Concept of customer value its measurement and management

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 customerThree 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.