Value in use

Value in use
See also
Customer perceived value Advertising elasticity of demand Sales mix Sales price variance Market growth Percentage of sales Service quality dimensions Perceived value Negative correlation

Value in use is a concept used to measure the total benefit a customer derives from a product. Value in use is more comprehensive than traditional concepts of value such as price, cost, and performance. It is the perceived benefit and utility the customer derives from a product, taking into account all aspects of the product, such as performance, features, and convenience. It is the total value derived from a product, not just the cost of ownership.

Value in use is typically measured by surveying customers about their perceptions of the product and its value to them. This data is then compared to the price, cost, and performance of the product to determine the total value in use. Value in use is often used to determine the value of a product relative to its competitors, as well as its potential for growth and expansion in the market.

Value in use is the sum of the following components:

• Price: The cost of the product or service.
• Cost: The amount of money needed to produce, distribute and maintain the product or service.
• Performance: The quality and speed of the product or service.
• Features: The unique characteristics of the product or service.
• Convenience: The ease of use of the product or service.

The value in use of a product or service is the total benefit the customer derives from it, taking into account all of these components. By measuring the value in use of a product or service, organizations can better understand the potential of the product or service to increase sales, as well as its potential for long-term growth and sustainability.

Example of Value in use

Value in use can be illustrated by an example of a subscription streaming service. The price of the service is the cost of a monthly subscription, the cost is the money spent on creating and delivering content, the performance is the quality and speed of the streaming service, the features are unique content and other offerings, and the convenience is how easy to use and access the streaming service is. The total value in use of the streaming service is the sum of all these components, taking into account the customer's perceptions of the product and its value to them. By understanding the value in use of the streaming service, organizations can better understand the potential of the product to increase sales, as well as its potential for long-term growth and sustainability.

Formula of Value in use

The formula of value in use is:

Value in use = Price + Cost + Performance + Features + Convenience

This formula takes into account all of the components of value in use, and provides the total value of a product or service. By understanding the value of a product or service, organizations can make better decisions about their product or service offerings and better understand the potential of the product or service to increase sales.

When to use Value in use

Value in use is a useful tool for gauging the success of a product or service. It is often used to compare products or services to each other, and to compare the value of a product or service to its cost. Additionally, it can be used to determine the potential for growth for a product or service, and to identify areas for improvement and development. Value in use is an important measure of a product's or service's success, and can be used to help organizations optimize the value they offer to their customers.

Types of Value in use

• Direct value in use: This type of value in use is the most obvious and direct benefit derived from a product or service. It is the immediate value that can be measured in terms of price, cost, performance, features, and convenience.
• Indirect value in use: This type of value in use is the benefit derived from a product or service that is not immediately measurable. It is the value derived from intangible benefits such as increased brand loyalty, customer satisfaction, and competitive advantage.

Steps of Value in use

1. Identifying customer needs: The first step in determining value in use is to identify the customer needs that the product or service can fulfill.
2. Quantifying customer needs: Once customer needs are identified, the next step is to measure the value a customer assigns to each need.
3. Measuring product performance: The performance of the product or service is then measured in terms of quality, speed, and other factors.
4. Measuring cost: The cost of the product or service is then measured in terms of the cost of production, distribution, and maintenance.
5. Measuring features: The features of the product or service are then measured in terms of their uniqueness and impact on the customer experience.
6. Measuring convenience: The convenience of the product or service is then measured in terms of its ease of use.

Advantages of Value in use

• Allows organizations to measure the total benefit derived from a product or service.
• Provides data to compare the value of a product or service to its competitors.
• Helps to identify potential areas for improvement or expansion.
• Helps organizations to better understand customer needs and preferences.

Value in use is a comprehensive concept that can help organizations better understand the total value of their products and services. By taking into account price, cost, performance, features, and convenience, organizations can measure the total benefit derived from their products and services, and use this data to make informed decisions about their products and services. This can help organizations to better understand customer needs and preferences, as well as the potential for growth and sustainability in the market.

Limitations of Value in use

Value in use is a concept that is often difficult to measure accurately. It is difficult to accurately measure the customer's perception of the product, and it is also difficult to quantify the cost of production, distribution, and maintenance of the product. Additionally, value in use is relative to the competition, so it is difficult to compare products from different companies without taking these factors into account. As such, value in use should be used in conjunction with other measures of value, such as price, cost, and performance, in order to get an accurate picture of the total value of a product or service.

Other approaches related to Value in use

• Total Cost of Ownership (TCO): The total cost of ownership of a product or service takes into account not only the initial cost of purchase, but also the cost of its maintenance and use. This is a useful metric for understanding the total cost of ownership of a product or service over its useful life.
• Quality Adjusted Life Years (QALYs): Quality-adjusted life years (QALYs) is a measure of the quality and quantity of a person's life, taking into account medical conditions and treatments. This measure can be used to understand the total value of a product or service in terms of the health and wellness benefits it provides to customers.
• Benefit/Cost Ratio (BCR): The benefit/cost ratio (BCR) is a measure of the net value of a product or service relative to its cost. It is calculated by dividing the total benefit of a product or service by its cost. This measure can be used to determine the potential profitability of a product or service.

Suggested literature

• Macdonald, E. K., Wilson, H., Martinez, V., & Toossi, A. (2011). Assessing value-in-use: A conceptual framework and exploratory study. Industrial Marketing Management, 40(5), 671-682.
• Sandström, S., Edvardsson, B., Kristensson, P., & Magnusson, P. (2008). Value in use through service experience. Managing Service Quality: An International Journal, 18(2), 112-126.
• Ballantyne, D., & Varey, R. J. (2006). Creating value-in-use through marketing interaction: the exchange logic of relating, communicating and knowing. Marketing theory, 6(3), 335-348.