Consumer Values, Product Benefits and Customer Value: a Consumption Behavior Approach
ABSTRACT -
From the perspective of consumption behavior analysis, this paper
constructs a framework of product valuation for consumers and its
typology of product benefits. Then, the paper presents a comprehensive
model of customer value for the consumer market integrating consumer
values, product benefits, logistic benefits, and various costs of
consumption. Finally, the implications of holistic consumption behavior
analysis for marketing strategy are discussed.
[ to cite ]:
Albert Wenben Lai (1995) ,"Consumer Values, Product Benefits and Customer Value: a Consumption Behavior Approach", in NA - Advances in Consumer Research Volume 22, eds. Frank R. Kardes and Mita Sujan, Provo, UT : Association for Consumer Research, Pages: 381-388.
Albert Wenben Lai (1995) ,"Consumer Values, Product Benefits and Customer Value: a Consumption Behavior Approach", in NA - Advances in Consumer Research Volume 22, eds. Frank R. Kardes and Mita Sujan, Provo, UT : Association for Consumer Research, Pages: 381-388.
Advances in Consumer Research Volume 22, 1995 Pages 381-388
CONSUMER VALUES, PRODUCT BENEFITS AND CUSTOMER VALUE: A CONSUMPTION BEHAVIOR APPROACH
Albert Wenben Lai, University of Wisconsin-Madison
ABSTRACT -
From
the perspective of consumption behavior analysis, this paper
constructs a framework of product valuation for consumers and its
typology of product benefits. Then, the paper presents a comprehensive
model of customer value for the consumer market integrating consumer
values, product benefits, logistic benefits, and various costs of
consumption. Finally, the implications of holistic consumption behavior
analysis for marketing strategy are discussed.
"Everything we do starts with knowing a client's business inside out. That's the keyC to anticipating their needs, to solving their problems, to bringing them opportunities they might not find on their own." C J. P. Morgan
INTRODUCTION
Most
marketing strategists will agree that creating customer value is
fundamental to both profit-seeking companies and nonprofit
organizations. Indeed, creating superior customer value is a necessary
condition for a company securing a niche in a competitive environment,
not to mention a leadership position in the market (Day 1990).
According to Porter (1980), a company can follow two generic routes to
compete in a market: differentiation and low-cost. Day (1990) maintains
that both approaches have the same objectiveC
to create superior customer value, because "regardless of which of
these routes is emphasized, the effort will fail unless significant
customer value is created" (Day 1990, p. 163).
Day
(1990) addresses the issues in analyzing customer value and proposes
that it can be expressed in a "value equation": "Customer's Perceived
Benefits-Customer's Perceived Costs=Perceived Customer Value" (p. 142).
Although Day's approach to customer value is basically sound, some
details regarding consumer customers remain unclear. For example, the
process by which consumers perceive product benefits is nebulous: Day
particularly addresses product valuation by industrial customers in
detail, but this is only in principle a part of a much more complex
process of product valuation by consumers. Hence a theoretical
framework which underlies the consumers' overall product valuation is
still missing in the literature. Such a framework should address the
issues of how consumers perceive the benefits and costs of products, as
well as what possible benefits and costs consumers may perceive from
products in the market. The current paper tries to fill these gaps.
In
addition, the word "value" has discrepant meanings in the marketing
literature, especially between its two areas: marketing strategy and
consumer behavior. What marketing strategists mean by "customer value"
is quite different from the meanings of the "consumer values" discussed
in consumer behavior research (Clawson and Vinson 1978; Kahle 1977;
Peter and Olson 1990; Sheth, Newman and Gross 1991; Vinson, Scott and
Lamont 1977; Wilkie 1990). Generally speaking, "customer value" focuses
on the buyers' evaluation of product purchase at the time of buying,
while "consumer values" stress people's valuation on the consumption or
possession of products. Actually, Day's approach to customer value (Day
1990), by emphasizing the customers' perceptions, indicates a
direction in which the two different, but related, concepts of
"value(s)" in marketing discipline might be integrated. The current
paper helps accomplish this integration by suggesting a model of
customer value for consumer markets.
