Customer value elasticity, equi-value curves and value vectors: implications for customer behaviour and strategic marketing.

The analysis presented in the paper uses algebraic and geometric methods to explore the implications of the two different specifications of the customer's value equation, the ratio approach and the subtractive approach, for customer behaviour and strategic marketing decisions. Three key concepts are defined and investigated for each specification of the customer's value equation: customer value elasticity, equi-value curves (or "iso-values"), and value vectors. Customer value elasticity measures the sensitivity of customer value to small changes in customer perceived benefits and sacrifices. Equi-value curves are functions connecting points of equal customer perceived value. Value vectors are customer-value-based marketing strategies which have a specific directional orientation with respect to equi-value curves. The analysis of customer value elasticity and of equi-value curves suggests a number of important hypotheses for subsequent empirical testing. The analysis of value vectors suggests that there are eight feasible customer-value-based marketing strategies available to business organisations.