True Economic Value (TEV)

TEV or Economic Value to a customer (EVC) is a measure of how much value an individual customer, or customer segment, gets from using a company’s products or services

The higher EVC is to a customer, the more likely they will pay a higher price for a product/service

EVC = Tangible value the product provides + Intangible value the product provides

• Functional (or utilitarian) needs. I buy a Sam Adams beer to quench my thirst.

• Social needs. I buy a Sam Adams beer to fit in with the people at my office holiday party.

• Ego-expressive (or symbolic) need. I buy a Sam Adams beer to make me look upscale and intelligent.

• Recreational needs. I buy a Sam Adams beer to have a prop to hold and something to fiddle with while I am at a bar.

Absolute EVC = Your product’s EVC – Costs customer must incur to purchase the product

Relative EVC = [Your product’s EVC – costs to customer to purchase your product] – [The next best alternative’s EVC – costs to customer to purchase that product]

If a product relative EVC is negative, customer is unlikely to buy the product.

hbr.org

Why should consumers buy your product?