This paper
first reviews the literature on consumption behavior analysis relevant
to marketing strategy. Next, a framework of product valuation for
consumers and its typology of product benefit are proposed based on the
consumption behavior analysis. After the process of product valuation
for consumers has been made clear, the paper presents a comprehensive
model of customer value for the consumer market integrating consumer
values, product benefits, logistic benefits, and various costs of
consumption. In the proposed model, product benefits, logistic
benefits, and costs are defined in terms of consumers' perception in
the activities of acquisition, consumption (or using) and maintenance,
as well as consumers' expectation of personal values satisfaction before
buying. Finally, the implications of consumption behavior analysis for
marketing strategy are discussed.
CONSUMPTION BEHAVIOR ANALYSIS AND MARKETING STRATEGY
Many
marketing researchers have maintained that detailed analyses of
consumption behavior are the fundamental basis for creating superior
customer value for consumers (Day 1990; Boyd and Levy 1963; Treacy and
Wiersema 1993; Normann and Ramirez 1993). The importance of a
comprehensive analysis of customers' consumption activities in planning
effective marketing strategies was first pointed out by Boyd and Levy
(1963). They maintain that marketing strategies should be planned and
implemented in terms of the customer's needs and behavior patterns.
Also, the core element of an effective marketing plan is to think in
terms of the "consumption system" in which the product plays a part.
Boyd and Levy defined a consumption system as "the way a purchaser of a
product performs the total task ... that he or she is trying to
accomplish when using the product C not baking a cake, but preparing a meal" (Boyd and Levy 1963, pp. 129-130).
Underlying
this systematic view of consumption are at least two concepts critical
to customer value analysis. First, this systematic view looks beyond
the purchase behavior of buyers to the use behavior of consumers:
"Whatever reasons people have for buying a particular product are
rooted in how they use that product, and how well it serves the use to
which they put it" (Boyd and Levy 1963, p. 130). Second, the systematic
view emphasizes the dynamic interrelations between the products that
comprise a consumption system: "The use behavior for a particular
product is bound to be affected not only by ... the task to be
performed with the use of that product but also by the related products
and their use behaviors that make up the total consumption system"
(Boyd and Levy 1963, p. 130).
Based on their
observation of the holistic nature of customer judgment, Day et al.
(1979) advocated the application of customer-oriented approaches to
defining a product-market and then identifying its competitive
structure. In particular, Day and his colleagues endorsed a
usage-situation approach to defining a product-market (or competitive)
structure. The usage-situation approach emphasizes that the anticipated
use, the functions to be served, and the consumption context of a
product ultimately influence consumers' choices among products/brands
(Srivastava 1981). Although it takes a systematic view of consumption,
the usage-situation approach stresses that the substitutability among
products/brands in the usage-situation determines market structures
(i.e., the competitive providers) of the product-type in question
(Srivastava, Alpert and Shocker 1984). While the usage-situation
approach is based on the holistic view of consumption behavior and is
dubbed customer-oriented, it deals only with companies' need to define
their product-market structures. It has nothing to do with the analysis
of customer value and how this value can be expanded. As Solomon
(1983) points out, conventional marketing research has paid much more
attention to the substitutability of products than to their
complementarity, and the usage-situation approach is no exception. In
summary, the literature on consumption behavior analysis can proceed
further to conceptualize the aspects of complementarity-in-use of
products through which consumer may derive product benefits
holistically in the product complement.
CONSUMER'S PRODUCT VALUATION AND TYPOLOGY OF PRODUCT BENEFITS
The
questions of how and what consumers perceive from products in the
market request the process and structure by which consumers value the
products. Based on consumption behavior analysis, the current paper
proposes a framework of product valuation for consumers and its
typology of product benefits (see Figure 1). This model stresses that
to investigate the consumer's product valuation, it is necessary to
integrate cultural values, personal values, consumption values, and
product benefits (Clawson and Vinson 1978).
