Customer Value…its definition and importance.

September 3, 2018

 

Customer Value. Two words that are very common to us all.  Yet do you know what it is?  More importantly, why is it so important for our fellow professionals?  Strangely there does not exist a consensus over the exact meaning of customer value less even a stable definition.  The purpose of this short feature is to elucidate a feasible definition or definitions of customer value and tease out the importance of customer value in the development and organisation regardless of the sector that you are presently specialising within.

 

Customer value can be understood at different levels.  Firstly, in its most basic manifestation it can be defined as the level of user satisfaction a customer derives from the purchase of any good or service we acquire in a shop such as, for example, a consumer perishable for a reasonable monetary price.  At another level, an arguably more sophisticated one, we extract value from the sense that we walk away from our purchase of a service or goods with an enormous sense of either wellbeing and psychological or cerebral satisfaction like the completion of an educational and training programme.  Other factors that shape customer value range in the dimensions from emotional to social value. This though is to understand customer value merely from the position of the customer.  For those of us working within industry the notion of customer value must begin with an understanding of what value we are trying to create but also how does it benefit our firms and organisations.  These are the core questions before us.

 

The battle for customer value as grasped from the point of view of a supplier is not a linear straightforward process.  As has been written elsewhere customer value needs to be understood at two key levels, ‘before’ and ‘after’ the purchase of any service or product.  A key overall understanding of customer value propositions is essential. It should be said that suppliers and customers can often have very different viewpoints of exactly how to qualify customer value.  Let’s imagine you develop an easy online catalogue system for customers specifying your products and goods thus giving you a quicker connection to the developments in the market.  For customers the real value of that system would be a more sharper user interface, avoiding the need for unnecessary physical travel.  Those different standpoints about customer value percolate down into how we try to improve the customer experience.  How do firms respond? One way might be a healthy analysis of the customer environment so that any changes can be properly anticipated and fulfilled ensuring that a smoother experience can be enjoyed.  Another facet by which customer value can be enhanced to a significant degree is of course customer feedback.  This involves a merging of product knowledge, developing customer relationships and fluid organisational structure so that products and services can be critically examined and improved upon in a dynamic interaction.

 

The crucial point about customer value is that it can never be fully understood.  Moreover, because of that it prompts us to ask deeper questions about the nature of our businesses and not only at the user interface.  How are our logistics and component supplies feeding into our customer use? What factors lead to changing perceptions of customer value? Who are our customers, and can we be sufficiently agile to meet their changing needs and demands?  What consequences flow from not weighing customer value properly and are these always negative?

 

Customer value will remain the key organizing principle along with profit and market share that will guide how we develop our futures.  It’s essential that we comprehend that it is not a static idea but an evolving one as well as a deeply educational prism through which service and product development are almost inextricably linked.  

 

How we apply these different meanings of customer value shall fundamentally determine our successes and failures.

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