Linked to the concept of Customer Perceived Value
In two of my previous articles in news analysis section, I linked the concept of value chain to news pieces relating to two different industries, where focus was on the losing relevance of Just-in-Time model.
Businesses exist on the value they build. Value is built both within & outside the organization, and the energy to sustain is derived from it.
Today, I will cover the concept of Customer Perceived Value, linking it to a business news piece to help you learn the strategies that can denote value to the customer and bring growth for the marketer.
Before I come to the excerpts from news clippings, let me devote some time on the concept of Customer Perceived Value or CPV.
Let me ask you, as a marketer, do you think customers buy products? Do they find your differentiation appealing?
My answer is NO.
Customers do not buy products. Customers buy your promise of performance which you speak in the language of benefits. They are appealed by your differentiation, again, only if it sounds beneficial to them.
When the brand Dove says it has one-fourth moisturizing cream, it differentiates itself from other soap brands. But do customers buy it for this differentiation? Not really!
Customers buy brand Dove because it says it has one-fourth moisturizing cream that gives softer smoother skin. Now, this is the benefit that appeals the customers.
The cost a customer is ready to incur for a particular benefit or set of benefits is the worth of the product in customer’s life and this is what is known as Customer Perceived Value
In the above example, I have mentioned just one benefit relating to Dove, but there is always a basket of different benefits which make the product a valued offering. This whole basket of benefits is the value proposition which marketers bring to market. In order to gain a competitive edge, marketers have to develop strategies which can increase total customer benefits and reduce total customer costs leading to a rise in customer perceived value and thus, the win.
Various components of Total Customer Benefits and Total Customer Costs, as portrayed by Philip Kotler, are shown diagrammatically below. There can be many more benefits and costs constituting CPV.
Now, let me connect this to one business news article I recently came across. The news article is about the ed-tech sector witnessing exponential growth and increasing number of unicorns, especially during the pandemic.
This news is from HT Mint dated 28th May, 2021:
Now, the analysis.
Pandemic fueled the adoption of technology in education across all segments. Potential of big growth brought investor funding for start-ups in ed-tech. The cost value analysis of build vs. buy route to growth, took the unicorns of the sector on to the merger & acquisition route, which enabled them to increase the customer perceived value by providing them with wide product & service offerings.
As mentioned in the news above, India’s second largest unicorn Byju’s, with 3 acquisitions of Scholr, WhiteHat Jr & Aakash Educational Services, could expand its product portfolio which now has K12 solutions, coding courses and test-prep education services. With such diverse set of products, Byju’s is able to cater to wide segment of students at different stages of their education lifecycle. Another investor backed unicorn, Unacademy, has acquired half a dozen companies.
The CPV of students and parents increases as they start getting high product and service benefits from brands like Byju’s & Unacademy. A brand that is growing fast, getting large funds from investors and acquiring new players in the market has a big segment of satisfied customers, and all of this develops trust towards the brand. Thus, it gives image benefit to the customers and reduces their psychological cost or tension.
The news also mentions that current scenario of acquisitions is leading to consolidation in education sector. I feel this consolidation will bring a diverse set of educational products and services under one brand umbrella, which will definitely bring in a synergistic effect, reducing cost for the marketer. Benefits of this reduced cost, if passed on to the customer, will increase the CPV.
All the mergers and acquisitions and the consolidation of the sector will open up opportunities for the ed-tech companies to diversify in different directions and make the offerings more accessible.
On the total customer cost parameter of CPV, there has come a massive change in the current time as compared to pre-pandemic one. In the pre-pandemic world, we saw students enrolling in different institutes/coaching centers for different courses and exam preparations. The decision-making process of students and parents, leading them to final choice of coaching institute was extremely time consuming, requiring lot of effort. Current ed-tech companies have reduced that time and energy cost of the customers by providing different offerings and services on a single platter.
Further, what can be seen is, if a student is highly satisfied with the K12 education services of a particular brand with a wide product portfolio, they will prefer going ahead with the same brand for future education requirements, such as test-prep or courses like coding and more. Staying with the same brand for crucial aspects of their life reduces the psychological, time and energy cost of the student. For students taking multiple courses with a brand, the pricing would definitely be attractive for them, providing benefits for their long association. Monetary cost goes down for such customers and the brand builds a strong loyal base.
Lastly, what also gets interpreted and stands true is that a growing brand with a strong image attracts the best of talent from the market, such as those who are willing to work and add value to these companies. As a result, customers get the personnel benefit as well.
Marketers need to make a conscious effort towards balancing the benefits & costs aspects which lead to increase in the overall customer perceived value. More importantly a detailed understanding of the customer segment is essential as importance of each benefit & cost differs for the different segments.
nice and true analysis Prachi.....
The Learning which I have got from you during my MBA has always intact with me. This platform is only going to increase that learning. Thankyou so much mam.