Babson College - Consumer Perceived Value: The Development of a Multiple Item Scale

Following the Total Quality Management approach, in which organizations focus on internal processes and structure to increase quality for competitive advantage, management has more recently adopted an external orientation by looking towards markets and customers for this purpose (Woodruff, 1997). In line with this thinking, the creation of customer perceived value is often suggested to be central to long-term success. It may be of particularly relevance to retailers, since customers in this environment are continuously evaluating alternatives.

However, competing on superior customer value requires more than merely including customer value as a part of an organization's mission statement or objectives. Indeed, beyond the obvious internal issues, such as managerial commitment to the principle of competing on value and the development of a supportive organizational culture, organizations need to understand what consumers value and which dimensions will provide market advantage.

Despite this need, little research has examined the value construct itself and, indeed, there is no well-accepted measure. This lack of a value tool has meant that many studies have relied on ad-hoc or convenient value measures, with the most common probably being a single value-for-money item, such as "this product offers good value for money." Our research shows that this approach reduces the usefulness of such research, as consumption value is more complex than such a simple definition would suggest.

We investigate the customer value concept in this research and develop a parsimonious 19-item measure (called PERVAL) to be used to assess customers' perceptions of the value of a consumer durable good at the brand level. The development process was undertaken in a sequence of steps, starting with a number of focus groups that asked a variety of consumers about how value had been created for them in recent purchase decisions. The groups provided more than one hundred different potential value items that were assessed by expert judges and placed into value categories derived from previous research. From this phase, eighty-five items emerged that represented four distinct value dimensions, which were termed price, quality, social and emotional value.

This was followed by two quantitative phases that sought to refine the scale. In both phases, respondents were asked to recall a situation in a shop in the last three months when they had looked at a particular durable product, which they could identify by brand and price. A wide variety of durable goods were selected, including clothing, footwear, furniture, cars, computers, sports goods and household appliances. A stable 19-item value construct that measured the four suggested dimensions was derived from these two stages. The measure has sound psychometric properties, including high levels of reliability and validity.

A third phase of data collection was also undertaken to evaluate the scale in the post purchase stage. The results strongly supported the four dimensional construct, suggesting it can be used in a variety of purchase situations.

Our findings clearly demonstrate that value is multidimensional and that retailer executives need to understand the different drivers. While all of the four dimensions are related to decision outcomes, they were not equally important. For example, while emotional value was most important in willingness-to-buy, functional value (quality) contributed most to reducing expectations of problems with the good. In contrast, all four dimensions related almost equally to word-of-mouth communications.

This understanding of the key motivators of different outcomes is central to developing appropriate marketing mix decisions, including pricing and promotions. The use of simple constructs that fail to take account of value's multidimensional nature will not provide managers with the information they need to make such decisions nor the diagnostic information required to understand why consumers make the choices that they do.

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