I've recently returned from the New York, where I was visiting for a month. During the month, my iPhone was on wi-fi and I rarely used the data roaming. However, I did forget to turn my auto data-roaming off. So when I got slapped with a £560 bill I decided to use this as an example to illustrate value-in-use and how the concept is not as easy as it seems.
When we use the word 'use', we immediately think of physical use like using a car, a stove, a TV. Actually, the word 'use' is much broader. The better word is of course 'consumption' but even then, with consumption, we conjure images of using up something. Not necessary. As I have explained before, a ferrari sitting on your driveway gives you value-in-use even if you are not driving it. This is because you are still consuming the benefit of the ferrari on your driveway - the status and pride it gives you. So when it comes to emotional value, value-in-use is derived from the 'consumption' of the emotional attributes of the good or activity. A piece of art, an antique on your mantel - these give people great pleasure and such pleasures are still value-in-use because every day the piece of antique sits there, you are 'consuming' (or experiencing) it.
It gets a little more complicated and less obvious in certain offerings. In the case of my telco service, my iPhone did not 'use' the data service in New York (whether directly or indirectly through roaming). I was on the house wifi. Yet, one can argue that I did 'use' it, because the mere provision of availability of use by the telco is of value to me. In this case, one must differentiate between the actual use of the data and the use value of the availability of the data.
Let's try another example. I work with the defence industry and one of the most used words in maintenance and service contracts is availability e.g. delivering 85% availability of a missile, or some other equipment. If I were to promise you the availability of a piece of equipment, it doesn't matter if you use it or not - my job is to make sure that all the parts are in good condition and the equipment works.
'Use' would affect the availability of course, so if I 'use' it badly, the parts would fail often and this would make repair more frequent and threaten availability (and therefore the design and delivery of the service - one of my papers on value co-creation in outcome based contracts actually discusses this) but the point I'm trying to make is that as a customer, availability for use is of value, even if i don't actually use it (of course, i have no intention of educating my telco on this - I only asked for my money back since i did not use it :p).
Still not convinced? Think about the servicing and support of a nuclear weapon to achieve value-in-use for the customer. It is the availability-for-use of the weapon that is prized and paid for. We all hope it would never actually be used.
So pop quiz - what's the pricing, design and delivery of 'availability-for-use' as value and how is this different from 'actual-use' value? There are huge pricing implications in this (and for me personally, a £560 question). Think hard about this and you would really be pushing the boundaries of pricing, value, design and delivery....
Irene,
ReplyDeleteThis was a great topic and your post a good conversation starter. Having mulled over what you said, I agree with you that 'value-in-use' is broader than just the value from actually using a product/service. I also agree that in many cases this broader definition would include the 'availability' of the product or service.
However, I would like to extend this framework and add a moderating variable - context. I think availability by itself does not speak the whole story unless we put a context around it that will quantify the need in that situation. Couple of examples of what I am talking about -
a) You talked about the defense industry and the fact that, "..If I were to promise you the availability of a piece of equipment, it doesn't matter if you use it or not - my job is to make sure that all the parts are in good condition and the equipment works". Totally agree with you here - but here just the availability has value as the defense "needs" this availability (since many lives may depend on it). Let us say that you are making the same kind of promise for the same equipment to a museum owner -- in this case, I would venture that your promise of availability has far less value (in fact it might have negative value as no museum owner want a military equipment to go off accidentally :-) ).
b) You gave the Ferrari example and how this product can have value even without being used (status/pride) - again, totally agree with you here. Let us now take an old beat-up but still working 1990 car sitting in the garage of the same owner (as the Ferrari). Imagine the same car now in a farmer's home where the nearest neighbour is 50 mile away and this is the only automobile they have. I would venture that even though the product and it's availability is the same -- the value accorded to the product is much higher in the second case (by the farmer) than in the first (where there are more alternatives).
Bottom line, I think you have a case here that when companies look at value they should go beyond the mere "use" of the product/service. But when it comes to creating a pricing model for "availability-for-use", I would tread much more carefully and look at the context first - else things might backfire. My recco - have a dynamic model for pricing etc. that can easily be used to get the sector where the customer falls into and then assign the appropriate value.
Regards,
Ned
Hello Ned
ReplyDeleteAbsolutely agree with you on context. In fact, many of us use value-in-use synonymously with value-in-context.
I have just finished writing a futures article on 'future of pricing and revenue models' in the Journal of revenue and pricing management and context is one of the focus. In the article, I wrote that we are moving away from profiling (customer types) to contexting (use-types) i.e. we will starting focusing on how customers derive their value in-use i.e. when, where and how customers are consuming the goods and activities. The future will see more sophisticated data being available – location-based, RFID tagging –which could provide precious data on use and contexts and provide insights into the value customers hold in all these contexts, and how they could be priced within each context, or in bundles.
So, yes, spot on - context is the future!
Irene
Adding to the conversation... When it comes to value-in-context of an antique, rare painting or stamp, there's obviously no downstream value-in-use. No availability requirement, etc.
ReplyDeleteBut there's scarcity. If a painting is so unique that only one original exists, paying a lot of money to have that access right may be of value to someone. Particlurly if you believe that the pleasure derived from looking at a reproduction doesn't come close to looking at the original.
Having paid millions for that painting, sharing it with many others (by loaning it to a museaum) doesn't subtract from the owner's value of owning it - may actually add to it the emotional component Irene mentions.