Creating Customer Value

“The difference between the prospective consumer’s evaluation of all the benefits and all the costs of an offering and the perceived alternatives“
– by Philip Kotler.

Value has a total different connotation when it comes to marketing. The benefits that a consumer expects out of a product or a service, something which will satisfy the needs and wants, is called value. Since a customer never knows for the first time if the product will actually satisfy his/her needs, s/he always perceives them.

Red Bull in this case, through its advertisements and famous tagline, makes a customer perceive that it gives such a boost of energy that your body starts functioning with a double of what it was doing before. So because of these perceptions s/he will buy Red Bull over other energy drinks.

What a consumer gets out of the product, and what s/he pays to get it, is the total value s/he gets out of that product. Hence, the value a customer gets out of the Red Bull is the boost of energy against the payment of Rs 95 (that's how much a can of Red Bull costs).

Customer perceived value is thus the difference between the benefits the customer gets and costs s/he incurs to get those benefits.

Following is the chart representing determinants of the customer-perceived value.

 If the total customer benefits increases, value goes up and if the total customer cost increases, value goes down.

Total customer benefits:-

1. Product benefit: What makes a customer choose Red Bull over others is its distinguished taste, attractive and sleek packaging?

2. Services benefit: A good service builds strong customer loyalty and base. Services include home delivery, solving customer complaints, maintenance services etc. Red Bull doesn't provide these kind of services to its customer. It has a strong and smart customer distribution network. The ease of availability makes for a positive customer experience.

3. Personnel benefit:  There is no direct personnel interaction with the consumer in case of Red Bull. So the question of getting benefit in terms of responsive and trained staff does not arise.

4. Image benefit: Red Bull is a very strong brand. It has mastered the customer experience by becoming the face of extreme sports and associating its properties with "adventure" and pushing the limits. Red Bull is not so much an energy beverage as it is an aspirational brand. . The association factor is so strong that people buy it despite its premium price.

Total customer cost:-

Monetary cost: Red Bull is a premium brand . One can of Red Bull is priced at Rs 95. This does make it a non frequent purchase, at least where Indian customer is concerned. I, for example love it. But the last time I drank was a year back. Being a student doesn't give me this luxury.

Time cost: The distribution network is the strongest. You will find it in every restaurant, club. bar, college canteens etc. This availability and presence reduces the cost.

 Energy cost: Again the easy availability saves customer's search efforts and energy.

Psychological cost: Red Bull and all other major energy drinks brands are satisfactorily available in the cities. But someone living In a small town will have to really make an effort to get it. The search for the outlet, accessing that spot and ultimately getting it will really make him worked up. Now if he/she hasn't tried it before, taking all these efforts has a risk attached to it. What if you travel all the way to get one can of red bull and end up disliking it? There is psychological cost or risk attached to every product esp. the absolutely new one.