Cultural Values
Cultural,
social, and familial environments affect the formation and development
of individual beliefs. In a socio-cultural environment, a set of values
usually represents widely shared beliefs about what is desirable.
These socio-cultural beliefs are called cultural values or "society
core values" (Engel, Blackwell and Miniard 1990) and are implanted into
individuals "naturally" through socialization and education, perhaps
with some modification as personality and attitude moderate the
learning process. For example, Kahle (1985) proposes a "List of Values"
(LOV) generic to American culture in the 1980s, such as self-respect,
security, self-fulfillment, fun and enjoyment in life, and warm
relationships with others. These cultural values are seen by some
social thinkers as "objective" (Frondizi 1963). This notion of being
objective implies that they are commonly known to the members of a
society. However, not all of the cultural values in a society will be
adopted unanimously by its members. Some cultural values might be
followed by only a small portion of the people, while other values
might be accepted widely. In sum, cultural values are generic beliefs
about what a society argues to be desirable and beneficial. These values
are then freely adopted on an individual basis.
Personal Values
Personal
values are the individuals' beliefs about what are desirable to
themselves. They are self-centered; that is, personal values are closely
linked to needs. Moreover, they are derived from, and modified
through, personal, social, and cultural learning (Clawson and Vinson
1978). From a cognitive perspective, personal values are the mental
representations of underlying needs after the modification, taking into
account the realities of the world and reflecting the individual's
personality (Wilkie 1990). For example, the cultural value of
"self-fulfillment" might be manifested quite differently in the minds
of two individuals with different familial and personal backgrounds.
According
to Rokeach (1973), human values have two main types: terminal and
instrumental. Terminal (or end-state) values are beliefs people have
about the goals for which they strive (e.g., self-fulfillment, or
enjoyment in life). Instrumental (or means) values are beliefs about
desirable ways to attain these terminal values (e.g., owning an elegant
house, or taking a vacation). Therefore, personal values generally
correspond to terminal values, while values of desirable activities (to
be discussed next) are comparable to instrumental values. Personal
values are enduring beliefs which guide various actions and judgments
across specific situations. Hence, personal values are more abstract
and may be generalizable easier than values of actions. In other words,
the concept of personal values is similar to the idea of "global
values" (in the realm of a person's perception) proposed by Vinson et
al. (1977); these are small in number (dozens) and considered to be at
high levels of conceptualization.
Consumption Values
Consumption
values refer to subjective beliefs about desirable ways to attain
personal values. People achieve personal values (or goals) through
actions or activities, such as social interaction, economic exchange,
possession, and consumption (Sheth et al. 1991). According to means-end
chain models of consumer product knowledge (Peter and Olson 1990),
people may have ideas and preferences about various actions that can
help them achieve personal values. Therefore, relative to personal
values, consumption values are instrumental in nature. For example,
owning an elegant house and acquiring a prestigious car are for some
people desirable ways of achieving self-fulfillment. Attending football
games (especially those of favorite teams) and taking a vacation trip
are favorable activities which lead to personal fun and enjoyment.
Furthermore, individuals may hold several personal values by which they
direct or evaluate consumption activities. Therefore, the consumption
values of these types of activities (or possessions) are sophisticated
and do not simply satisfy one single personal value (Shet et al. 1991).
As
we can observe in ourselves or others, consumption activities usually
include an assortment of goods and services (Boyd and Levy 1963). For
example, "owning an elegant house" requires house owners to acquire
many goods and services in addition to the house itself, just as
"taking a vacation trip" involves many other related acquisitions.
Moreover, in a product constellation for a consumption activity, there
may be some properties in common. McCracken (1988) observes that "the
consumer goods in any complement are linked by some commonality or
unity" (p. 119). From a social interaction perspective, Solomon (1983)
maintains that consumers employ product constellations in "setting the
stage" for the social roles they play. Product constellations occur,
because individuals use entire complements of products to achieve
personal values. The products unified in a constellation all carry the
same information about individual values. Furthermore, Lai (1994)
maintained that consumers may obtain satisfaction holistically from the
related consumption activities and the constellation of products in
use.
