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Customer Perceived Value (CPV)

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Customer perceived value approach: pricing

Customer perceived value defined
How is Value Created and What Does It Do?
BREAKING DOWN 'Perceived Value'

Perceived value is the worth or merits a customer ascribes to a product or service. Usually, customers are unaware of the factors involved in pricing a product or service, such as the actual or estimated costs of production. Customers rely on the emotional appeal of the product or service and their evaluation of the benefits they believe they will receive. A consumer's perceived value translates to the price they are willing to pay for a good or service. Utility refers to the benefits and values a consumer receives from the use of a product.

Consumers demand products and services that are useful and offer the benefits not satisfied by other available products. Although many products and services provide similar benefits, their perceived utility varies among consumers. High utility translates into increased demand and higher prices. A company's brand communicates a set of expectations associated with its products and services. A well-established brand commands higher prices than its generic equivalents.

The value of the product equates to how well the brand meets the consumer's expectations. For example, expectations may include higher quality, increased utility, ease of access, and an enhanced consumer image.

A luxury good is one whose demand increases as consumer incomes increase. Naturally, people with more substantial incomes devote more of their income to purchasing luxury goods and services, which are relatively expensive to obtain. Luxury goods and services make the lives of consumers more enjoyable and enhance their status and prestige. The highest value is with owning or consuming them, not in their functionality.

On the qualitative side, value is the perceived gain composed of individual's emotional, mental and physical condition plus various social, economic, cultural and environmental factors.

On the quantitative side, value is the actual gain measured in terms of financial numbers, percentages, and dollars. For an organization to deliver value, it has to improve its value: When an organization delivers high value at high price, the perceived value may be low. When it delivers high value at low price, the perceived value may be high. The key to deliver high perceived value is attaching value to each of the individuals or organizations—making them believe that what you are offering is beyond expectation—helping them to solve a problem, offering a solution, giving results, and making them happy.

Value changes based on time, place and people in relation to changing environmental factors. It is a creative energy exchange between people and organizations in our marketplace. Very often managers conduct customer value analysis to reveal the company's strengths and weaknesses compared to other competitors.

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What is 'Perceived Value'

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Customer Perceived Value is the evaluated value that a customer perceives to obtain by buying a product. It is the difference between the total obtained benefits according to the customer perception and the cost that he had to pay for that.

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The customer perceived value stems from tangible, psychological and social advantages, and since it affects demand for a product, it needs to .

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Perceived value is the worth or merits a customer ascribes to a product or service. Usually, customers are unaware of the factors involved in pricing a product or service, such as the actual or estimated costs of production. Perceived customer value is a marketing and branding related concept that points out that success of a product or service is largely based on whether customers believe it can satisfy their wants and needs.

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Value in marketing, also known as customer-perceived value, is the difference between a prospective customer's evaluation of the benefits and costs of one product when compared with others. Value may also be expressed as a straightforward relationship between perceived benefits and perceived costs: Value = Benefits / Cost. Customers will buy from the firm that they see as offering the highest perceived value. Customer perceived value (CPV) is the difference between the prospective customer’s evaluation of all the benefits and all the costs of an offering and the perceived alternatives. Total customer value is the perceived monetary value.