Tuesday, June 17, 2008

Value, Cost and Satisfaction

Value, Cost and Satisfaction
How do consumers choose among the many products that might satisfy a given need? Suppose one person needs a travel five kilometers to work each day. A number of products could satisfy this need: roller blades, a bicycle, a motorcycle, an automobile, a taxicab and a bus. These alternate constitute his product choice set. Assume that he would like to satisfy several additional needs in traveling to work, namely speed, safety, ease and economy. We can call these his need set. Now each product has a different capacity to satisfy his various needs. Thus a bicycle will be slower, less safe, and more effortful than an automobile, but it will be more economical. Somehow he has to decide which product will deliver the most satisfaction.

The guiding concepts here are value and satisfaction. Value is the consumer’s estimate of the parodist’s overall capacity to satisfy his needs. Suppose he is primarily interested in the speed and ease of getting to work. If he were offered any of these products at no cost we would predict that he would choose the automobile. However, since each product involved a cost, he will no necessarily choose the car, which cost substantially more than a bicycle. He will have to give up of other things to obtain the car. Therefore, he will consider the products value and price before making a choice. He will choose the product that will produce the most value per dollar. He will form an estimate of the capacity of each product to satisfy his set of needs. He might rank the products from the most need-satisfying to the least.
Value, Cost and Satisfaction
Related Posts Plugin for WordPress, Blogger...

Top most popular posts