Measuring Customer Value and Market Dynamics for New Products of a Firm: An Analytical Construct for Gaining Competitive Advantage
Graduate School of Administration and Management (EGADE), Monterrey Institute of Technology and Higher Education (ITESM) - Mexico City Campus
ITESM Working Paper No. 01/2005
The role of customer value has been largely recognized over time by the firms as an instrument towards stimulating market share and profit optimization. The customer values for a new product of firm in competitive markets are shaped more by habits, reinforcement effects, and situational influences than strongly-held attitudes. A strong and sustainable customer value associated with a new product launched by a firm may also lead to build the customer loyalty in the long run. An analysis of the new product-market structuring based on customer value may be developed well within the microeconomic framework of a firm. The measure of customer value as the efficiency of new product may be viewed from the customer's perspective towards a ratio of outputs (e.g., perceived use value, resale value, reliability, safety, comfort) that customers obtain from a product relative to inputs (price, running costs) that customers have to deliver in exchange. However, the aggregate returns on the customer value towards the new product from the perspective of a firm may be observed manifesting in enhancing the market share, market coverage and augmenting profit in a given market.
There has not been many contributions emerged in the past addressing the measurement of the customer value as an intangible asset of the firms, though substantial literature is available discussing the customer relations and loyalty building perspectives. This paper attempts to critically examine the available literature on the subject, discuss a model that provides a framework for analyzing the variables associated with customer value and to identify potential research areas. A basic premise of the paper is that the focus should be on maximizing total customer value and customer satisfaction which are inter-dependent in the decision making process towards buying new products. The framework of the construct is on a proposed model which integrates all aspects so as to maximize the potential of the organization and all its subsystems to create and sustain satisfied customers. The discussion in the paper on the customer value gaps in the process of marketing new products explores the possible situations that may lead to lower the customer value.
Keywords: New product management, customer value measurement, market coverage, aggregate returns, market penetration, model construct and estimation, profitability
JEL Classification: B41, C13, C44, C51, D11, M21, M31
Date posted: February 21, 2005