Consumption Schemata
Cognitive
psychologists maintain that people may acquire knowledge structures to
represent various consumption activities and product constellations
(Abelson 1976; Crocker 1984). Lai (1994) uses the term consumption
schema to refer to the cognitive structure which organizes and
represents personal ideas and beliefs about the substance of a
consumption activity, such as interrelationships among complementary
products, the cultural value and social meanings of the commodities,
and personal preferences and affective associations. Hence, a
consumption schema represents a consumer's basic thoughts about a
consumption activity, though peripheral adjustments may be needed to
accommodate the specific situation in which the consumption takes
place. In short, in consumption, or possession of products, people may
acquire personal consumption schemata (or a particular planned
pattern), including their anticipation of and requirements for a product
(or a complement of products), reflecting their consumption values of
that consumption or possession.
Typology of Product Benefits
From
the customers' perspective, products are viewed as a bundle of
benefits, not attributes (Day 1990; Peter and Olson 1990). In other
words, "customers are less interested in the technical features of a
product or service than in what benefits they get from buying, using or
consuming the product." (Hooley and Saunders 1993, p. 17) In a
competitive market, in addition to their basic benefits, products
usually have many other attributes, such as features, styles, symbolism,
durability, quality, and related services. By designing products with
combinations of these attributes, marketers try to attract consumers
with particular consumption values.
A
comprehensive understanding of possible benefits that customers may seek
in products is a fundamental basis for marketers to formulate sound
marketing strategies, especially product differentiation or positioning
(Peter 1990; Boyd and Levy 1968). Sheth et al. (1991) categorize five
product benefits which influence the consumer's choice behavior:
functional, social, emotional, epistemic and conditional. However, these
benefits are only generic; that is, they are general, potential, and
not yet applied to a specific consumption activity. Moreover, because
Sheth et al.'s analysis is not grounded in a holistic approach to
consumption behavior analysis, Sheth and his colleagues conflate
product benefits with consumption values; that is, they do not
distinguish "generic product benefits" from "consumption values," as
the current paper does. Furthermore, their categorization ignores other
important generic product benefits: e.g., hedonic benefits, aesthetic
benefits, and holistic benefits.
Going beyond
Sheth et al.'s original categorization of product benefits (Sheth et
al. dubbed them as "consumption values"), the current paper proposes a
typology of product benefits that a consumer may derive from possession
or consumption. The typology includes eight generic product benefits:
functional, social, affective, epistemic, aesthetic, hedonic,
situational, and holistic. The definitions of these terms are discussed
briefly in what follows:
(1) Functional benefit
refers to a product's capacity for functional, utilitarian, or physical
performance. Functional benefits are derived from the tangible and
concrete attributes that a consumer may directly experience when using
or consuming the product.
(2) Social benefits
are the perceptual benefits acquired from a product's association with
social class, social status, or a specific social group. Highly visible
products (e.g., clothing, jewelry, and automobiles) often carry social
benefits.
(3) Affective benefit refers to the
perceptual benefit acquired from a product's capacity to arouse
feelings or affective states. Affective benefits are often associated
with cultural-ethnic meanings (e.g., Christmas trees, Thanksgiving
turkeys) or personal, idiosyncratic meanings, tastes and memories
(e.g., foods that arouse feelings of comfort through their association
with childhood experiences, or cars with which consumers are said to
have "love affairs").
(4) Epistemic benefit
refers to the benefit acquired from a product's capacity to satisfy
curiosity, provide novelty, and/or meet a desire for knowledge.
Exploratory, novelty-seeking, and variety-seeking consumption behaviors
are examples of epistemic value pursuit. Also, a consumer's propensity
to adopt new products is consistent with epistemic benefit (Sheth et
al. 1991).
(5) Aesthetic benefit refers to the
benefit acquired from a product's capacity to present a sense of beauty
or to enhance personal expression. Aesthetic benefit usually is
subjective and idiosyncratic. Style demands, product-appearance demands,
art purchases, and fashion-following are examples of consumers'
pursuing aesthetic benefits.
