porter's value chain analysis is a business management framework that

identifies and analyses the activities that a company performs to create value
for its customers. It was developed by Michael Porter in his book "Competitive
Advantage: Creating and Sustaining Superior Performance" (1985).

Porter's value chain analysis divides a company's activities into two

categories: primary activities and support activities.

Primary activities are directly involved in the creation, delivery, and sale of the
company's products or services. They include:

• Inbound logistics: Receiving, warehousing, and managing raw materials and

components.
• Operations: Converting raw materials and components into finished products.
• Outbound logistics: Storing, transporting, and delivering finished products to
customers.
• Marketing and sales: Creating awareness of and demand for the company's
products or services.
• Service: Providing support to customers after the sale.

Support activities enable the primary activities to take place. They include:
 • Procurement: Acquiring raw materials and components.
• Human resource management: Hiring, training, and managing employees.
• Technology development: Developing and maintaining the company's
technology infrastructure.
• Firm infrastructure: General management activities, such as accounting,
finance, and legal services.

The following diagram illustrates Porter's value chain analysis: