What is "customer value" that realizes differentiation?

What is "customer value" that realizes differentiation?

How do customers buy their products and services? The idea of ​​“customer value” is a hint. And what is the framework that enables differentiation from other companies?


1. Concept of customer value proposition

A unique customer value proposal is the starting point for differentiation from other companies
"Customers buy products and services to solve their problems"
Customers buy goods and services not because they want the goods or services themselves, but because they want some kind of benefit or solution. For example, you buy an electric drill because you want to make a hole, and you go to the gym because you want a youthful body.

There are so many products and services out there, but they don't solve all the problems customers have. Also, customers themselves are not necessarily aware of the problems they are having. Therefore, if we can meet the problems that the world has not yet met, or the problems that exist, but are not yet noticed, it will be a great difference.

However, discovering unique customer value is not easy. Therefore, in this column, we will introduce some frameworks for discovering customer value.

Framework (1) << Basic expression of customer value >>

Customer value is given by the following formula.
Customer value = Benefits / Cost
Benefits include both rationale and sensibility benefits.

"Functional (performance / spec) value" is an advantage in terms of reason, and "emotional value (value felt by using a product)" and "self-realization value (value that expresses one's personality)" Is an aesthetic benefit.

Taking soap as an example, "more dirt" and "good foaming" are functional values, "color and fragrance" "feel" and "feeling" are emotional values, "natural ingredients" "natural orientation" "luxury feeling" Is the self-realization value.

In the case of the service industry, in addition to the benefits, "process quality (quality of the provision process)" may be added.
In the case of intangible services such as products, it is difficult to perform proper quality evaluation before purchasing. In some cases, a reasonable quality evaluation will not be possible even after purchase. Therefore, users tend to evaluate the quality of service in the process of providing the service.

Even if the service content itself is not much different from the others, if the staff responds seriously to the customer's circumstances, the value and satisfaction for the customer will be high.

On the other hand, costs include financial costs (customer payments), time costs (time required to go to buy a product or reach a location where services are available), and physical costs ( There are physical fatigue to get a product or service, install it, and make it available, and mental cost (such as effort to learn usability).
 
Increasing the numerator benefits or lowering the denominator cost will increase customer value. Think about whether you can contribute either of the two benefits or the four costs.

Framework (2) << Think about the scene to use >>

Even with the same products and services, there are various ways in which customers will find value depending on the situation.

1. Cross-border goods

Examples of items that cause changes in the consumer environment : Internet, automobiles / motorcycles, travel / tourism, amusement facilities

2. Guardian goods

Examples of items that save consumers' crises and bring healing and compassion : Food / beverage , Banking / insurance, home security, home appliances, furniture / interior, beauty / health equipment, accessories

3. Strengthening goods

Examples of items that enhance consumers' vitality and ability: PCs, stationery, books, sports equipment, fashion, food Beverages, education

4. Reward goods
Items that are acquired and donated by the victory of consumers
Ex.) Houses, luxury cars, jewellery, precious metals, education, alcohol, luxury goods


For example, beauty treatment salons can change you depending on the person. It can be "things" "things that grow and enhance vitality and ability" "things that are won and donated by victory".

Let's think about "what value does your product / service have for the customer? (What kind of value do you want to provide?)".

Framework (3) << Remove customer inconvenience >>

In the framework (1), we have taken up the cost to the customer (some sort of hassle when using it). In order to remove the cost (inconvenience) for the customer, it is necessary to pay attention to the following three "inconveniences".


Eliminate inconvenience in use Change "difficulty" to "easy" such as "easy to use", "easy to use", "easy to ask" and "easy to understand".
Example: Amazon's online ordering / same day delivery

● Remove “unnecessary” from overdoing Example
of providing value that is necessary for customers
Example) QB house, simple mobile phone, standing bar

● “Uncertainty” that can be called disappointing remove
to eliminate the "regret after the purchase" feel before a customer purchases
example) return freedom, value guarantees (achievements billing), pay-as-you-go system, trial use

Framework (4) << Consider consumer activities >>

In order to remove the inconvenience of customers mentioned in Framework (3), it is necessary to pay attention to the process of purchasing and using the customer.

<Purchase stage>
1. Problem recognition (revealing needs)
2. Information search
3. Product selection
4. Order
5. Delivery
6. Payment (finance)
7. Product receipt

<Emergency solution stage>
8. Product installation / assembly
9 . use master
10. errands resolution

<continuation stage>
11. return merchandise
12. maintenance
13. Product disposal
14. Product replacement upgrade

seller (company) side, but will believe Eteshite the point of sale is the goal, purchased for the customer The point is just a start for subsequent use. Consumers are having problems with any of this process. Expand your eyes on the overall consumer activity and think about what your company can do.

Framework (5) << Add sharpness >>

One of the most common ways to think about the benefits for customers is to add functionality to everything. I feel that the idea that "customers want various functions is better to add various functions" and "more functions to make a difference" is still strong.

However, many of the features are unnecessary for the user. Also, the more features you add, the more it will bounce back to cost (price for customers). There are many customers who say that "the functionality is minimal and the price is cheap". "Removing unnecessary functions and providing at a price that customers can afford" is also a fine differentiation (this is called "negative differentiation").

Even if a certain function is enhanced, it is necessary to sharpen other functions that are not valuable to our customers. The points of sharpness are as follows.

● Which factors should be “removed” that are commonplace in the industry?
● Which factors should be “reduced” below industry standards?
● Which factors should be “increased” over industry standards?
● Which elements should not be added to the industry so far?


For SMEs, differentiating functionally (reasonable in terms of benefits) would be quite difficult. However, other benefits and costs can contribute to customer value. We would be grateful if you could share the framework introduced in this column with your organization and use it as a material for developing ideas for customer value.

<Reference>
“Job Theory” by Clayton M. Christensen et al. Harper Collins Japan
“Making a Selling Mechanism This Way” K. Kuriki, Nobutoshi Shimizu, Takuro Youda Nihon Keizai Shimbun
"Grand design of business model"
Masanao Kawakami "Chuo Keizai " "Blue Ocean Strategy" W. Chan Kim (Author), Rene Moborgne Random House Kodansha
"Story Marketing by Cases" Satoru Yamakawa Japan Management Association Management Center
The Different Between Positive and Normative Economics

The Different Between Positive and Normative Economics

What is the different between positive and normative economics?


Positive economics only explains the facts of present, past and future means we can say that it talks about facts only. Positive economics talk about a particular economic situation only. Not any economist can give his opinion to come out from a situation, so statements without opinion are known as positive economics.

Normative economics talk about solution of a problem. It includes " Ought to be" In the normative economics, economists add their advice to solve a problem such statements including opinion are known as normative statements. If i say that poverty in india was 20 % of the world before 10 years. So I am talking about a fact only not giving my opinion that how to reduce poverty, so this statements comes under positive economics.

Now if I say that government should do something to reduce poverty whatever, so that poverty can be reduced. It will come under normative economics if the word " should" or " Ought" is coming in the statement. Then it is a normative statement if you want to know more then get ready to know more.

The view about positive science came from English classical school Accordingly, some economists N.senior and J.s Mill said that economists cant add their advice he can only talk about a fact economists cant give their advice but after it, Hawtrey and other economists did not agree with it. They say that an economists is nothing if he cant add advice say, if a doctor cant treat his patient then it means nothing to be a doctor same way, if an economists cant add his opinion about a problem , cant give his judgement then it is worth to be an economist.

So hawtrey was against the opinion of english classical school. Here is an example This example is assumed lets know more about Positive statements are based on facts collected. But you can verify positive statment But there is no guarantee of truth.  There is no debate caused by positive statements In normative economics debates take place Economists do not agree generally with different opinions.
Opportunity Cost Definition and The Real Examples

Opportunity Cost Definition and The Real Examples

The basic economic problem is the issue of scarcity. Because resources are scarce but wants are unlimited, people must make choices. This lesson showcases the most important concept in macro-economics, which is the concept of opportunity cost

Very simply, everyone has the same amount of hours in a day but we all make different decisions about what we do, what we choose to buy, how we spend our time. What determines these choices, opportunity cost does.


Every time you make a choice, there's a certain value you place on that choice. You might not know it or think about it but every choice has a value to you and when you choose one thing over another you are saying to yourself, "I value this more than another choice I had." 

Now the opportunity cost of a choice is what you gave up to get it. If you have two choices, either an apple or an orange, and you choose the apple, then your opportunity cost is the orange you chould have chosen but did't. You gave up the opportunity to take the orange in order to choose the apple.