(6) Hedonic benefit
refers to the benefit acquired from a product's capacity to meet a need
of enjoyment, fun, pleasure, or distraction from work or anxiety.
Olshavsky and Granbois (1979) claim that hedonic benefit is an important
dimension of many products. People are not always looking for rational
or "serious" benefits; they may want to relax or be distracted. Taking
a vacation trip, going to bars, watching sports, comic movies or TV
programs, or even buying funny trinkets to make fun of friends are
examples of hedonic benefit pursuit.
(7)
Situational benefit refers to the benefit acquired from a product's
capacity to meet situational needs in specific circumstances. A product
acquires situational value in the presence of antecedent physical or
social contingencies that enhance its functional, social, or other
benefits. Situational benefit is measured on the profile of a
particular consumption situation.
(8) Holistic
benefit refers to the perceptual benefit acquired from the
complementarity, coherence, compatibility, and consistency in a product
constellation as a whole. Holistic benefits are frequently required and
perceived in clothes, furniture, and food consumption. Holistic
product benefit is a result of "synergy" derived from a product
combination. Its implications for marketing strategy will be discussed
later in detail.
Different types of product
benefits may be correlated and combined in particular consumption
activities, or there may be trading off between them. In addition, a
product may offer multiple generic benefits. For example,
"to a first-time home buyer, the purchase of a home might provide functional [benefit] (the home contains more space than the present apartment), social [benefit] (friends are also buying homes), emotional [benefit] (the consumer feels secure in owning a home), epistemic [benefit] (the novelty of purchasing a home is enjoyable), and situational [benefit] (starting a family)" [The braces are the author's, to substitute the word "benefit" for the original word "value" and avoid confusion. The parentheses, however, are in the original passage.] (Sheth et al. 1991; p. 163).
Perceived Product Benefits
Generic
product benefits are intended benefits that manufacturers design into a
product. However, these intended benefits may or may not be perceived
or appreciated by particular consumers. A product has benefit to
customers to the degree that they can perceive, appreciate and then use
that product as anticipated consumption activities to achieve personal
values. Normann and Ramirez (1993) recapitulate this concept well; "A
company's offerings have values to the degree that customers can use
them as inputs to leverage their own value creation. In this respect,
then, companies don't profit from customers. They profit from
customers' value-creating activities" (p. 74). In sum, consumers
perceive and appreciate product benefits via their personal consumption
values and consumption schemata; these product benefits are termed
"Perceived Product Benefits" (Day 1990).
In
summary, the framework of consumers' product valuation delineates the
relationship between "personal values", "generic product benefits", and
"perceived product benefits" via "consumption values" and "consumption
schemata" (see Figure 1). That is, it illuminates the structure of
consumers' product valuation and how and what benefits consumers may
perceive from products. With this framework of product valuation for
consumers and its typology of product benefits in place, the current
paper proceeds to investigate the concept of customer value.
A MODEL OF CUSTOMER VALUE FOR CONSUMER MARKETS
Customer Value and Consumer Values
Many
marketing strategists and industrial-organization (I.O.) economists
emphasize that creating superior "customer value" is a key element for
companies' success (Day 1990, Porter 1980). However, what they mean by
"customer value" is quite different from the meanings of the "consumer
values" we have discussed above. "Value" to marketing strategists means
a return for something in an exchange (e.g., the value of the dollar
is variable). Therefore, the meaning of "customer value" is a level of
return in the product benefits for certain amount of customer's money
(i.e., the price) in a purchase exchange (e.g., to give the buyer good
value at the right price). In addition, the concept of customer value
has by nature a normative perspective, since it is a fundamental
concept underlying the competitive analysis in the field of I.O., based
on economic principles and the customer's choice in the market.
Consumer
behavior researchers, on the other hand, generally use the word
"values" to mean something desirable, useful, or important (Peter and
Olson 1990). Our previous discussion also adopted this meaning.
