Perceived Value of Products

Enhancing the marketing effort means increasing the value that the customer perceives in the product or service offered. Since the customer determines value, the customer is where organizations should start when considering how to improve the perceived value.

The approach that an organization takes for perceived value depends on the nature of the product or service offered. The chart below illustrates how three different products have distinct combinations of characteristics that have low, medium or high impact on customers’ purchasing decisions. For example, the most influential characteristics of diamonds are design and prestige. Customers that value design and prestige are more likely to buy diamonds that those who place more value on different product characteristics such as function or utility.

The Impact of Different Characteristics on Purchase Decisions

Once marketers have researched the motivations and values of customers in a specific international market, the next step is to adapt what they sell and how they sell it to match their preferences. Enhancing value can mean changing the product to give it new features or a different design. In other cases, it can mean changing how the product is sold.

Want to learn more about planning and implementing marketing strategies? Check out the FITTskills Marketing Products and Services online workshop!

10 product characteristics and features to highlight to customers

1. Quality: Emphasize the number of satisfied customers or the durability of the service/product. Offer warranties or after-sales service to demonstrate that the organization stands behind the service/product.
2. Functionality: Inform the target market about different ways of using the product. A campaign for orange juice argued, “It’s not just for breakfast anymore”.
3. Design: New packaging or different colours may satisfy this concern. Alternatively, the organization may need to modify the appearance of the product.
4. Prestige: Sell the product at a high price through an exclusive retail outlet. Emphasize the intelligence or taste of people who buy the product.
5. Safety/security: Emphasize that the product conforms to health or safety standards or that it has performed better than the competition on tests.
6. Timely delivery: Design your distribution chain so that the product always arrives when it “absolutely, positively has to be there”.
7. Ease of assembly or maintenance: Perform partial assembly before the sale, provide written instructions with the product and offer to help purchasers with assembly.
8. Delivery to a specific location: Develop a delivery system that brings the product where the customer wants it. A key value for pizza restaurants is the ability to bring the product to the customer’s home.
9. Ambiance at the point of purchase: Sell your product in a fashionable boutique setting.
10. Price: Use a big-box store format to move huge volumes while
    incurring minimal overheads.

Perceived Value of Services

The intangible nature of services can make them more difficult to sell. Service providers need to understand how customers assess services. One way marketers can do this is to understand the relationship between perceptions and expectations. This relationship has been described as:

Satisfaction = Perceived Value – Expectation

If customers perceive that an experience has exceeded their expectations, the customer is satisfied. If customers perceive that an experience has not met their expectations, then the customer is dissatisfied.

Not all customers are the same. Their culture, life experiences, age and other characteristics cause great variation in perceptions and expectations. For service providers, this means that they need to understand customer expectations in the target market. Understanding expectations allows organizations to set a benchmark for perceived value that will result in customer satisfaction.

Although each customer’s perception of value is unique, aspects of perception can be objectified and business strategies used to address issues.

For example, if customers consistently stand in line to wait for service, then they would likely perceive shorter waiting times as valuable. The service provider could influence the perceived value of their service by adding additional staff to reduce waiting times. However, customers vary and what might be considered a short wait for some may be too long for others.

The numerator of this equation includes what the customer receives from experiencing the service. Results are the outcomes, what the customer hopes to obtain from using the service. The process refers to the factors of delivery, e.g. wait times, information provided, the interaction. Emotional value is what the customer feels about the service, brand or the event when experiencing it.

The denominator is the cost of the service to the customer. In addition to the monetary cost of the service paid by the customer, there is also the cost of any inconvenience, such as wait times, parking or delays. Uncertainties are the cost of the unknown—what the customer is unsure of in relation to the service—and they can cause anxiety.

Service providers can influence these factors using business strategies. For example, costs can be controlled to ensure prices are reasonable for the customer, contingency plans can be put in place for inconveniences, and money-back guarantees offered to reduce uncertainty. Meeting the customer’s expectations for results and process also increases the emotional value of the service.

The chart below shows the factors that contribute to the benefits and costs that influence how a customer views the value of a service. Ideally, the “Total Customer Benefits” outweigh the “Total Customer Costs”, creating an overall positive perception of the service.

Customer’s Perceived Value of Service

By defining the customer, assessing customer satisfaction and determining the perceived value of the service, the service provider can identify the selling points for the service being offered. This information helps service providers adapt and customize their services and develop their value propositions.

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Whenever organizations try to enter a market, they will encounter some obstacles or conditions that make entry more challenging, more expensive or even impossible. Without a full understanding of the different types of market entry barriers, organizations may choose an ineffective market entry strategy. The research and risk analysis completed as part of the feasibility study may reveal potential barriers.

Here are nine of the most common market entry barriers and potential strategies to address them.

1. Trade and economic sanctions

• Choose a different market not affected by economic sanctions
• Export a different line of products/services not subject to trade sanctions
• Delay market entry if it appears sanctions may be lifted

2. Export and import controls

• Select a different market with which to trade
• Develop alternative goods/services to trade

3. Customs tariffs and taxes

• Develop value-added activities in the target market, such as after-sales service, that are not subject to tariffs and will enhance the value of the more expensive product
• Start producing goods in the target market to avoid the need for importing
• Partner with an organization in the target market that will produce goods at its facilities

4. Import and tariff quotas

• Export to a different market
• Develop products/services that will not be subject to quotas
• Produce goods/services in the target market to avoid having to import

5. Government subsidies

• Develop value-added activities in the target market to increase the attractiveness to foreign purchasers
• Adapt the product or service to give it more appeal and justify the enhanced price

Want to learn more about developing a strategic plan for market entry? Check out the FITTskills Planning for International Market Entry online workshop!

