Value Creation
To be successful you have to do something well, but this is not enough to be profitable.
The key to profitability is to CREATE VALUE (and more value than your competitors).
How to meassure the value created?
Value created is customer’s willigness to pay for that product (the perceived benefit that that product has meassures in monetary terms – note that this value can vary among different market segments) minus the product unit cost.
- Total Value created: Benefits to customers (B) – product unit cost (C)
- Value captured: Benefits to customers – price charged (P)
Strategies within the B-C framework
- Cost advantage: have lower C and charge P below competitor’s C
- Differentiation: have higher B and charge similar P
- Niche: identify B-C structures for specific market segments (which may not be appealing to other segments)
Note: disruptive technologies may change the B-C structures within an industry.
See the Marketing Section:
- Cusotmer Value Drivers (aquisition)
- Customer Satisfaction (retention)
Tags: B-C, value capture, value creation