Value - we hear and use the word all the time. But do we really know what it means? Do we know how to truly measure it? And how do we increase the value of our brand?
Below is a tutorial that answers all three of these questions.
WHAT IS VALUE?
Very often in business, we are confronted with the question, "What is value?" And just as often, the answer is usually, "I can't put it into words, but I know what value is when I see it." This is a dangerous way of approaching value, or any business question. If you can't articulate what value is, then you truly don't know what it is. If you don't know what value is, how on earth will you be able to increase it? And if you can't increase the value of your product, how will you stay competitive?
Simply put, value is the difference between a brand's benefits and its costs. We can represent it with the following equation:
Value = benefits - costs
So then, measuring value is as simple as measuring a brand's cost to the consumer, measuring the benefits, and subtracting. Simple, right?
It's not that easy.
While we can easily measure the costs - dollars, time, driving miles - we really have no concrete way of measuring a product's benefits. Benefit is a subjective and abstract concept by nature; attaching hard numbers to it is fruitless.
If we want to measure the value of a brand, what do we do?
MEASURING VALUE
The heart of the problem resides in the fact that in measuring value, we often try to do so in the absolute. In other words, we take a product and try to assess its value without comparing it to anything. For the reasons mentioned above, this is impossible.
One way to measure value, then, is to compare the product in question (we call that the focal brand) to a competing product that the customer would likely turn to we cal that the referent brand). For instance, Listerine may compare itself to Scope. Campbell's may compare itself to Progresso. Porsche may compare itself to Ferrari. In this way, we can arrive at a new definition of value in the relative sense:
Value is the perception of the resources received minus those resources given up in comparison with a referent alternative.
In other words, we measure a brand's value by measuring how superior or inferior its attributes are to a competitor's. Listerine, for instance, may assess its value by comparing its germ-killing ability to Scope's. Porsche may measure its value by comparing its acceleration speed to Ferrari's. By using a referent alternative, both brands more tangibly assess the benefits that build value.
This still leaves us without a quantitative way of measuring the benefits that build value. To do this, try using the framework below:
| worse than referent | same as referent | better than referent | |||||
| Attribute Level | -3 | -2 | -1 | 0 | 1 | 2 | 3 |
| $15,000 | | | x | | | | |
| Dual Airbags | | | | x | | | |
| 200 Horsepower | | | | | | | x |
| Fiberglass Construction | | | | | | x | |
Along the left side of the framework we list the focal brand's attributes that the customer cares about. Along the top we place a scale ranging from -3 to +3. For each attribute, we compare the focal brand with the referent brand. If the focal brand is worse than the referent brand in any one category, it receives a ranking between -1 and -3. If it is better, it receives a ranking between +1 and +3. And if they have equal attributes, then the focal brand receives a 0.
For instance, suppose in our template above that our focal brand is the Toyota Camry and our referent brand is the Honda Accord. The Camry's $30,000 price tag is $5,000 higher than the Accord's, so we give the Camry a -1 ranking on price. It's dual airbags are exactly the same as the Accord's, so we give the Camry a 0 on that. It has more horsepower and better brakes than the Accord, so we give it a 3 and a 2 in those categories.
At first glance, it would seem that the Camry is far more valuable to the consumer than the Accord. If we add up the rankings, we find that the Camry is a +5 compared to the Accord - a reasonably comfortable margin.
But there's one more vital component to the framework. One of the fundamentals of marketing dictates that customers buy products based on one or two benefits they consider most important. Given this fact, we have to weigh each of the attributes we list in framework. In this way, no one ranking can skew our results.
If we refer back to our framework, we can see this weighting in action. The "importance rating" along the right weights each attribute according to its importance in the customer's eyes. In our example, the customer finds price and airbags to be the most important attributes; horsepower and brakes fall far behind. By multiplying the weights by each ranking, and then adding up the total, we find that the Camry's value is a mere 2 on the scale. Clearly, the Camry is not as valuable as we had thought.
CONCLUSION
Value is a vague, poorly understood concept that is extremely difficult to measure. The above framework gives you the ability to quantify the value that certain benefits bring, and translate those numbers into an actionable perspective on your brand.
But this is just the first step. Now that you know how valuable your brand is in the eyes of the consumer, you can take steps to improve it. We'll discuss some of those steps in greater detail in a later tutorial. Suffice it to say, however, that even knowing where your brand's value stands gives you a significant advantage in plotting strategy for your company's success.
