Concept of Value

Topics: Customer service, Price, Customer Pages: 5 (1776 words) Published: February 19, 2013
Concept of Value Proposition
The concept of value proposition is often used in marketing literature [Anderson et al. 2006, Clarke III 2001]. Value proposition is understood in this paper as a composition of values delivered to customers by a company in order to satisfy their needs. Values are delivered to customers through products or services, other instruments of marketing or in other ways (e.g. by corporate credibility). They can be differently categorized. Probably the simplest categorization of values includes functional and symbolic values. In the traditional economy a very common rule of value proposition formulation is combining the price level with the values for customer. According to this rule, companies offering inferior values charge customers lower prices than companies offering superior values. Hence, there can be several strategies of value proposition distinguished (e.g. inferior value – low prices, superior value – high prices). The application possibilities of this rule on the Internet are constrained. The rule explains well the strategies of companies taking part in a monetary value exchange, such as online stores. Among them there are companies selling a product with inferior customer service and charging low price and other companies that enrich the same product in great customer service and expect higher prices for it. Referring values to price level may not always be used on the Internet for several reasons. In the online environment many companies offer superior customer values for free. To these companies belong newspapers publishing content or companies offering communications services on the Internet, such as e-mail or instant messaging providers. Moreover, according to Kim on the Internet the strategy of offering superior values and charging high prices is rarely adopted [2004]. In traditional economy this strategy is most often used when marketing high quality, well-branded products to affluent customers. Author distinguished five following strategies of value proposition on the Internet: strategy of efficiency, free values, complete customer solutions, unique values and value co-creation. It is worth mentioning, that these strategies have been formulated according to different criteria and may be merged. Strategy of Efficiency

Efficiency strategy consists in offering values to customers, which are to lower their transactional, interaction and other costs and in this way allow savings of time and money. The examples of companies adopting this strategy are online auctions. Due to supply aggregation they offer wide range of products, which leads to lowering customer transactional costs within offer search and analyses. Moreover, these companies decrease also customer costs by reduction of information asymmetry. This phenomenon occurs when one of the transaction parties has greater knowledge than the other party and is able to take advantage of it. Usually, this is the seller who has greater knowledge, which is the best seen on the second-hand market.  Online auctions reduce the information asymmetry using the seller’s evaluation performed by buyers. It is worth mentioning that online auctions also deliver knowledge on buyers, which allows reducing the risk and the transactional costs of sellers. Research of Garciano and Kaplan showed that transactional costs of buying or selling a used car with the use of Internet is twice as low as without it [Zott, Amid, 2001]. Many Internet companies apply the efficiency strategy while offering values related to communications. These solutions such as e-mail services, instant communicators, social networking websites also reduce the transactional costs of a customer. Strategy of Free Values

Free value strategy is based on offering values to customers, for which they are not charged. This strategy has been popular since the early years of commercial use of Internet. As a consequence many companies, among which newspapers, charge customers outside Internet,...
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