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Monday, April 07, 2008

100th Post of the year - Revisiting Customer Value

This is the 100th Post of 2008

I thought it may be appropriate to look at the responses of my question on Customer Value on LinkedIn (This is the second question asked and I have interesting responses - just reproducing public answers, There defintely were personal responses to me which I will selectively post)

The question Asked:
What are the ways in which one can understand Customer Value? I would like to know your practical experiences. This is a continuation of my first question on customer value.
About a month back I asked the following question "what is customer value?". I thank all the experts who answered the question. I have collected all the answers and posted on my blog as well at http://innovationcrafting.blogspot.com/2008/03/customer-value-responses-to-my-question.html
Would like to know how you are able to understand customer value - which typically is highly opaque? Does any tools, techniques, methods, systems help? It would be great to understand the tools that have worked?

The answers

Tarun Mishra
Independent Think Tanks Professional

What are the ways in which one can understand the Customer value? Good question. Let me answer it differently. First of all, customer value can be understtod only by living the life of your customer. Living the life of customer means by exploring their life, their challenges, their needs and their desire. You may argue that we do it always. But reality is that when you do it you try to apply logic and justify the customer's psyche. We evaluate their need. We try to rationalize customer's point of view and draw our point of view. This is not equal to living life of customer. So living customer life is take customer's like as it is and work a solution from there. As soon as you do it you will find you and your customer becomes one. customer's interset becomes your interest. Customer's pain becomes your pain. The solution thus discovered becomes a value based solution and the relatiobship with customer becomes value relationship and not just vendor-customer relationship. I hope this helps.


Sanket Dantara
Student at Indian Institute of Management, Ahmedabad

There is a term called Lifetime Customer Value, it tries to put into money terms the value the customer generates for your business through his/her life. Maybe you can read up on that and see if it helps
Clarification added 20 days ago:
"by through his life" i mean "throughout his life"


Bhanu Potta
Program Manager - Knowledge Management Program at Perot Systems

Navneet, Good question. Customer Value has been a buzz word for a decade now. Evolving from meaning “Meeting Customer Requirements” to “Customer Satisfaction” to ”Customer Delight”, the term Customer Value has now matured to exactly & directly mean CUSTOMER SUCCESS. Today’s challenge is no longer to meet requirements or satisfy or delight our customers, but to Create Success for our Customers in their business leveraging on the services we provide them. Now and going ahead, the Litmus Test for things we wonder if they are of Value to Customer is to verify their direct influence or capability to create Customer Success. Good Luck. Bhanu Potta

Sunil Raghunathan
IT Transition, Transformation & Change Management Expert

As mentioned in my previous response, understanding customer value is often impaired by the context, semantics and experiences. One of the ways (methods/tools/techniques) of understanding customer value could be through use a well-defined, and widely accepted frameworks & performance indicators. In this context, Balanced Scorecard comes to my mind right away. Not to mean that it best encapsulates the definition of value from different facets, but just that it busts some of the impairment of value definition due to context, semantics and experiences. Ofcourse, one can then slice the Balanced scorecard into hierarchies and dimensions based on business drivers. But more than the method/tool/technique/framework one can only benefit, if it is definied and praticed with correctly, objectively, and consistently across the board.

