Economic Value for the Customer (EVC)

Examples of Economic Value for the Customer (EVC) in the following topics:

• Other Inputs to Pricing Decisions

  • Factors to consider in pricing include Economic Value added to Customers (EVC), competitor's pricing, and government regulations.
  • Marketers can also study this effect on their products using Economic Value for the Customer (EVC).
  • EVC is based on the insight that a customer will buy a product only if its value to them outweighs the value of the closest alternative.
  • The utility of a product depends on its value to the customer minus its price.
  • Add the reference price and differentiation values together to get EVC

• Adding Value

  • Louis Vuitton is known for quality, luxury custom-made handbags.
  • It is the link between a society's material requirements and its economic patterns of response.
  • It is an organizational function and a set of processes for creating, delivering, and communicating value to customers.
  • On the qualitative side, value is the perceived gain composed of an individual's emotional, mental, and physical condition plus various social, economic, cultural, and environmental factors.
  • Identify the major attributes and benefits, such as ease of use or improved social standing, that customers value for choosing a product.

• The Development of Value-Driven Firms

  • For a long time, the sole purpose of a company, it was thought, is to make profits, at least in the minds of CEOs who normally focus on short term returns.
  • This was the precursor to customer value management, which has been practiced for the last 35 years, being incorporated into corporate thinking.
  • Some people focus on customer service, others on customer experience, others on lifetime value for a customer; many companies believe that having a customer service department is all it takes to create customer value.
  • A new practice called Total Customer Value Management (CVM) involves a total focus upon the customer.
  • Voice of Employee will be captured through the Customer Circles and Employee Value Add, and the Voice of Customer and Voice of Competitor will be captured by Customer Value Added (CVA).

• The marketing model

  • The marketing model is an approach whereby companies create value for their customers.
  • A simple way to understand the creation of value to customers is by examining the following equation:
  • Value is created by increasing benefits to the customers.
  • For this reason, "benefits" is specified in the numerator of this equation (the higher the benefits, the higher the perceived value by the customer); on the other hand, "price" is placed in the denominator since the higher the price the lower the perceived value.
  • Now you must understand how value is created for your customers.

• Pricing During Difficult Economic Times

  • Cutting prices can quieten customer complaints and help boost sales for a time, but can have longer-term effects on profitability, and weaken the brand's image.
  • It is important to protect the brand, not alienate customers, and remember what value the company offers in order to get through the difficult economic period unscathed.
  • The strategy is most often used in difficult economic times.
  • Or should they maintain prices, hope for better times to return, and in the meantime lose customers who might never come back?
  • Slashing prices on low value goods (while maintaining prices on high value goods) is a potential pricing strategy during difficult economic times.

• Competition Based on Value

  • For a firm to deliver value to its customers, it must consider what is known as the "total market offering. " This comprises the organization's reputation, staff representation, product benefits, and technological characteristics as compared to competitors' market offerings and prices.
  • The migration from product-oriented to customer-oriented strategies is called Total Customer Value Management (TCVM).
  • This requires implementing a customer-focused vision – a major shift in strategic thinking, often including moving the basis for competition from product or price to process or service value.
  • TCVM goes beyond conventional customer value management, which provides a rational set of techniques, methodologies, and strategies to weave the needs and wants of customers into the key process designs and management activities of the enterprise.
  • TCVM also creates value for employees, business partners (customers, delivery chain, supply chain, unions) and shareholders.

• Reminding and Retaining Customers

  • The promotional activities of an organization continue long after customer acquisition.
  • One method organizations use to show appreciation for existing customers is personalized marketing.
  • Some companies allow for products to be customized using a configuration system.
  • The emergence of database technology for developing personalized products, ads, and services for specific users with particular profile attributes has helped organizations tailor their offerings for existing customers.
  • It also counteracts the theory that new customers must be gained at the expense of losing older customers.

• Value-Based Pricing

  • Value-based pricing seeks to set prices primarily on the value perceived by customers rather than on the cost of the product or historical prices.
  • This image shows the process for value based pricing .
  • The principal difficulty is that the willingness of the customer to pay a certain price differs between customers, between countries, even for the same customer in different settings (depending on his actual and present needs), so that a true value-based pricing at all times is impossible.
  • Also, extreme focus on value-based pricing might leave customers with a feeling of being exploited which is not helpful for the companies in the long run.
  • Value-based pricing focuses entirely on the customer as a determinant of the total price/value package.

• Identifying Potential Business Customers

  • Identifying your customer begins with formulating a value proposition.
  • You have to be able to answer this question: "To whom is this proposition of value?
  • The North American Industry Classification System (NAICS) is used by business and government to classify business establishments according to its primary type of economic activity (process of production) in Canada, Mexico, and the United States.
  • In particular, the salesperson should know the requirements that a potential customer has set for his future, his priorities, and in all probability, his financial resources.
  • Failing to analyze a prospect is the main reason for a great deal of wasted prospecting time spent on a customer who should have been promptly discarded after due research.

• The Exchange of Value

  • For a firm to deliver value to its customers, they must consider what is known as the "total market offering. " This includes the reputation of the organization, staff representation, product benefits, and technological characteristics as compared to competitors' market offerings and prices.
  • On the qualitative side, value is the perceived gain composed of individual's emotional, mental and physical condition plus various social, economic, cultural and environmental factors.
  • For an individual to deliver value, one has to grow his or her knowledge and skill sets to showcase benefits delivered in a transaction (e.g., getting paid for a job).
  • For an organization to deliver value, it has to improve its value to cost ratio.
  • For example, a consumer in Japan might value a pizza topped with tuna more so than one topped with pepperoni.