Customer Value

Cigarettes have always been a controversial product. What starts out as an experiment invariably leads to an addiction that is very hard to get rid of. It has been described as a "small cylinder of finely cut tobacco leaves rolled in thin paper". Nowadays, considering the awareness about tobacco products, cigarettes are looked down upon as agents of death. However, despite the prices of cigarettes having gone from Rs. 5 in 2008 to Rs. 12 in 2014 (that's an average CAGR of 12.25% over 6 years), the consumption of cigarettes have not come down. Quoting available data, Minister of State for Commerce and Industry D Purandeswari said in a written reply to the Lok Sabha that domestic consumption of cigarettes during the year 2011-12 was 1,16,166 million sticks, showing an increase of 4.19 per cent as compared to the previous year.

Customer delivered value is a sum total of the total customer value and the total customer cost 

Total Customer value = Product value + services value + personnel value + image value

Total customer cost = Monetary cost + time cost + physic cost + energy cost

Customer Delivered value = Total Customer value – Total customer cost

Here we try to identify and categorize the value derived from a cigarette by a customer:

• Image value: Image benefit is most common in the younger sections who aim to "look cool" and gain the approval of others. Smoking is often seen as a rebellious activity and may help the younger consumers help get a feeling of freedom. It is often seen as a rite of passage in many engineering schools of India. Smoking is also seen as a method of networking and bonding with colleagues in the corporate world.
• Personnel value: Cigarettes offer no personnel benefit.
• Services value: Cigarettes offer no services benefit
• Product value: Cigarettes offer a psychosomatic stimulus (also knows as a "high") which is very addictive to the consumer. Addiction is the sole reason why people continue to smoke despite all the negatives of smoking.

Let's also try to identify and categorize the costs pertaining to a cigarette:

• Psychological cost: Psychological costs are huge when it comes to smoking cigarettes. Majority youngsters who smoke do so without the knowledge or approval of their parents/guardians. Thus the fear of getting caught is huge for them. On the other hand, the psychological cost for matured adults is also great since they have been bombarded with anti-smoking advice and thus the fear of dying due to it always at the back of their minds.
• Energy Cost: Energy cost related to a cigarette is negligible. Cigarettes are available everywhere.
• Time Cost: Time cost related to a cigarette is negligible. It hardly takes any time to buy and consume a cigarette.
• Monetary Cost: Monetary cost associated with a cigarette is not much in India in comparison to the West. Government efforts to increase the price of cigarettes also seems to be yielding no results.