There are, in fact, two different ways that you can think about a product's differential value-inuse. Practically speaking, it will sometimes be more useful to think of it from one perspective, sometimes from the other.
The first way
The first way to think about differential value-in-use is the way we just derived it: a product's differential value to a customer is the difference between the product's total value-in-use to the customer and the total value-in-use of the customer's best other alternative, or
| dVf-a = Vf - Va |
The second way
The second way of thinking about a product's differential value-in-use to a customer is as the sum of the values-in-use of all the specific individual differences between the product and the competitor's best other alternative. Formally, differential value-in-use from this perspective looks something like this:
| dVf-a = dv1f-a + dv2f-a + dv3f-a + ... + dvnf-a |
Here, dVf-a represents the sum total of all the differences in value-in-use to the customer between two competing products, and each individual dvxf-a represents a single specific difference in value-in-use in some aspect of the customer's business.
This second approach looks at differential value-in-use as the sum of the use values of all of the point-by-point differences between Product F and Product A in those areas in which they either add to or subtract from the benefit they provide a customer.
Implications
Mathematically there is no difference between the two perspectives. However, when it comes to using the concept in practical applications, the difference can sometimes be critical. When it comes to actually estimating a product's differential value and relative worth, this second way of thinking about the value differential between two products can often offer a big advantage over the first. The advantage is that it provides a way to develop an estimate of the two alternatives' differential value-in-use without having first to come up with an estimate of their full values-inuse. With this second approach, all you need to do is focus on the differences between the two.
This may not seem like a big deal to you at this point. However, as you gain experience in doing business case value analyses, you will discover that there is often a world of difference between estimating individual points of differential value-in-use and estimating total value-in-use. Sometimes, in fact, the estimation of total value-in-use can border on the impossible.
This is not to say, of course, that isolating individual point-by-point differences between competing alternatives is easy. That in itself can be quite a challenge. However, estimating total value-in-use can be an even greater challenge. In some cases, it simply can not be done. Therefore, as you go forward, keep in mind that there are these two different ways to think about a product's differential value-in-use.
© 2001 CustomerValueCenter