Satisfaction and value
Quality represents the benefits that the customer derives from a transaction, but it must not be forgotten that these benefits come at a cost to that customer. If the costs outweigh the benefits, satisfaction will disappear. Abbott (1955) summarizes this important point:
When price tags are attached to ideas, services or products, it is the best bargain that wins. How good a bargain anything is depends upon both quality and price; these two elements together form the basis for evaluation of winning contestants in the market place.
It is not sufficient, therefore, to measure and improve quality as a strategy for creating satisfaction. Providers must understand that considerations of quality must be balanced against those of cost to the customer. Those providing the greatest quality in return for the least cost will create the greatest satisfaction. This balance between cost and quality defines the concept of value.
The subjectivity of value
There are problems of subjectivity when trying to define and measure value. Zeithaml (1988) defines perceived value as: ‘The consumer’s overall assessment of the utility of a product based on a perception of what is received [i.e. quality] and what is given’.
Customer sacrifice
It is important to stress that what is given is not limited to money. Ravald and Gronroos (1996) coin the phrase ‘consumer sacrifice’ to indicate that transactions may involve both financial costs and psychological costs.
Psychological costs are defined as the mental effort spent in worrying that the product will not offer adequate benefits, and time spent in rectifying product errors. A customer will often be prepared to pay more for a product if that added expenditure buys peace of mind. The extent to which a customer is prepared to bear financial and psychological costs in return for a perceived benefit will depend on their individual circumstances. Obviously, customers with a lack of disposable income will tend to be more sensitive to financial loss. In the same way, customers who feel stressed by a high-risk purchase decision will be more sensitive to psychological costs. As with satisfaction and quality, the specification of a good value product cannot be determined by the producer alone. Customers’ perceptions of value must be monitored constantly if the producer hopes to satisfy its customers.