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History of Customer Perceived Value
The concept of customer perceived value (CPV) has been around since the 1980s. It was first introduced by Philip Kotler, a marketing professor at Northwestern University, who argued that companies should focus on creating value for their customers rather than simply trying to sell products. Since then, CPV has become a widely recognized and studied concept in marketing.
Customer Perceived Value(CPV)
Customer perceived value refers to the customer’s evaluation of the benefits they receive in exchange for the cost they pay for a product or service. CPV is a subjective assessment that varies from customer to customer and is influenced by a wide range of factors, including the customer’s needs, preferences, and expectations.
How to calculate Customer Perceived Value?
The formula for customer perceived value is:
CPV = Total Customer Benefit – Total Customer Cost
In this formula, Total Customer Benefit refers to the total perceived benefit that a customer receives from a product or service, while Total Customer Cost refers to the total perceived cost of purchasing and using the product or service.
Total Customer Benefit
Total Customer Benefit refers to the perceived benefit that a customer receives from a product or service. It includes not only the functional benefits of the product or service but also the emotional and social benefits that customers derive from using it.
Different types of Total Customer Benefit
Total Customer Benefit can be increased by offering products and services that meet customers’ needs and preferences and by providing excellent customer service that makes the purchasing process easy and enjoyable.
There are different types of Total Customer Benefit, such as:
- Functional Benefits: These are the tangible benefits that customers receive from a product or service, such as its quality, features, and performance.
- Emotional Benefits: These are the intangible benefits that customers derive from a product or service, such as its ability to make them feel good or improve their well-being.
- Social Benefits: These are the benefits that customers derive from using a product or service that helps them connect with others or feel a sense of belonging.
Different types of Customer Benefit of Google
Google’s search engine provides:
- Functional benefits by offering fast and accurate search results,
- Emotional benefits by helping customers feel knowledgeable and empowered
- Social benefits by providing a platform for connecting with others.
Total Customer Cost
Total Customer Cost refers to the total perceived cost of purchasing and using a product or service.
It includes not only the monetary price of the product or service but also the time and effort required to research, purchase, and use it.
Total Customer Cost can be minimized by offering products and services that are easy to use and by providing excellent customer service that makes the purchasing process easy and enjoyable.
Different types of Total Customer Cost
There are different types of Total Customer Cost, such as:
- Monetary Cost: This is the actual price that customers pay for a product or service.
- Time Cost: This refers to the time and effort required to research, purchase, and use a product or service.
- Effort Cost: This refers to the effort required to learn how to use a product or service.
Different types of Total Customer Cost of Google
Google is a good example of a company that focuses on customer perceived value. Here we can brief:
- Google’s search engine provides low monetary cost by offering a free service,
- Low time cost by providing fast and accurate search results
- Low effort cost by offering a simple and intuitive interface.
Google also offers other products and services, such as Google Maps and Google Drive, that provide customers with a high level of perceived value.
Goal of Customer Perceived Value Analysis:
The main goal of customer perceived value analysis is to identify the factors that contribute to customer satisfaction and to enhance those factors.
The analysis helps organizations to understand the value that customers place on their products or services and to make necessary improvements to increase customer loyalty and profitability.
Strategies to improve Customer Perceived Value
To improve customer perceived value, organizations can implement several strategies:
- Conduct market research to identify customer needs and preferences
- Use customer feedback to improve products or services
- Offer personalized solutions to meet individual customer needs
- Provide exceptional customer service
- Offer competitive pricing
- Build a strong brand reputation
Antipatterns of Customer Perceived Value
Antipatterns refer to common mistakes that organizations make in their efforts to improve customer perceived value. Some of the common antipatterns include:
- Focusing too much on price and neglecting other factors that contribute to customer satisfaction
- Providing poor customer service or failing to meet customer needs
- Ignoring customer feedback and failing to make necessary improvements
- Focusing solely on short-term goals rather than long-term profitability
Antipatterns of Customer Perceived Value in Google
Google has faced criticism for neglecting customer privacy and security concerns.
In 2019, the company was fined $57 million by the French data protection authority for failing to provide customers with clear information on how their personal data is collected and used.
