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Sunday, 20 October 2013

Marketing Notes - Customer Value Analysis

Question - Define and explain the term value analysis. Why customer value analysis is important in marketing? What are the different types of value analysis exercises?

Answer
Introduction
Whatever product a marketer has to offer in the market, one thing is sure, it's going to get competition. It depends on the product type and marketplace what degree of competition it'll get. In highly competitive marketplace, managing the non-price purchase and satisfaction drivers that matter most to customers can positively impact market share. Customers make purchase decisions based on how valuable they perceive the quality of available products or services as they relate to price. Those organisations that are perceived to offer low value are highly unlikely to attract new customers and retain their existing customers. 
In a highly competitive market, an organisation's competitive position is determined by the perceived value of its products and services, relative to the competition. Customer value analysis is a powerful analytical technique that help marketing managers to measure and grow relative market share.

What is Value Analysis
Value analysis is a process to identify and eliminate product or service features that add no true value to the customer or the product bur incur cost to the process of manufacturing or provision of service. Value analysis process is used to offer a higher performing product or service to the customer at a minimal  cost.

The competitive pressures are forcing manufacturing and marketing organisations to re-examine their product ranges to offer higher level of customisation without incurring high cost penalties.

Definition of Value Analysis
Value Analysis can be defined as "a process of systematic review that is applied to existing product designs in order to compare the function of the product required by a customer to meet their requirements at the lowest cost consistent with the specified performance and reliability needed."

Value analysis is a systematic, formal, and organised process of analysis and evaluation. Value analysis concerns the function of a product to meet the demands or application needed by a customer. In value analysis the review process include an understanding of the purpose to which the product is used. The formal management process must meet these functional specification and performance criteria consistently in order to give value to the customer. In order to yield a benefit to the company, the formal review process must result in a process of design improvements that serve to lower the production costs of that product whilst maintaining this level of value through function.

Customer Value Analysis
Customer Value Analysis is a powerful tool used to better define an organisation's products or services because it provides a better understanding of what customer value most. It allows an organisation to view its performance relative to the competition. Customer Value Analysis leads to development of high quality products, new product line extensions, and an optimal marketing strategy.

Customer Value Analysis is critical to understand the needs of the market, and to track organisation's and competitor's performance on those needs. 

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