6. Trade blocs (if the organization’s nation is not a participating member)

• Partner with an organization in a preferred trading relationship with the chosen market or in the chosen market
• Set up a subsidiary organization in the chosen market or in one that has a preferred trading relationship
• Invest in production facilities in the chosen market to avoid the need for exporting
• Adapt the product or service to enhance its perceived value and justify the increasing price

7. Political instability

• Enter the market for a short-term venture only
• Limit exposure by not locating facilities or employees in the country
• Request cash or an irrevocable confirmed letter of credit up front, before delivering goods or services

8. Customer preferences (product familiarity, religious and cultural aspects, language, etc.)

• Adapt products or services to appeal to the target market

9. Economic barriers (costs for land, construction, raw materials and resources, tax rates, market wage rates)

• In markets that will not bear the cost of the product/service, assess ways to cut costs
• Reposition product/service as a luxury item
• Specify payment in stable currencies
• Use hedge funding techniques to mitigate currency risk

How will you handle the market entry barriers facing your business?

Careful research will identify potential problems in a market and those problems will vary from one market to another. For example, Canadian exporters to the U.S. might not encounter many cultural barriers, but they will have to overcome those imposed by U.S. protectionist legislation.

It is important to evaluate exactly which barriers apply to which markets. Only then can decision-makers responsible for logistics, marketing and distribution develop a plan, recommendations and proposed solutions to overcome or minimize the impact of the specific barriers, allowing for the desired market penetration.

There are few barriers, no matter how difficult or insurmountable they seem, that cannot be overcome or at least minimized. The process requires a detailed study of each barrier and consultation with available experts, including local business people.

A preferred strategic approach is to use partnering to help overcome most, if not all, barriers to entry. Local partners can provide insights and useful advice into market dynamics, serve as representatives and agents, and become business associates and even permanent joint-venture partners. A careful use of partnering strategies can go a long way toward eliminating barriers, reducing risks and smoothing the way to market entry.

The post Overcome 9 of the most common market entry barriers with these strategies appeared first on Trade Ready.

Customer value is the measure of a company’s contribution to its customer based on the company’s entire range of products, services offered and intangibles. Effective supply chain management aims to provide optimal customer service for minimal cost. However, companies cannot fulfill customer needs if they do not have a clear understanding of customer requirements.

The most successful international companies are those that know how to assess customer needs effectively and apply the findings to their strategies for supply chain management. They must ensure that their offerings are adapted to suit local tastes and preferences and must have their products available when customers want them. Companies must also offer a price for their goods or services that is both competitive and profitable.

Before mapping out global supply chain management strategies, companies need to have a thorough understanding of customer requirements in all targeted international markets.

This information will be critical in mapping out networks and supply chain strategies.

Selecting where to make profitable improvements

Providing optimal customer service is different than providing a maximum level of service. Sometimes the cost of providing additional services is prohibitive and the competitive environment does not require it. There is no need to plan a supply chain that will result in a faster delivery time if it does not result in happier customers or an increase in sales, profit and market share.

Although satisfying clients’ needs is a primary objective of the global supply chain management process, companies must ensure that their operations are viable and are conducted in a manner that does not exceed their capabilities.

For example, companies must evaluate their distribution options based on:

• the size of the target market for a product; and
• the service requirements of potential customers.

Required levels of customer service are closely linked with distribution options. For example, if customers expect a product to be delivered in twelve weeks and the supplier’s lead time is five weeks, the company can be confident that there is no need to maintain a distribution facility close to the customer base.

However, if customers seem to demand a product on an irregular basis, and they can readily obtain a competitor’s product, companies will have to decide how they can adapt their supply chain to accommodate this need. For example, they might have to consider opening a local distribution facility, using a local distributor or shipping the product by air freight to the customers. Which choice they make will depend on costs and the level of customer satisfaction afforded by each choice.

Providing optimal service to global markets

It is usually more complex for a company to provide high levels of service to international clients than to domestic clients. This is often due to factors such as the distances to reach foreign markets, the variety of transportation modes that might have to be used, multiple transfers and handling procedures, and regulations involved with transporting goods or service personnel across international borders.

Companies selling their products in international markets must develop strategies that provide the same high level of customer service offered in domestic markets. This might require opening and operating facilities in foreign markets.

The facilities should then be staffed with personnel that are familiar with customer needs and with the degree of customer service required in those markets. An adequate level of inventory and a number of replacement or repair parts would also need to be maintained at the facility.

In the modern global marketplace, companies that trade internationally must manage their supply chain in order to keep costs to a minimum and ensure they can meet the challenges associated with international trade and enhanced competition. Global supply chain management treats the entire supply chain as an integrated whole and works to integrate processes efficiently.

In this way, companies can ensure optimum customer service while cutting costs and avoiding problems associated with slow delivery or overproduction of inventory.

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