I start viewing the concept of value from marketing point of view. After all, it was my major in business school. Marketing theories approach value very often from a customer perspective and evaluate the concept based on difference between benefits and costs. In other words, value is created from a desired feature that is worth paying for, e.g. superior service and unforgettable experience or a product that makes everyday life a little easier with acceptable costs. Philip Kotler – a well-known guru in the field of marketing – talks about customers as value-maximizers, who invest “within the bounds of search costs and limited knowledge, mobility, and income.” Therefore, they choose to purchase the offer that brings them most value. Kotler suggest a framework for delivered value maximization in which customer delivered value is defined as difference between total customer value (benefits that are expected) and total customer cost (costs that are evaluated to be invested). Following figure depicts the framework.
Kotler gives two implications for the framework. First thing is to estimate the customer delivered value by comparing each competitior’s offer and assess how customers would evaluate the value you produce compared to others. Second, if you have a disadvantage in delivering value compared to others, there are two options to consider: either you can try to increase total customer value by improving image, personnel, service and/ or product value, or alternatively decrease the total customer cost in order to create greater value-delivered. In other words, companies can respond to the value-maximizing behaviour by increasing the benefit customer gets or decrease the cost they need to pay. (Source: Kotler, 2000, Marketing Management: Millenium Edition, 10th ed.)
So how does this model fit in with value creation in social media? Or should we rather ask what is the value of social media for marketing practice and how does it change the concept? Because social media is fundamentally about networking, a natural answer would be creating contacts, building relations, and enhancing cooperation. Thus, maybe we should talk about social marketing and add relationship value to the framework. I’ll return to the nature of marketing in digital media later on.
Tags: delivered value maximization, marketing, social media, value