Consumer research usually is based on a descriptive-study perspective,
such as in the fields of anthropology, sociology, and psychology.
Therefore, "consumer values" refers to the important personal goals
that consumers are seeking (Wilkie 1990). Furthermore, consumer behavior
researchers emphasize that people can achieve some of their personal
values through possession or consumption of products (Peter and Olson
1990; Sheth, et al. 1991).
In summary, "customer
value" normatively focuses on a buyer's evaluation at the time of a
product purchase, while "consumer values" descriptively stresses
people's valuation of product consumption or possession. Consumer
researchers will argue that consumers buy products not for the sake of
its "transactional value" (a simple term for customer value) but for
the product's benefits that will satisfy their needs or personal
values. Our earlier discussions of the process of consumer valuation
explored the domain of consumer benefits in product consumption or
possession. However, in an exchange environment, product benefits alone
do not completely explain consumers' product choice. Often, consumers
may find products very desirable. Yet, in assuming that the consumer
has adequate financial capacity, one must not equally assume that a
purchase must follow. These cases imply that normative points of view
are also necessary in consumer choice research. From an economics
perspective, consumers may apply cost-and-benefit evaluation to a
purchase decision, at least when the costs are "significant" to them
(Olshavsky and Granbois 1979). Therefore, with respect to a sound
customer value analysis for a consumer market, both the descriptive and
normative aspects are essential (Boyd and Levy 1963; Day 1990).
The
current paper proposes a comprehensive model of customer value for
consumer markets (see Figure 2), based on Day's original idea of "value
equation" and emphasizing customers' perception (Day 1990). This model
integrates descriptive and normative points of view about consumer
behavior, including the consumer values expectation before purchase,
customer value evaluation at the time of buying, and value
actualization in consumption or possession.
The Model
According
to social psychologists, people's perception of objects and events is
influenced by their cognitive traits (e.g., personality and attitude,
personal values, and consumption schemata) and demographics (e.g., age,
education, income and wealth, and time resources). As indicated in
Figure 2, these factors of "Customer Characteristics" are the
background of the customers' perception.
The
buyers' evaluation of a product purchase begins from their perceived
product benefits. The earlier discussions of consumers' product
valuation have proposed a framework about how the customers perceive
product benefits based on their terminal personal values and
instrumental consumption values (or consumption schemata). In addition,
the discussion has suggested and illustrated a typology of generic
product benefits with eight categories. As indicated in Figure 2, the
model suggests that "Perceived Product Benefits" could be a single type
or a combination of the eight categories of product benefits.
Nowadays,
product benefits based on consumption or use of the product are not
the sole benefits consumers can perceive (Day 1990). They may also
derive benefits of a purchase from the buying activities per se and
other consumption supporting features. Treacy and Wiersema (1993) claim
that today's customers have "an expanded concept of value [purchase
benefits] that includes convenience of purchase, [and] after-sale
service" (p. 84), in addition to the traditional product benefits, such
as quality and price. We conceptualize these new dimensions of purchase
benefit and denote them as "logistic benefits." Logistic benefits of a
product purchase are those benefits consumers can derive from the
buying per se and other (after-purchase) consumption supporting
features about the product. These include the purchase convenience,
buying pleasure, variety of choice, short ordering time, availability
of parts and supplies, warranty, and after-sale service. For the
purpose of this discussion, the current paper does not probe the
typology of logistic benefits. These logistic features, if designed by
marketers in the product deal, are also subject to subjective consumers'
perceptions to become desirable benefits for customers. Moreover, the
perceptions of the customers are moderated by their personal values,
consumption values, and other individual characteristics (see Figure
2).