In this way the opportunity cost is the value of the opportunity lost. Value has 2 parts to it. It has benefits as well as cost. If you choose an apple over an orange, maybe the apple cost less but maybe you enjoy it more. 

So looking at choice in terms of benefit and cost helps you make better economic decisions. To make a good economic decision, we want to choose the option with the greatest benefit to us but the lowest cost. For example, if we graduate from college and suddenly we find ourselves in the job market there are choices to be made. 

And let's say that two jobs become available to us. We can either work for Company A or Company B. Now the job with company A promises to pay us $20 an hour while company B promises to pay us $10. Based on this information alone, of course, most people would choose company A.
Why?
Because they're paying a higher salary, but when you look at this kind of choice in only dollar terms, then you're only seeing it from the perspective of the benefits. Now let's take that same example but now we discover that the job with company A requires a dress suit that'll cost you $1500. 

You realize the job with the higher salary may not be worth it to you, now you're starting to think economically. You're thinking economically when you look at a choice through the eyes of the benefits and the cost. Whatever we choose, the opportunity cost is the value of the choice we could have had. The opportunity cost of working for company A is the value of what we gave up.
Four Factors Of Production and Land Definition

Four Factors Of Production and Land Definition

Today for economics, we're going to be talking about the factors of production. So let's figure out what the factors of production are now.

Before we get started make sure you take out your guided notes, you can find them below the guided notes will go along with the article and I'll help you remember all the important concepts. It'll be important for you to do this, so that way when you have your test or quiz you know all the information and you don't have to go back and re-read this.

Now the factors of production are used to produce things in our society. The factors of production are land, labor, capital and entrepreneurship. These are the things that get used to produce stuff. Now it seems very simple and that's because they kind of are.

Just think about it, it's logic you have to have land, to be able to produce whatever you want to make. You have to have labor to have people that are willing to spend their time and energy to produce your product, you have to have capital.

Capital meaning money and the tools to be able to build whatever you are deciding to produce.

Entrepreneurship that's the idea, you have to have an idea for your company, the idea to create the product , the idea of the product.

When you have these four things, you have the factors of production. Now the factors of production get used in a bunch of different ways. It depends on what country you live in, it depends on the business hours the services that are going to be provided all. These things have to go into it but the factors of production hopefully aren't that complicated.

Now we're going to do some practice problems and see if you can identify which of the factors of production are being used .


Which of the four factors of production? Do you think are being used here, you have land, capital, labor or entrepreneurship. Take your time. Alright if any more time positive but if you think you got it and if you said land you are correct. Yes all resources would be part of land, so that would include water and coal and iron and all these different things that we take from the world alright.


Next practice problem. Let's see if you can get this one, so we've bunch of pictures up again. If you guessed entrepreneurship you are correct this is showing the ideas that come to create a product. The idea that sparked the innovation.


Let's go to another one. We have the picture up on the board right now. If you said labor you are correct it is labor that's right labor , these are the people who are producing it. they're not the people that came up with the original idea, but they're the people working to create this product.

Let's go into some word problems next . So run to the word problems now and remember all the answers will be land labor capital or entrepreneurship those are our four factors of production. Make sure you remember those because those will be important.

Our first problem is up, you have an idea to start a business and you decide to take a risk and do it. Which of the four factors of production is? It take your time. Think it through. If you said land you are absolutely incorrect. I apologize it is entrepreneurship entrepreneurship there you are coming up with the idea for the business and you're gonna take the risk to do it.

Let's say you do start your business and now you have to go and purchase office supplies to be able to run your day-to-day operations. Which of the four factors of production is being shown? If you need to the answer is capital that's right. It is capital you have to go out and purchase things for the day-to-day operations even those office supplies are capital goods.

If you remember from the economic question  article we talked about capital goods if you need a refresher. You can click the card on the top right and check that out. We'll do one more word problem and it is this your prompt is water, iron, coal.

Which of the four factors of production was just shown?

If you said land you are absolutely correct hopefully. Now the four factors of production are making sense, they're not too difficult but they're really important for us to understand because this is how we produce things businesses have to figure out. What they're going to do with the four factors of production, what resources are they going to use, how will they use them eventually. We'll be getting into PPF charts and looking at how do we use resources efficiently. 

What happens when we use them inefficiently, so it'll be important to have this foundation before we get into the more
complicated things.