The perceived monetary value of the bundle of economic, functional, and psychological benefits.

 “The difference between the prospective consumer’s evaluation of all the benefits and all the costs of an offering and the perceived alternatives“

– by Philip Kotler.

The concept of customer value is one of the most important factors affecting the marketing of any product. Value represents the use for of the product in the minds of the customer. Every product provides some value to the customers. It offers some set of benefits, advantages and disadvantages to the customer which is the reason why the product has been bought. The choice of a product depends a lot on its value as perceived by a potential customer.

In simpler terms, it is the difference between what customers gets from a product, and what he or she has to give in order to get it.

Once we can define customer Value, it is important that we understand the concept of Total Customer Benefit and Total Customer Cost. Philip Kotler defines them as follows

Total Customer benefit – “the perceived monetary value of the bundle of economic, functional and psychological benefits customers expect from a given market offering because of the product, service, people and image“.

Total Customer Cost – “perceived bundle of costs customers expect to incur in evaluating, obtaining, using and disposing of the given market offering, including monetary, time, energy and psychological costs“.

All the above mentioned concepts can be put together in a flow chart as follows:

Value derived from Magnum Ice Cream by a customer:

·   Image benefit: The Image benefit is the brand name associated with the product, MAGNUM and HUL. Magnum is the world's biggest stick ice cream brand and accounts for almost 2% of the total revenues of Hindustan Unilever, the largest ice cream maker in the world. Kareena is the ‘Pleasure Ambassador of the brand’ and she perfectly personifies the brand with her irresistible charm and royal demeanor.”

·       Personnel benefit: Ice creams offer no personnel benefit.

·    Services benefit: Services benefit accounts for the attributes of the services offered along with the product. Any kind of help, instructions or assistance offered with the product would fall under this. In case of Magnum, the nutritional content, ingredients, customer helpline numbers etc. will make up this benefit.

·       Product benefit: Product benefit accounts for the attributes of the product, which might entice a potential consumer to decide to choose this product over others. Magnum is pure pleasure from its first distinctive crack to the last bite.  Magnum is recognized as a symbol of royal treatment. It is crafted skillfully from bean to bite from the finest Belgian chocolate to invoke a sophisticated and luxurious experience. Its attractive gold –wrapper screams Quality. It provides a sense of satisfaction.

Costs Pertaining To A Magnum Ice Cream

:

·       Psychological cost:  Psychological cost is the total mental effort made during acquiring and using the product from the moment it was bought to the moment it was consumed. It is also very difficult to measure this as it would take lots of data to biologically decide what goes where.

·   Energy Cost:  Energy cost refers to the energy spent by the buyer during the entire process of buying the product. Energy cost related to Magnum is negligible as its available easily.

·   Time Cost: Time cost is the total amount of time that has been invested by a customer during his buying process. The time taken for the customer to reach a store and to buy a stick of Magnum is the time cost here.

·  Monetary Cost: Monetary cost encompasses the literal cost incurred by a customer in order to obtain the product. Cost per ice cream multiplied by the number of ice creams purchased is the total monetary cost in the case of Magnum.

Rs 80 per stick.

Hence, summing it all up, we can say that the ‘Customer Perceived Value’ for a product is a function of the ‘Total Customer Benefit’ and ‘Total Customer Cost’.