Additionally, the company has faced criticism for allowing third-party developers to access customer data without their consent.
References:
- Zeithaml, V. A. (1988). Consumer perceptions of price, quality, and value: a means-end model and synthesis of evidence. The Journal of Marketing, 2-22.
- Parasuraman, A., Zeithaml, V. A., & Berry, L. L. (1985). A conceptual model of service quality and its implications for future research. The Journal of Marketing, 41-50.
- Kotler, P., & Armstrong, G. (2010). Principles of marketing. Pearson Education.
- Moorman, C., Zaltman, G., & Deshpande, R. (1992). Relationships between providers and users of market research: the dynamics of trust within and between organizations. Journal of marketing research, 15(3), 314-328.
- Google fined 50 million euros by French data protection watchdog for GDPR breach. (2019). CNBC. Retrieved from https://www.cnbc.com/2019/01/21/google-fined-50-million-euros-by-french-data-protection-watchdog.html
how can we know that the benefits are real benefits for customers?
Just by focusing on users… You need to know them well that you can find it in processes of design thinking too
Nice example! can you give an example for web3 too?
Sure. here is an example:
Customer Costs:
One of the main customer costs associated with Web3 is the need for technical expertise. Unlike traditional web applications, many Web3 dApps require users to understand complex concepts such as blockchain, smart contracts, and private keys. This can create a barrier to entry for users who are not technically savvy. Additionally, because Web3 is still in its early stages, many dApps may be buggy, slow, or not user-friendly, which can also add to customer costs.
Customer Benefits:
Despite the technical challenges, Web3 offers several customer benefits. First and foremost, Web3 provides users with greater control and ownership of their data. With Web3, users can store their data in decentralized storage networks, which are more resistant to censorship and hacking. Additionally, because Web3 dApps are often built on blockchain technology, transactions can be executed without the need for intermediaries or trusted third parties, which can reduce fees and increase speed. Finally, Web3 enables new business models such as tokenization, which can provide users with new opportunities to monetize their data and assets.
Total Customer Perceived Value:
Taking into account both the customer costs and benefits, Web3 provides a high total customer perceived value. While there may be some initial technical challenges, the benefits of Web3, such as greater control and ownership of data, reduced fees, and new business models, outweigh the costs. As Web3 continues to mature and improve, it is likely that the customer perceived value will increase even further.
how can we compare costs and benefits? I mean measuring them?!
You need to sympathise with your target audience and understand their needs well to be able to measure the cost sensivity and benefit sensivity
How can I know my customer is sensitive on which costs?
Javad I need case-study of other company in banking system please
Some of the customer costs associated with a banking system are:
Transaction fees: Customers may incur fees for transactions such as ATM withdrawals, money transfers, and foreign currency transactions.
Account maintenance fees: Banks may charge customers for maintaining their accounts, such as monthly maintenance fees.
Opportunity cost: Customers may have to forgo potential earnings on their deposits due to low-interest rates or penalties for early withdrawals.
Time and effort: Customers may have to spend time and effort in traveling to a bank branch or waiting in line to access services.
Customer Benefits:
The benefits that customers derive from using a banking system include both financial and non-financial benefits. Some of the customer benefits associated with a banking system are:
Convenience: Customers can access banking services from anywhere, anytime through online banking, mobile banking, and ATM services.
Security: Banks provide a secure environment for customers to deposit their money and protect their financial information.
Interest earnings: Customers can earn interest on their deposits, which can help them grow their wealth.
Credit facilities: Banks provide credit facilities such as loans, credit cards, and overdrafts to customers.
Total Customer Perceived Value:
The total customer perceived value of a banking system is the difference between the perceived benefits and the perceived costs of using the system. To calculate the total customer perceived value, we can use the following formula:
Total Customer Perceived Value = Customer Benefits – Customer Costs
For example, if a customer earns $50 in interest on a deposit but incurs $20 in transaction fees and account maintenance fees, the total customer perceived value would be $30 ($50 – $20).
I hope this could have helped you
I really loved this article! thanks Javad