In an increasingly competitive world, it is important to understand how customers initially evaluate and select products and services. As a company we know it is essential to offer value-for-money, but understanding what that means to our customers is not as easy as it sounds. Aggregators have undoubtedly raised the profile of price and cost-savings as important considerations in the selection process, but does price = value?
The subjective nature of value was underlined in an interesting study into how shoppers assessed the value of fruit juice. Four broad classifications emerged from the different ways in which customers sought to define value:
- Low price
- Value is the cheapest
- Value is the juice on special offer
- Whatever I want from the product
- Value is what’s good for me
- Value is convenience – I want to drink it straight from the fridge without any mixing first
- The quality I get for the price I pay
- Value is affordable quality
- Value is the lowest price for a quality brand
- What I get for what I give
- Value is what you are paying for what you are getting
- Value is how many drinks from the package – frozen juices give you more value because you water them down to give more drinks
My conclusion is that perceived value is a balance between what is received and what is given. In other words, however subconsciously, all prospective customers do a cost-benefit analysis. For many, “cost” generally means more than just money in their analysis. It can include time, effort and physical energy. Similarly, “benefit” is measured in a variety of ways depending on the individual and the product. It can include considerations such as safety, protection against loss, appearance, comfort, economy and durability.
So, to answer the question posed at the start, I feel that value-for-money should mean much more than just price.
Even in the example of the fruit juice shoppers who say they look for the cheapest, I have no doubt that they would regard a purchase as poor value-for-money if they didn’t like the taste of the juice itself. Ultimately, the measure of whether a customer has received value-for-money is linked to how satisfied he or she feels post-purchase.
Increasing customer-satisfaction is not just a matter of doing a better job at delivering the same value or experience; it is about raising standards and managing expectations. A good place to start has to be making it easier for your customers to make a positive cost-benefit analysis about your product.