Concept of customer value

its measurement and

management

Prepared by, Product Policy &

Suresh B P Management Course-
Himanshu Jain Assignment
Vikas Kunj IRMA, Anand,
Binita Prasad Gujarat, India.
Shabana Parween
 Questions to address..
 What is customer value?
 How does one know whether value is
being created in the work one does?
 Is it created optimally? At what cost? For
whom?
 How can value be defined and
measured?
 How it can be managed?
 Where do customers stand?
 Company’s first task -To Create Customers
“Peter Drucker”

 Customers are Value – Maximizers

 They form an expectation of value and act on it, which

affects both satisfaction and repurchase probability

 Customer value from a Marketer point of view is the

customer’s economic value to the company, demand-
oriented view of customer value as the company’s or
its products’ value to the customer
Fundamentals of Customer
Value
"The perceived worth of the set of
benefits received by a customer in
exchange for the total cost of the
offering, taking into consideration
available competitive offerings
and pricings.“ Sawhney.M
 Customer Value Factors
Monetary Revenues Up buy, cross buy, referrals

Customer Profile Demographics,

Psychographics

Customer Profitability Customer based resources,

Customer based costs

Customer Lifetime Value Discount rate, Expected

value
Models of Customer Value
Customer Value Management
•Basis of achieving value—
Relationship with the customer
Three aspects
•Customer perspective
•Employees perspective
•Organisation structure and its ability
to deliver
 The Customer’s Perspective

 Based on two main

dimensions:
 1. WHAT your
company does for
them. (The “Problem
Solving” dimension).
2. HOW it does it.
(The “Relationship
Experience”
dimension).
Figure 1: A Company's Value Creation Process
Unique Value: A Customer ???
 Customer-centric: the
customer is part of the
solution;
 The ”product” :easy to
use and cost-efficient;
 Professional advice:
everything is done to
help the customer
succeed in endeavours
The Employee’s Perspective
 Earlier view--Employees as
assets
 Employees in most industrial
sectors enter into a relationship
with a company and become its
“intellectual shareholders”
 * Employee-Centricity: the
employee is actively involved in
the design of the solution;
* Freedom of Action: means that
the employee is empowered to
take decisions relating to the job
and act as he/she deems fit;
* Personal Development: the
solution enhances his/her
competence and   marketability
Organisation structure
assessment
 Healthy organisation --
mainly of highly trustful
and committed staff --
consistently deliver high
value to customers.
 Unhealthy organisation
has many “negative”
employees who do not
trust the organisation
and deliver low levels of
performance, which
affect customer value
conclusion

 Value Creation must be monitored across the

whole value chain from customers to
employees. Concentrating on only one
stakeholder prevents management from
seeing the potential negative impacts in
other parts of the value creation process.
 Continuos monitoring of
cutomers,employees and organisation
environment is required.
Customer value strategic
model
CVM in a nut shell
To increase revenues, organisations often
focus their efforts on the acquisition of new
customers. In some cases they overlook
and fail to realise the potential value of
existing customers
 Customer life time value
The CLV measures the profit streams of a customer
across the entire customer life cycle.
• Retention value
• Revenue
• Cost
• Acquisition cost of future customer
• Marketing costs represent costs of customer retention
and development
• Sales costs include both the production costs of the
goods sold and all costs of serving the customer
How to reduce the defection
rate
 The company must define and measure
its retention rate
 Distinguish the causes of customer
attrition
 How much profit it loses - In Individual
customer it is his lifetime value.
 Figure out how much it would cost to
reduce defection rate.
 References
 Customer-based Corporate Valuation by Hans H.Bauer,
Maik Hammerschmidt and Matthias Braehler
 Value based planning by Steve Andersen and Steve Bistritz
 Customer value-driven strategies by Michael Kaye &
Marilyn Dyason
 Diagnosing customer value by Adrian Payne and Sue Holt
 Marketing management book n Philip Kotler