Customer Perceived Value: creation and sources

By John Dudovskiy

Customer Perceived ValueIn the present marketplace, the customers are more informed than ever as they can reach out for the best offers available in the market, identify different alternatives by different companies, therefore, it can be said that they are the reasons for the best values to be created in the marketplace (Lancaster, Massingham and Ashford, 2002).

Kotler and Kelly (2006) stated that Customer Perceived Value is the difference between the prospective customer’s evaluation of all the benefits and all the costs of an offering and the perceived alternatives. Customer Perceived Value is based on the difference between what the customer gets and what he/she gives for different possible choice.


The creation of Customer Perceived Value

The marketers usually create value increasing the value of the customer offering by some combination of raising functional or emotional benefits and/or reducing one or more various types of costs.

Even if the same product is being offered by two different companies, if one of the companies provides better customer services, post sales service, training, on-time delivery and maintenance, the perceived value of the same product tends to increase because of the reliability of the selling company and their added values when selling the product.

Moreover, the more perceived value is also given to the company with a better corporate image as it indicates that the company is reliable and trustworthy, as it is one of the key factors in deciding when purchasing a product.

However, the companies also face complexities as consumers have varying degrees of loyalty to specific brands, stores and companies. As Kotler and Keller (2005) state that the key to generating to high customer loyalty is to deliver high customer values.

Furthermore, high customer values can also be delivered by offering the customer more than just the basic product but also extra advantages and benefits. As mentioned by Lancaster, Massingham and Ashford (2002), companies can deliver post sales services, delivery services and recycling at the useful life of the product. This helps the companies to keep in touch with customers throughout the lifecycle of the product and offer more products while in touch with customers.

This also provides an invaluable insight and primary data for the companies to analyze the buying behavior of their customers which later helps them to retain those customers. On the other hand, it seems to customers that the companies are delivering a full service to the products they purchased and care for their customers.

Customer Perceived Value is a useful framework that applies to many situations and yields rich insights. Kotler and Keller (2003) also stated that the seller must assess the total customer value and total customer cost associated with each competitor’s offer in order to know how his or her offer rates in the buyer’s mind.

Then a seller who is at a customer perceived value disadvantage has two options which are either to increase the value or to decrease total customer cost. If they increase the value, this calls for strengthening the offer’s products or services, or if they reduce the price, this calls for reducing the buyer’s costs by reducing the price, simplifying the ordering or delivery processes.


The sources of Customer Perceived Value

Gupta  et al (2005) stated that the overall Customer Perceived Value is derived from the following sources which are:

  • Product
  • Services
  • Personnel
  • Image

They further stated that if the company focuses on the above mentioned sources of value creation, their balanced combination can create both positive and decent value for the product.

However, the products which are at high perceived value by customers tend to be highly priced due to the image and reputation of the selling company. Therefore, the target market for these types of products could be limited in some cases. Therefore it can be considered as a limitation factor as the company can not always target the mass market (Kotler and Kelly, 2006).

As mentioned by Gupta  et al (2005), if companies want to increase their perceived value of their products by their customers, they can increase the total customer value by improving the products, services, personnel and image. Or it can reduce the buyer’s nonmonetary costs by reducing the time, energy and psychic costs or finally it can reduce the actual monetary value of its products to the customers.



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Category: Consumer Behaviour