What Is Customer Value?

Customer value is so fundamental to businesses that it is sometimes completely ignored. It gets

hidden under layers of actions and decisions. Companies may believe that they know what value
they are delivering, but they may not be able to easily define it. So what is value? How does one
know whether value is being created in the work one does? Is it created optimally? At what cost?
or whom? !oes the customer know what is valuable? Is value the same as what the customer
demands? How can value be defined and measured?
Models of Customer Value
"arketing and innovation e#pert professor "ohanbir Sawhney, has described customer value as,
$%he perceived worth of the set of benefits received by a customer in e#change for the total cost of
the offering, taking into consideration available competitive offerings and pricings.$ %his definition
encompasses seven fundamental lessons of customer value shown in igure &.
Figure 1: Fundamentals of Customer Value
Figure 2: Models of Customer Value
&. All benefits' %he suppliers list every perceived benefit delivered by their product or service.
%his method re(uires a standardi)ed list to be prepared for all customers in all scenarios*
however, this leads to what the authors call benefit assertion without any actual benefit to
the target customers.
+. avorable points of difference' ,ased on the customer-s awareness of alternatives, this
re(uires the supplier to have knowledge of alternatives to his own offerings. %he
proposition is for the supplier to articulate the ways in which his offering is different .and
better/ to the alternatives. %his leads to what is called the value presumption 0 an
assumption that points of difference articulated by the supplier are beneficial to the
customers.
1. 2esonating focus' %he suppliers need to make their offerings superior on key elements of
value that are most relevant to the customers. %he supplier-s offerings must demonstrate
and document their superior performance. In addition, the offerings must clearly display the
supplier-s sophisticated understanding of their customers- business problems.
It is clear from these few views that the terms $value,$ $customer value$ and $customer value
proposition$ tend to be overused, as companies and customers incorrectly assume that the terms
are easily understood by one and all. In fact, value may be the least understood concept in
business parlance.
Customer Value Framework
%here are two key dimensions of any customer3supplier scenario' &/ how well the customers know
what they need .customer needs are hidden and not clearly articulated/ and +/ how well the
suppliers know what the customers need. .See igure 1/
Figure 3: Elements of Customer Value Framework
%hese two dimensions create four scenarios4bo#es'
&. Known-known: %he first bo# represents the deterministic world 0 the focus is on
delivering (uality. %he gold standard in customer value propositions is creating a
resonating focus with the key needs of the customers. 5hen these needs are clear and
known to suppliers and customers, the customer value is measured and reflected in
delivery (uality 0 how efficient, how robust and how timely the service is. 6arameters such
as system availability, reliability and robustness become more relevant and contribute
more to customer value.
+. Known-unknown: %he supplier has to discover what clients need by following the path of
customer intimacy 0 getting to know the customer better. %his re(uires scanning,
observing, seeing, detecting, e#amining and recogni)ing the client-s needs through a deep
intimate process should be based on trust and confidence. %he delivery (uality strategy of
7nown3known fails in this bo#. Here, the insights that the client has need to be captured
through multiple interactions and touch points.
1. Unknown-known: %he supplier has to let the customer learn through a process of
orchestrated customer learning. 8lements of known solutions or needs are highlighted
through e#ploration workshops, interactions and designed e#periences so that a
customer-s hidden needs are revealed. %he finesse and diplomatic skills of suppliers
besides the stickiness of their solution becomes an important component of this strategy
as the customer is guided through the process.
9. Unknown-unknown: 5here no player knows the needs and where ma#imum synergy and
value can be co3created. In this scenario, value net deep dive is a model for discovering
and creating value. %he first problem is fundamentally accepting that unknown, but not
knowing can be perceived as a weakness. Accepting ignorance is the first step toward
learning and creating.
Customer focus
Definition
Why it is imortant?
Customer focus is the commitment to putting customers first
and ability to deliver a consistently high (uality service
Customers are both internal (i.e. colleagues) and external
(i.e. the community, tenants/service users or other
organisations).
All employees must demonstrate a full understanding of
customer needs and e#pectations to enable the effective
delivery and development of appropriate (uality services
which e#ceed customer e#pectations
!e"el # !e"el $ %& !e"el # ' !e"el ( %& !e"els # ) $' !e"el * %& !e"els #+ $ ) ('
Identifies and clarifies
individual customers
needs
%akes pride in
delivering high (uality
services and seeks to
e#pand own skills
2esolves customer
en(uiries promptly at
point of contact and
only refers to others
when genuinely
appropriate
Interacts well with all
customers taking into
account customers
diverse needs
:nderstands all
services and
accurately matches
these to customers
needs
7eeps customers up
to date and informed
!eals with customers
fairly and e(uitably
Consistently makes
decisions focused
on customer needs
Analyses delivery of
services and
provides solutions
to problems
inds different ways
to satisfy customer
needs
Constantly
(uestions ;how will
this benefit the
customer?<
Seeks customer
feedback to
investigate ways to
improve customer
e#perience
=oes beyond their
day3to day work to
assist customers in
a positive manner
Acts as role model
in personal
approach to
customer focus
%akes time to
establish underlying
needs of customers
beyond those
initially e#pressed
>rgani)es
processes around
customer taking
account of comple#
and sensitive issues
to meet their long
term needs
Implements
systems to record
customer feedback
and communicates
ideas and
information to
appropriate people
Creates an
environment where
team4s are
empowered to put
customers first
"akes sure the
organi)ation
continuously develops
and improves services
most important to
customers
Identifies good practice
? solutions and
integrates into service
provided
%ranslates operational
feedback into strategic
improvements
orms strategic ?
diverse
groups4partnerships to
improve services
2ecogni)es need for
developing new
customer bases ? acts
accordingly