Question

How do you determine the “value” of a product or service?

Answer 1

Value of a product refers to the benefit received by a particular customer by using a product or service minus the related costs. Value of products and services can be determined in several ways.

Determination value by market position.

  The firm can determine the value of their products as well as services with regard to their corresponding market position. Here the firm analyses the position hold by the product in the market. The products or services which is more likely by customers will usually holds a better market position than the products of competitors. Measuring the value by evaluating the current market positions helps to understand the interest of customers towards that particular product.

Determining value by profit.

Profits earned by selling a particular product or service reflect the customers perception about that product. The firm usually gets high profits when the customers like the product. In this approach the firms will evaluate the profits earned for product or service to determine the value of it. The value determined through this method will be more accurate. The profit of a product depend on various other factors also. Thus when the firm considers the profit for determining value all other factors are also considered indirectly.

Measure value collaboratively.

Under this method the collaborative estimation of value is done. Here the product feature or product is assigned a value. The value is given to the product and services on the basis of inputs like cost, level of effort and risk. Determining value under this method is considered to be better though it creates empathy in the minds of customers. Even though eh value determined in such a way is not much accurate though it is very subjective.

Determination of value by customer perception.

The customer’s perception towards the organization reflects their perception about the product. Under this approach the perception of customers are measured on the basis of utility. The value determined through this method is said to bee very effective. The value is determines for product or service by analyzing the customers perception. It helps to get more realistic value for the same.

Measure value on the basis of what matters to you.

In this approach the firm has the complete right to select a metrics to evaluate the value of product and service. The value can be measured on the basis of market, organization and product. The value is determined in such a way because it is believed that the value off product will differs over time. Thus the value can be ,measured on any metrics which is seem to better at present.