Customer Value can be explained in simple terms by knowing the difference between what the customer gets from the product/service and what he or she has to exchange in order to get it (may be money). It is very important for any company in the market to understand this difference; if failed to do so, this can be one of the biggest reasons for the product/service failure in the market. According to many researchers, in this ever growing world of technology and social media the organization’s inability of establishing unique and convincing value to their products/services is the main reason for its failure.
Keeping its importance in mind, many companies tries to understand what is their customer valuing. However, this can also be one of the most difficult things to understand. There are many factors causing it to be difficult for the marketers overcome this issue. However, for this task we will focus 3 main aspects. Firstly, every customer values different product/service differently. It might be situational or might be only for a definite period of time. Secondly, the market itself!
Technology and economic nature change the pace of the global market. With the competition aggressive as never seen before, it is important for the marketers to change their strategies with the ever changing market. Thirdly, some internal factors which make it difficult for organization to bring in customer value. Gist of Customer Value No one has made it clearer of this word “Customer Value” concisely than Lamb et al. (2008, 2009) who wrote, “Customer Value is the relationship between benefits and the sacrifice necessary to obtain those benefits.
Which means – if a product is of very good quality and is only obtained by paying a very high price will not be considered as of value by the customers, just like a low quality product which can be purchased for cheap price; but a value of a product is only seen by a customer when the quality of the product meets their expectation at an affordable price. Let’s take an example of coffee; some people love to drink coffee at Starbucks which may cost $10 and some people like to drink coffee from a local coffee shop which may only cost $4.
Now, people who drinks coffee at Starbucks expects them to use premium offee beans (Arabica) which tastes better and so are willing to pay $10 which worth (value) for Starbucks customers. On the same note, people who drink coffee at local coffee shop might just need to satisfy their caffeine addiction and they feel that it is worth for the price they pay. According to Butz and Goodstein (1996), a customer value is the emotional bond between the customer and the company (service/product provider) developed by means of the used service/product. The emotional bond is only developed when the service/product meets the customer’s expectation.
Different researchers have defined “customer value” in different ways but it all revolves around words like “benefits”, “satisfaction”, “expectation” and “worth”. If a company who wants to understand “customer value” for their product/service they need to understand more about these words with respect to their customers. But it is not as easy as it seems. Perhaps, even in dictionaries it’s difficult to find synonyms for these words because these words depend on situations. Challenges for marketers For companies to operationalize “customer value” in marketing their product can only be done by learning their “customers” and “market”.
These terms can be very challenging to learn or to understand because of its diverse nature. * Customer’s change is inevitable Customer’s needs or wants can be situational. Different customers can seek same products/service for variety of needs. Vodaphone has a pre-paid mobile plan that allows customers to make international calls at a cheaper rate and also allows making free calls to local Vodaphone customers. As an international student I choose this plan to make international calls at a cheaper rate but my friend who is a local chooses the same plan because most of his friends are Vodaphone users.
Further to this, a customer’s needs may change with change in their circumstances. Just like, if I secure a part-time job which gets me constant income, I will consider changing my mobile plan to post-paid service which has more offers. Customer’s needs are dynamic and can change over time. We humans have different needs at different age. Products brought by a person from a shopping mall will be different when he was single and when he gets married and more so when he’s a father. (Don Peppers & Martha Rogers, 2010) It is difficult to predict or to foresee these changes in the same customer with the change in situation.
At every point of time, customers are trying to actually achieve their needs for that point of time (Hultink and Atuahene-Gima, 2000). There is no single system to understand or to foresee customer’s need and to categorize them. Marketers should learn their customer’s needs beforehand to make their product valuable to their customers. To achieve this, organizations needs look at their products/services through customer’s point of view (Don Peppers & Martha Rogers, 2010). As the changes in customer’s situation can be quiet fast, organizations needs to be quick in changing their strategies and innovations to meet their ever changing customers.
Technological drawbacks Climbing the technological ladder too quick might pull down the organizations efforts in boosting customer’s value for a service/product. An excellent customer service is very important to maintain or to boost the value of the product/service with regards to customers. Traditional human to human interactions have been replaced by human to machine interactions by the help of technology. These changes force customers to embrace self-service technologies which can create discomfort among some low-tech savvy customers (Parasuraman, 2000).
There may be customers with limited knowledge in technology or may not be willing accept the technological introduction (Walker, Lees, Hecker and Francis, 2002). Almost everyone has experienced this scenario when they call a customer service center of telecommunication provider. The call keeps bouncing to different automated machines and still our problems are not solved until we speak to a customer service executive. Similarly, online banking system with tight security measures some people still prefer to visit banks personally for some services.
This is because either the customers are not willing trust these technological services or lack of knowledge to use these services. Secondly, Internet world made it easier for customers to compare the quality, product/service details, and cost of same/similar product from different companies (Bakos, 1997 & Lynch & Ariely, 2000). Customers can comfortable get information about the various products using internet at home without physically going to the market (J. Nielsen, 2000). This increases the competition exponentially and any company is vulnerable to this situation if they do not keep up with the hanging market trends.
Companies have to constantly indulge in innovation that meets their customer’s expectation and introduce strategies to keep the customers excited about their current and upcoming product. Even a speculation of an upcoming product of the competitors can adversely affect the company’s current product in the market. Like the speculation of Samsung III (latest mobile phone) with more and better specifications tremendously reduced the sales of iphone 4s current product, even to a point that the recently released iphone 5 didn’t reach its expected sales mark.
Barriers within Organizations Every organization has its own culture and employees working will be very comfortable with those culture. This culture may not be aligned with the ever changing customer’s expectations and needs. Using their own employees, organization tries to understand their customer’s needs by merely guessing it. By doing so, organizations come up with customer’s needs through employee’s perspective (or sales point of view) and not customer’s perspective. Now this “guessed” customer’s needs might be exactly opposite to what the organizations actual customer’s needs.
This creates a difference between the customer value and service/product offered, which in turn results in unsatisfied customers (Woodruff, 1997). Example, Kodak Company was reluctant to change with the change in the market and customer’s needs. Customers were finding it easier to use a digital camera over a film based camera. However, Kodak Company expected its customers to use film based cameras which are not user friendly. This gradually resulted in Kodak losing its customer base to its competitors those who embraced to this change in era.
Now even if the organization decides to move towards the customer’s needs by proper findings and learning their customers. It depends on managers to implement these finding in marketing their product and also in future products. Managers might be too busy with their normal duties to implement the learning on customer value. Thus the adapting to change becomes a problem when it is not in line with the introduction of new information on market change and their customers. This can also happen when the organization is reluctant to continuously train their employees on the market and customer variations.
Conclusion: There are many other factors such as market variations, globalization, wide variations in customer’s psychology, brand image etc. that makes it challenging for a marketer to show value to customers in their products/services. Theodore Leavitt of the Harvard Business School explained this idea by saying that “The customer is not interested in a quarter-inch drill. Rather the customer is interested in a quarter-inch hole”. By understanding the results preferred by the customer, an organization can invest its marketing and innovation in the right direction for the customers to achieve their desired results.