Coffee is sold at Rs.5/- per cup at the wayside restaurant and also at Rs.500/- per cup in luxury five star hotels and elephant dung coffee is sought after at Rs.2500/- per cup. Why is the customer willing to pay such a wide variety of prices for coffee? It has to do with 'value addition' is what you might have already heard. Let us try to view this from the point of view of the customer. There is a simple way to calculate the 'value' that a customer gets Value = [Benefit from the physical product (not only functional)+ Benefit from service received + Benefit of 'image' and other psychological benefits (Brand image/ brand association, feeling good/ happy) + Time benefit (saving or spending time comfortably)].
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