Economic value: what is it?
Economic value can be described as a measure of the benefit from a good or service to an economic agent. It is typically measured in units of currency. Another interpretation is that economic value represents the maximum amount of money an agent is willing and able to pay for a good or service. The economic value should not be confused with market value, which is the minimum amount a consumer will pay for a good or service. Thus, economic value is often greater than the market value. (Investopedia)
So in simple words, this notion of economic value will help you defining your price and indirectly your benefit. It is a subjective notion (except for past economists like Karl Marx) as it contains tangible and intangible value of the product. A coffee in beans as less value than drinking a coffee with your partner on a romantic place. Nespresso created more economic value by creating a new experience for coffee lover at home.
5 different economic values
Before deciding on your own marketing strategy, you should understand what the market is currently proposing to buyers! Based on the work done by Pine and Gilmore (HBR, The experience economy), we can identified 5 different types of offer:
Commodity: Buyers cannot differentiate between offers. It is often referred as commodity. The cheapest takes it all. I buy it because I need this (benzine, sugar, flour, …).
Product: Buyers have multiple offers that differentiate themselves on features (more of that, less of this, …) that can even create emotional differences for the buyer (make me younger, smarter, …). This is what we where and still use to see for fast moving consumer goods (chocolate, drinks, …) even if some brands are trying to elevate their product to experience by organising multiple stages (think about RedBull). I buy it because i use it.
Service: Buyers receive a service in addition to the product they bought. Competitors differentiate themselves with these services (after-sales, analytics, …). I buy it because I need it and they help me using it.
Experience: Buyers are going through stages which are personal and potentially sensational. Products and services becomes commodities (we can find similar offer everywhere). Competitors differentiate themselves with experience (before, during and after purchase). Most of the companies are trying to build experience but few are really successful to achieve long term sustainable differentiation on this. I enjoy buying and using it and it is the reason why I bought it.
Transformational: Experiences are elevated from mere enjoyment to actual personal transformation. Buyers are looking to be different after the purchase and use of it. I am not buying running shoes, I become a runner! I buy it because it helps me to become someone different.
What does it mean for the Marketing Canvas Method?
When you analyse the context, just define where the market is today. The higher the market is on this curve, the higher the economic value is. When looking at your context (please use Market cards):
Identify where your market is on the curve (1-5)
Identify if one competitor is trying to move upward (game changer, challenger)?
Identify where the market is on the product life cycle curve (Introduction to Decline)?
Curious
More on the method here
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