“Here’s a good one. It has a pool, tennis court and the room looks nice.” He said to his wife as he was searching for the ideal holiday getaway.
“You call that a pool?! And that room looks dingy.” She responded, as she was looking at other options. “What about this one? It looks like it has a nice room, it’s near the lake and almost the same price.”
“What amenities does it have? Are we just paying for the room? There’s no pool, no tennis court, just a fancy room. I’m not paying that price just for a room.”
This was the conversation I had recently when my husband and I were looking for a place to stay for our weekend getaway in Bright. His value for our money was about multiple facilities especially a tennis court, while mine was more about a really nice room.
Value can be defined as the perceived benefits compared with the perceived costs (Iacobucci 2012). However, it is not as simple as that. Value lies in the customer’s mind. What is value for me is not necessarily value for my husband. We all weigh up the perceived benefits against the perceived costs differently. When the perceived benefit equals the perceived cost, customers perceive they receive ‘fair value’. Look at the following value map:
For businesses, when you understand where your customers’ perceived value (both negative and positive) lies, you can then work on improving these experiences. Ideally, you want to be on or below the line. This is where perceived cost and perceived benefit are at their highest. If the hotel is prepared to provide more value for money than their competitors, then this will likely increase their market share.
But, any share gains may just be short-lived. Competitors positioned on the value line are confronted with a vital decision. Do they allow this business to take market share or do they respond with a more competitive offering (pricing or benefit changes) that protects their market position?
What would you do?