The Value Map
The Customer Value Map is an invaluable tool for tracking how customers perceive your products. Customers, whether households or businesses, look for products that give them the best value for their money. The Value Map displays the performance-vs.-price choice that your customers face as they evaluate your products against competitors. Armed with a carefully developed Value Map, managers can see instantly how competitive their products are. In companies that do a good job of managing customer value, managers at all levels use Value Maps to track how their customers are perceiving them in a world in which competitors’ prices, products and features are continuously changing.
Plots price vs. performance for each brand.
Prices can be measured as a monetary amount or on a scale of price attractiveness (1 to 10).
Fair-value reference line shows fair price for performance. The slope shows customers’ price-for-performance tradeoff.
Fair-value zone flanking the fair value line shows quartiles in customer-perceived value.
Best-value frontier identifies the best performance levels available to the customer at different prices. Products here are likely to be the future market-share winners.
Click on the buttons for explanations of the parts of the value map.
Data for the value map can come from product evaluations, expert judgment, or from market research (see Comparative Performance Scorecard) The example value map in the diagram above shows price vs. performance for minivans in 2001. The data on performance and price come from product evaluation ratings put out by Consumer Reports Magazine. This example uses list prices; in many applications, the analysts use transactions prices.
Businesses should try to know competitors’ prices when they set their own prices. This does not mean that they should set prices equal to competitors. It does mean that they need to price competitively for what they offer.
In the minivan example above, the Honda Odyssey is selling for more than $3000 more than the Mercury Villager. This may not seem competitive. However, based on the Consumer Reports Ratings, the Odyssey outperforms the Villager. Judging by the two models’ positions relative to the fair-value reference line, the extra $3000 is fully justified by the performance advantages.
The philosophy of setting prices consistent with performance advantages relative to competitors is called value pricing. The value map is the central tool in enabling companies to use this pricing strategy.