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Measuring Customer Value and Market Dynamics for New Products of a Firm:An Analytical Construct for Gaining Competitive Advantage

Author

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  • Rajagopal

    (Monterrey Institute of Technology & Higher Education, ITESM, Mexico City Campus, Mexico DF)

Abstract

The role of customer value has been largely recognized over time by the firms as an instrument towards stimulating market share and profit optimization. The customer values for a new product of firm in competitive markets are shaped more by habits, reinforcement effects, and situational influences than strongly-held attitudes. A strong and sustainable customer value associated with a new product launched by a firm may also lead to build the customer loyalty in the long run. An analysis of the new product-market structuring based on customer value may be developed well within the microeconomic framework of a firm. The measure of customer value as the efficiency of new product may be viewed from the customer’s perspective towards a ratio of outputs (e.g., perceived use value, resale value, reliability, safety, comfort) that customers obtain from a product relative to inputs (price, running costs) that customers have to deliver in exchange. However, the aggregate returns on the customer value towards the new product from the perspective of a firm may be observed manifesting in enhancing the market share, market coverage and augmenting profit in a given market. There has not been many contributions emerged in the past addressing the measurement of the customer value as an intangible asset of the firms, though substantial literature is available discussing the customer relations and loyalty building perspectives. This paper attempts to critically examine the available literature on the subject, discuss a model that provides a framework for analyzing the variables associated with customer value and to identify potential research areas. A basic premise of the paper is that the focus should be on maximizing total customer value and customer satisfaction which are inter-dependent in the decision making process towards buying new products. The framework of the construct is on a proposed model which integrates all aspects so as to maximize the potential of the organization and all its subsystems to create and sustain satisfied customers. The discussion in the paper on the customer value gaps in the process of marketing new products explores the possible situations that may lead to lower the customer value.

Suggested Citation

  • Rajagopal, 2005. "Measuring Customer Value and Market Dynamics for New Products of a Firm:An Analytical Construct for Gaining Competitive Advantage," Econometrics 0502012, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpem:0502012
    Note: Type of Document - pdf; pages: 21
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    References listed on IDEAS

    as
    1. Paul Ingenbleek & Marion Debruyne & Ruud T. Frambach & Theo M. M. Verhallen, 2003. "Successful New Product Pricing Practices: A Contingency Approach," Marketing Letters, Springer, vol. 14(4), pages 289-305, December.
    2. Hans H. Bauer & Maik Hammerschmidt & Matthias Staat, 2004. "Analyzing Product Efficiency – A Customer-Oriented Approach," Microeconomics 0402004, University Library of Munich, Germany.
    3. Perraudin, William R. M. & Sorensen, Bent E., 2000. "The demand for risky assets: Sample selection and household portfolios," Journal of Econometrics, Elsevier, vol. 97(1), pages 117-144, July.
    4. Ulf Johanson & Maria Mårtensson & Matti Skoog, 2001. "Measuring to understand intangible performance drivers," European Accounting Review, Taylor & Francis Journals, vol. 10(3), pages 407-437.
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    Cited by:

    1. Rajagopal, 2006. "Fiscal Policy and Growth: The Case of the Spanish Regions," Economic Issues Journal Articles, Economic Issues, vol. 11(1), pages 9-24, March.

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    More about this item

    Keywords

    New product management; customer value measurement; market coverage; aggregate returns; market penetration; model construct and estimation; profitability;
    All these keywords.

    JEL classification:

    • B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C44 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Operations Research; Statistical Decision Theory
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics
    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing

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