Customers determine the value of a product or service. In today’s competitive environment, value creation is a corporate advantage. However, building this value is often difficult. People have different ways to assess value. Some folks use traditional ways based on some established reference point, such as a company’s price guide.
Yet, some ways are informal. In many countries, haggling is an acceptable practice of transactional selling. Philip Kotler and Kevin Keller, authors of Marketing Management, explain how businesses must understand customer decision making processes for purchases. They note, “They [customers] tend to be value maximizers, within the bounds of search costs and limited knowledge, mobility, and income.”
Here’s a personal example. My family visited Mexico and began the great American tradition of haggling sellers to get the price of merchandise down. Radio host Dave Ramsey believes everything is negotiable. Anything that is worth the effort of negotiation must have passed the value threshold to the consumer. Paul Peter and James Donnelly, authors of Marketing Management, note that culture, social class, and reference group influences play an important role in consumer behavior.
Some risks are involved with purchasing. This reality has a bearing on value for customers. If decisions involve low risk, they are often done quickly with little thought. Yet, major purchases normally require more risks, like buying a house. Therefore, having a good relationship with the seller is important.