As mentioned above, the costs of obtaining
the perceived product and logistic benefits are usually the major
concerns of buyers, since consumers may apply principles of
costs-and-benefits to evaluate a purchase. The model proposes that the
relevant costs of a purchase considered by consumer include monetary
cost, time cost, risks, and human energy cost. Furthermore, every
category of the costs may play a part in purchase, possession,
consumption, and maintenance. The monetary cost refers simply to
monetary payment. The time cost refers to the amount of time required
for the relevant activities of acquisition or consumption. Consumers
encounter risks when they face the uncertainty or potential negative
consequences of consumer activities: being cheated, overcharged, or
misled into buying an unnecessary product; while possessing or using
certain products, such as unconventional clothes, may incur social costs
which include being teased by colleagues. Maintenance risks include
being overcharged for supplies and or suffering the possibility that
they will be discontinued. Finally, the human energy cost refers to
physical effort, difficulty of operation, and cognitive energy; these
might be of great concern to elderly customers. Nevertheless, all of
these costs, like the benefits, are also subject to consumers'
perception. Since perceptions of time, money, risk, and human energy
vary among people, these costs may be evaluated differently among
customers.
According to the cost-and-benefit
principle, customers evaluate the benefits against the costs and
perceive the buying value of products. As indicated in Figure 2, the
inputs of evaluation are the "perceived product benefits", "perceived
logistic benefits", and "perceived costs". However, as suggested by
many paradigms in consumer research, such as expectancy-value research
(Fishbein and Ajzen 1975) and elimination-by-aspects analysis (Tversky,
1972), not all benefits and costs are equally evaluated. Some benefits
and costs are considered central factors and are therefore weighted
heavily, while others are perceived as peripheral factors and weighted
less. This phenomenon concerning consumers' idiosyncratic patterns of
weighting for the evaluating factors is also reflected in the model.
Finally,
the model suggests that customer value is a consequence of subjective
evaluation which in turn results from the summing up of the various
perceived benefits and perceived costs, taking into account the
differently weighted factors. In other words, the "perceived customer
value" in the model is defined as the surplus (or the difference)
between perceived benefits and perceived costs (Day 1990); that is, it
refers to a level of subjective return for the customer perceived costs.
DISCUSSION: IMPLICATIONS FOR MARKETING STRATEGY
In
the current model of consumer customer value, product benefits,
logistic benefits, and costs are defined in terms of consumers'
perception in the activities of acquisition, consumption (or using) and
maintenance, as well as consumers' expectation of personal values
satisfaction before buying. In other words, our consumption behavior
approach is holistic analysis-oriented, going beyond traditional
"customer-oriented" methods which usually focus on the buyers' economic
evaluation at purchase.
As emphasized in the
model, the importance of product benefits, logistic benefits, and costs
vary among people due to their individual characteristics. These
phenomena have led in marketing practice to benefit or cost segmentationC
the process of dividing consumers into homogenous subgroups or
segments based on their interest in particular product benefits. The
benefits most important (central) to target customers is a fundamental
issue in marketing strategies, such as product differentiation and
positioning. For example, to succeed with a "value strategy" (also a
high price strategy) a company needs to offer products with premium
quality in the central benefits, such that their customers "correctly"
perceive those benefits and are willing to pay the price premium
(Treacy and Wiersema 1993). On the other hand, to make a "cost strategy"
(or a low price strategy) profitable, a company must offer products
with an acceptable level of quality in the central benefits and minimal
quality in the peripheral factors, such that their customers will
enjoy the product and perceive the purchase as a value (Normann and
Ramfrez 1993).
The current paper's implications
for market positioning are clear: its categorization of generic product
and logistic benefits may help marketers identify their target
consumers' central and peripheral benefits. Then, the typology could
help companies design their products and related marketing programs,
such as advertising and distribution.
Holistic Product Benefits and Marketing Strategy
One
new category of product benefit introduced in the current paper is the
"holistic product benefits" customers may perceive and appreciate in a
product constellation. This type of product benefit has been largely
ignored in the literature. Their implications for marketing practice
will be discussed next.
