Value – the traditional view

Value = Quality/Price

This is the traditional, simplified much accepted model to describe Value, as perceived by the customer.  Here, it establishes Value as being:
1. directly proportional to Quality (product and/or service)
2. inversely proportional to Price

Excluding situations where Price and perceived Quality are correlated (i.e. higher price drives higher perceived Quality or vice versa), marketers have tried hard to maximize Value by enhancing Quality perceptions and/or lowering perceived Price.

value 1

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For example, a more expensive laptop is a better laptop; or a higher-priced carton of milk is superior to other lower-priced brands of milk in the same pack sizes.

Further, use of immediate or delayed gratifications – such as promotions (deals, price-offs, premiums/freebees) or reward points – are typically deployed by marketers to help drive down the perceived Price.

One cannot help but notice the fundamentals of Economics at play here: The generation of Consumer Surplus!

Given the increasing complexity and nature of businesses, where lines between pure product and pure service start blurring, perceived Value can be manipulated by driving both Quality and Price perceptions.

Take for example the case of bottled water sold at a store or served at a restaurant. Even at a store, we could buy the bottle at room-temperature or chilled.

The fact is, the notion of Value can be easily affected by playing around with factors that contribute to how a product, a service or a brand is delivered to, or used/consumed by, a customer.


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