One essential task in new product and service development is to create superior value for the customer and exceed customer’s expectations. The question what creates value for a customer is a difficult one and can certainly not be answered easily. The framework presented in the paper “Customer Value Creation: A Practical Framework” written by J. Brock Smith and Mark Colgate seems like a valuable tool to answer these questions.

Creation of value for customers is a critical task for marketers, particularly when developing new products and services or starting new businesses. This paper presents a new conceptual framework for marketers to ponder when exploring ways to distinguish themselves, in the eyes of the customer, from others in the marketplace. This framework is built on the strengths of existing frameworks. Possible applications of the framework in designing marketing strategy, recognizing new product opportunities, and enhancing product concept specifications are discussed.

They have developed a framework that includes several dimensions of customer value that adopts a strategic orientation in that the focus is on identifying categories of value that could differentiate offerings and not on identifying all of the specific benefits and sacrifices that may be perceived by consumers or customers. The framework is applicable to consumer and business contexts, and goods as well as services.

The four types of value that have been identified are

Functional/instrumental
Functional/instrumental value is concerned with the extent to which a product (good or service) has desired characteristics, is useful, or performs a desired function.

Experiential/hedonic
Experiential/hedonic value is concerned with the extent to which a product creates appropriate experiences, feelings, and emotions for the customer.

Symbolic/expressive
Symbolic/expressive value is concerned with the extent to which customers attach or associate psychological meaning to a product.

Cost/sacrifice value
Consumers and customers also try to minimize the costs and other sacrifices that may be involved in the purchase, ownership, and use of a product. Cost/sacrifice value is concerned with these transaction costs.

In the next step they identify five sources of customer value information, products, interactions, environment, ownership/possession transfer and identify possible value aspects for each type and source of customer value. The result are four pages of value aspects.

I have been looking for such a comprehensive framework already for quite a while because such a framework is indeed helpful in identifying the value of new products and services in order to derive their chances of becoming a successful new product or service. And I completely agree with the authors conclusion:

The customer value creation strategy framework developed in this paper offers a useful tool for specifying and illustrating value creation strategies, illustrating brand and organization positioning, identifying opportunities for new value creation propositions, and suggesting enhancements to the value propositions of existing products.

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