There is lot of talk of value for money these days. In
fact you get to hear it from every retailer that you visit. How do you actually
create value and is there any limit to the value that should be created ?
When we talk about value it is all about the
perception in the mind of the consumer and whether the product P satisfies his
needs. There is no limit to how much value ( or rather features) which an
enterprise can add to its product: the limit lies in the affordability of the
product as added features will no doubt add to costs as well.If we plot the
graph for this, it should look something like this:
1. The start of the Value curve( Red) : Notice the gap
between the price the consumer is willing to pay for the product. The
knock-offs generally lie around here in the value curve: the product
development cost is minimum and returns are high.
2.The middle of the Value curve : This is the region
where most players in the region lie. The R&D investments are substantial
and sales are also good, however the products are not path breaking.
3.The target point: This is where the price and value
meet. It is the ideal place to position a product in the market. Great sales
are always a characteristic for players in this segment. Apple IPhone can be
regarded as a product lying at this point right now.
4.The end segment of the value curve: This is the
segment which constitutes absolute maverick firms. These firms invest
substantially in development and are always looking to deliver to markets for
the future. However care should be taken that the product is not too advanced,
otherwise the benefits are reaped by another player in future. For example, the
first touch screen phone,Simon, was built by IBM but no one hardly knows about
it.
The nature of the price curve (blue) should also be
studied carefully and it is noteworthy that consumers are not willing to spend
beyond a point as can be marked by the flattening of the curve.
Food for thought: How much value do you build to your
product ?