A general consensus seems to be reached on value creation involving the production and delivery of goods/services at a cost that is lower than what the consumer is willing to pay for that good/service. In accepting this approach, price does not enter the picture, since it would not affect value creation. Is this a realistic statement? If so, what is the key role of price in a value system?
Hi, Francisco:
Realistically speaking---it would depend perhaps on firm and or store image and consumers characteristics on the perception of value! Please take a look at this recent research study (Zemguliene, 2013) that you may find useful:
In this study the author argued that the retail store image, customer evaluation of merchandise value and intention to purchase ar primary factors of customers willingness to pay---that store image is expressed in terms of tangible and intangible dimensions as assessed by consumers. Consumers are affected by the store's attributes and consider image associations in order to assess perceived benefits and attitudes.
This study develops a proposition that store image makes an influence on the level of perceived product value. As recent research has shown, perceived value is related to willingness to pay a higher price. Accordingly, this study posits a path model of store image, product value perception and willingness to pay a premium price.
The author proposed theoretical framework on the differences in retail image -- customer attitude relationship according to customer characteristics -- gender and income. Therefore the author hypothesized the impact of gender and income on the perceived merchandise value and willingness to pay a premium price. Analyzing the path model, this study investigated the influence of retail image and customer characteristics on the important retail outcomes. The results suggest a link of retail store image and perceived value of merchandise, also the hypothesized assumptions of the link of customer income and endogenous variables of perceived value of merchandise and willingness to pay a higher price were supported by the results!
- ŽEMGULIENĖ, J. (2013). RELATIVE IMPORTANCE OF RETAIL STORE IMAGE AND CONSUMERS CHARACTERISTICS ON THE PERCEPTION OF VALUE AND WILLINGNESS TO PAY A PREMIUM PRICE. Region Formation & Development Studies, (9), 157-165.
Hope this helps!
Nadeem
Price has a key role in the value creation.
When looking at the Economic Value Added (introduced by Stern Stewart & Co.), it becomes evident that
- the economic value added EVA beyond the return required by shareholders is driven by NOPAT
- NOPAT is driven by EBIT
- EBIT is driven by Net Sales and
- Net sales is driven by volume and price
So, one of the key success factors is pricing - i.e. to chose the right price to optimize net sales.
The pricing strategy has to take into account the value drivers or value potentials of a company. They may include brands, employees, etc. Of course, there is much more to say about pricing, but I think that would go beyond the core of your question.
Hope, this helps.
Elisabeth
http://www.sternstewart.com/
Dear,
Have a look on the attachments, it will be helpful for you...
https://hbr.org/2012/06/pricing-to-create-shared-value
https://www0.gsb.columbia.edu/mygsb/faculty/research/pubfiles/500/jmkg.67.1.063.pdf
https://faculty.fuqua.duke.edu/~charlesw/s591/Bocconi-Duke/Bocconi/s6_Demand_View/priem.pdf
https://www.google.com.pk/url?sa=t&rct=j&q=&esrc=s&source=web&cd=9&cad=rja&uact=8&ved=0CFoQFjAI&url=http%3A%2F%2Fciteseerx.ist.psu.edu%2Fviewdoc%2Fdownload%3Fdoi%3D10.1.1.335.2759%26rep%3Drep1%26type%3Dpdf&ei=o93eVKDHLsjFPcCIgMAF&usg=AFQjCNGd8bn2Kvkf49_ipgrKjd6ynasEJQ&sig2=BdnwLXd0jMxhAaLQgGQPEA&bvm=bv.85970519,d.ZWU
Hi, Francisco:
Realistically speaking---it would depend perhaps on firm and or store image and consumers characteristics on the perception of value! Please take a look at this recent research study (Zemguliene, 2013) that you may find useful:
In this study the author argued that the retail store image, customer evaluation of merchandise value and intention to purchase ar primary factors of customers willingness to pay---that store image is expressed in terms of tangible and intangible dimensions as assessed by consumers. Consumers are affected by the store's attributes and consider image associations in order to assess perceived benefits and attitudes.
This study develops a proposition that store image makes an influence on the level of perceived product value. As recent research has shown, perceived value is related to willingness to pay a higher price. Accordingly, this study posits a path model of store image, product value perception and willingness to pay a premium price.
The author proposed theoretical framework on the differences in retail image -- customer attitude relationship according to customer characteristics -- gender and income. Therefore the author hypothesized the impact of gender and income on the perceived merchandise value and willingness to pay a premium price. Analyzing the path model, this study investigated the influence of retail image and customer characteristics on the important retail outcomes. The results suggest a link of retail store image and perceived value of merchandise, also the hypothesized assumptions of the link of customer income and endogenous variables of perceived value of merchandise and willingness to pay a higher price were supported by the results!
- ŽEMGULIENĖ, J. (2013). RELATIVE IMPORTANCE OF RETAIL STORE IMAGE AND CONSUMERS CHARACTERISTICS ON THE PERCEPTION OF VALUE AND WILLINGNESS TO PAY A PREMIUM PRICE. Region Formation & Development Studies, (9), 157-165.
Hope this helps!
Nadeem
Prices regulate value creation within economic reproduction cycle so as if market price do not cover costs plus profit , production is cut. In econ dynamics, innovations can be covered by production prices after some econ cycles of production.
In an economy, the product and the service is so important, even if you see the service as it does not generate value to the product as it should be, since the service becomes an added value that invite consumers to buy the good at a higher cost than similar, but give good service attention. If you go to a restaurant, although the menu is very good, but has a good service attention, probablemte not return, but if the service is good is very safe for you to return, although the cost of the product is higher than other restaurant . Finally, the service provided, if it generates an intrinsic value in the product, the consumer ultimately pays willingly
In order to answer this question, one has to answer the following questions: what is “value”? what is “value creation”? In fact, Joan Robinson (1964) considered the notion of ‘value’ as ‘one of the great metaphysical ideas in economies’. Following Bowman and Ambrosini (2000), value creation can be framed as combining acquired input resources (e.g., raw materials from suppliers, machines, buildings) and transforming them through the actions of organizational members to a greater level of perceived value for customers. If value creation is about creating a “value pie”, value capture is about “splitting the pie”. Hence, pricing is not related to “value creation” but rather “value capture”. Most recent HBR article by Michel(2014) named “Capture More Value” focuses exclusively on various pricing and marketing strategies and discusses how many businesses focus on “value creation” through innovation and ignore “value capturing”. Having said that, surely pricing strategy is very important as a value capture mechanism. Even though a firm creates superior value, it may not capture the potential rents associated with that value without setting the right price for what it sells (Dutta et al., 2003; Mizik and Jacobson, 2003).
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