B–C=V
How people make IT choices
7/1/2016
"Changing neural pathways every class period."
1
1. Definitions b – c = v
• Value = The difference between the benefits
enjoyed and its costs
• Benefits – Happiness, enjoyment or
advantages produced by a product or service
• Cost – Price paid to acquire, produce,
accomplish, and maintain
7/1/2016
"Changing neural pathways every class period."
2
2. Types of Benefits/Costs
Benefits
• Organize
• Entertain
• Enhance prestige/status/sexiness
• Increase efficiency
• Communicate
• Connect with people
• Improve security
• Improve health
• Monitor
• Increase power
• Send symbolic message
• Experience something unique
• Make a task easier
• Make a task more convenient
• Improve reliability/certainty
7/1/2016
Costs
• $$$ & Time
•
•
•
•
•
•
•
•
•
Acquiring
Learning
Using
Maintaining (Updating)
Disposing
Ego
Safety
Privacy
Lock-in (loss of flexibility)
"Changing neural pathways every class period."
3
3. Increasing IT value
Drive Up Benefits
• Add features
• Improve “sex appeal”
• Aesthetics
• Celebrity Endorsements
•
•
•
•
•
•
Enhance performance
Improve durability
Offer choices
Highlight network effects
Provide “loyalty rewards”
Create valued
experiences
7/1/2016
Drive Down Costs
• Simplify (“de-complexify”)
• Offer warranties
• Provide training
• Ease ordering process
• Offer service
agreements
• Reduce price
• Institute a “return policy”
"Changing neural pathways every class period."
4
4. IT provider’s perspective on the
“value game”
• Avoid oversupplying benefits
• Use “switching costs” to your benefit
• Maintain loyalty
• Encourage “upgrades”
• Decrease benefits
• Increase maintenance costs
• Maximize the impact of “network effects”
• Provide unique benefits or lower costs to
consumers (e.g. marketing strategy)
7/1/2016
"Changing neural pathways every class period."
5
5. So what?
a) What is a benefit/cost to you may not be to another
person.
b) Initial perceptions of benefits/costs may not
correspond to experienced benefits/costs
c) Today’s benefit/cost may not be the same as
tomorrow’s benefit/cost (e.g. value is a fluid concept)
d) Social networks moderate perceptions of value
e) Value-added innovations either increase benefits or
decrease costs
f) Some benefits/costs are difficult to quantify
g) The interests of IT consumers and companies are
not always the same
7/1/2016
"Changing neural pathways every class period."
6
6. Applications
Zune 30 gig (Brown) = $220
vrs.
iPod 30 gig (Black) = $237
vrs.
vrs.
7/1/2016
"Changing neural pathways every class period."
7