Significance of the Value Equation for Global Marketers

Topics: McDonald's, Marketing, Perception Pages: 2 (622 words) Published: July 16, 2010
Significance of the Value Equation for Global Marketers
According to Keegan (2002), the value equation can be considered as a guide to create perceived value for customers by any organization operating anywhere in the world. The value equation is known as V=B/P, where V is the value, B is benefits and P is price. The value can be increased in two ways, by increasing the numerator ‘benefits’ or by reducing the denominator ‘price’. Keegan (2002) elaborates that the benefits can be increased by improving the product itself, the product distribution, and/or the communication. Therefore, a company that can produce a superior quality product at the lowest cost could achieve a competitive advantage in a market place. However, I tend to disagree with Keegan’s approach to value equation, as I believe the ‘value’ of any goods or services resides in the mind of the customer. The research also shows that the definition of ‘value’ has often been debated within the research community for many years (Blois, 2004). According to Blois (2004), the most important aspect of ‘value’ is for the manufacturer to remember the customer’s interpretation of ‘value’ as opposed to what the supplier may perceive as ‘value’. Considering the value equation, it may appear to the manufacturer that they understand the customer's interpretation of value by considering the benefits and the price of the goods produced. However, the key is not just the core need of the customer, but what a customer expects the offered product to fulfill, and how the customer perceives the purchase, will contribute to the generation of value for it. Therefore, some researchers have modified the value equation to V=X/P, where the X factor represents the sum of design, quality and reputation or brand (Product Design, 2004). This equation is based on the assumption that ‘value’ has two components, that is, the emotional and the functional (The Engineer, 2004). For example, a product needs to have a functional...
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