In consumption settings
where multiple products are needed, the product constellation forms a
"consumption system" (Boyd and Levy 1963). A consumer may obtain
utility holistically from the product constellation based on a personal
consumption schema. When a consumer tries to combine a product
constellation and to construct from it a meaningful combination,
certain dimensions of compatibility and complementarity between
products may be critical to perception of the products' benefits. These
dimensions briefly described here (for a detail discussion and
examples, please see Lai [1994]): (1) "functional exhaustivity"
suggests that products are combined in a way that the required
functions are completely fulfilled; (2) "operational connectivity"
suggests that the operations (or the physical shapes and positions) of
the products are smoothly connected. (3) "aesthetic coherence" relates
to the sense of beauty or to personal expression in the product
constellation; and, (4) "meaning-role consistency" refers to the
perceived coherence between the cultural meanings of products and the
social roles which the consumers assume (Solomon 1983).
The
holistic product benefits may be a good basis for product positioning.
As defined previously in the current paper, holistic product benefit
refers to the perceptual benefits acquired from the complementarity,
coherence, compatibility, and consistency in a product constellation as
a whole. A company could set itself apart from the competition by
identifying and promoting itself as the best provider of certain
holistic benefits of a product constellation to satisfy consumer's
needs. In pursuing a competitive positioning through holistic product
benefits, the company may need to reshape its business scope or
redefine its product lines, and consequently obtain its sustainable
competitive advantage.
Organizations can design
competitive marketing strategies based on meaningful and desirable
combinations of product benefits for their customers. How to select a
competitive strategy and the desirable benefits of the product will
largely depend on the company's knowledge about the customers'
consumption behavior. In addition, the relative defensibility of the
strategy in the market is another problem in selecting a competitive
strategy. The consumption behavior approach to the customer value would
provide more strengths in strategy defensibility. For example, the
positioning through holistic product benefits can enjoy the synergetic
effects derived from a meaningful product combination that is developed
from a comprehensive knowledge of customer consumption behavior.
Furthermore, sometimes a company has to coordinate a complementary
business group (also a synergy generating activity) to provide
meaningful product combinations to customers (Normann and Ramirez
1993). In these situations, the defensibility of the competitive
strategy would be even stronger because of the synergetic effects.
Normann and Ramirez (1993) recapitulate this implication for marketing
strategy well: "One of the chief strategic challenges of the new
economy is to integrate [the consumption behavior] knowledge and [the
interfirm] relationshipsC devise a good fit between [companies'] competencies and customers [(customers' needs or individual values)]..." (p. 74).
CONCLUSION
The
consumption behavior approach to customer value can be an effective
way of achieving more innovation, enhancing customer value, and
obtaining greater marketing penetration and strategy sustainability.
Consumption, like production, involves a constellation of goods and
consumption values or desirable benefits. If marketers think of
consumers as engaged in a constructive process by which they achieve
their consumption values, it may be easy to see that a variety of
holistic benefits are involved as customers use the products (Boyd and
Levy 1963). Although the marketers may already plan and act in terms of
consumer needs and behavior patterns, they can gain even more insight
if they study consumer's consumption behaviors in which their products
play a part. For knowledge of the customers' consumption behavior to be
truly meaningful, much more would have to be known about the
customers' personal values, feelings and thoughts, and consumption
values. In other words, understanding the consumers' consumption
behavior means that their activities should be analyzed thoroughly and
holistically, from the expectation about consumption values at the
prepurchase stage, to the purchase evaluation at the stage of selection
and acquisition, to consumption values actualization in the stage of
use, possession, and maintenance.
One caveat
about customer value: greater customer value does not necessarily equal
greater customer satisfaction. Customer value is defined as the
difference (or surplus) between benefits and costs; it is a level of
return for customer costs. From a cognitive perspective, according to
expectation theory, satisfaction is the result of a comparison between
what actually occurs and what is expected. Hence the customers' buying
satisfaction depends on both their perceived value of the purchase and
their knowledge of what a fair level of buying value should be. In
short, customers will feel satisfied to the extent that the perceived
value of their buying exceeds the standard they hold. From this point
of view, exceeding value is the key for customer satisfaction, not
customer value per se (a surplus value). This issue can be viewed as an
avenue for further study.
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