Alastair Campbell
Independent management consultant and trainer
There are a lot of good tools to help. Some that I have used and found valuable are described below, but for a good overview I suggest reading the definitive textbook Marketing Management by Kotler.
1. A framework for thinking about customer value - there are several but the one I have used most is Parasuraman / Ziman model which suggests dimensions of customer value (for a non-aspirational product / service) of Tangibles, Reliability, Responsiveness, Empathy and Assurance. - you can also obviously do primary research with your customers to come up with a framework but every time I've done this we've ended up with similar lists of attributes - the more valuable thing is how the product / service can contribute to these dimensions of value for the customers and how much they value different levels of performance, incoluding the current performance. 2. A segmentation model which will allow you to identify peer groups of customers with roughly similar needs and values. The only sensible basis for segmentation is NEED and forcing yourself through understanding whether different customer groups needs are homogeneous or not is a hugely valuable part of the process of thinking about value. 3. A value innovation toolkit. I have used an awful lot of tools to generate new value propositions or to incrementally enhance existing propositions. Mapping customers activities or following customers around or identifying 'lead' customers to understand how they use the produce can be useful to provide start points, but if you're trying to create new value you'll need some stimulus to innovation. Contact me separately ac@camc.co.uk if you want more on this. 4. A customer testing / feedback method Whether you're trying to diagnose the current importance to the customer segements of different product / service attributes and assessing current customer perception of performance, or just trying to maximise value from a new proposition, you'll need a method to engage customers. Typically this needs to be a qualitative phase followed by a quantitative phase and you will need someone with good market research experience on the team to help you design it. You can get a great added bonus out of the qualitative phase by getting stakeholders (e.g. your top mgt) sitting behind a mirror wall listening to the customer focus groups talking about what they really value, and the real problems they want fixing. That has been the single most valuable intervention I have seen in creating urgency for improvement in customer value in top management - they are much less swayed by the data than by the personal experience. Finally you need some kind of tool to compare the relative customer value of different investments in product or service attributes - to ensure you get the best 'bang for the buck'. Some use pairwise ranking research questions with customers for this, but I have also used a direct 'customer value points' tool that allows you to say for instance what is the value of improving phone response times compared to making the call a free call. A big area and my general advice would be start by keeping things simple to get an initial round of rough conclusions from some qualitative customer research before then working out where you can justify the time and money on achieving the real rigour.
Happy to exchange more ideas ac@camc.co.uk

Ellen Domb
TRIZ Consultant, Editor of the TRIZ Journal

I have been working this year with Tony Ulwick (author of the book "What Customers Want") and his colleagues at Strategy (www.strategyn.com). I am very impressed with how fast and how useful their results are--and I speak as a former QFD practioner who has been very negative on many other methods. In brief, they do a detailed analysis of the "jobs" that the customer needs to perform, and the satisfaction/dissatisfaction with the way those jobs are performed, then do extensive analysis of the results to find opportunities. The methods of asking the questions are very disciplined, which makes it possible to analyze the data very reproducibly--understanding what customers want becomes much more of a science than an art. Links:
http://www.strategyn.com/

Richard Zultner
President at ZULTNER & COMPANY

Customer Value is a core concept of Modern QFD. The subset of methods in QFD for discovering what 'value' is for the customers you are targeting is Voice of Customer analysis. This involves not just analyzing what the customer "says" but also what they "do" -- the tasks or "jobs" customers are trying to accomplish. QFD has an entire subsystem of methods and tools for this purpose. As Ellen Domb mentions, Tony Ulwick has developed a nice proprietary approach for concept innovation (based on his experience with traditional QFD in the early 1990's).


Dr Rajiv Narvekar
Research Evangelist at Infosys

Hi Navneet I would like to add another dimension to what others have replied to. The principle that firms will develop products and services and offer them to customers for consumption has been challenged. Customers are no longer passive recipients of what firms offer (however customer oriented the firm be). Customers want to play an active role in the creation and the consumption of the product. They want to be involved right from the design stage. They want to get peer feedback when they suggest designs. They want to engage with a community of other customers and improve their experience with the product / service. Firms therefore need to create a platform where communities of customers interact with the firm. This platform has to be supported by a set of nodal firms that offer complimentary services. The starting point to unlock value is to focus on the interaction elements between the firm and its community of customers. Some companies that are doing this are Progressive Insurance, Nike, Medtronics etc. Let me also assure you that this is applicable in B2B and B2C markets as well.


Tom Mathew
dam at wipro

Easiest way to understand is to reverse the role. Assume I am a land lord and I want to understand how my tenants behave. I would live as a tenant to gain experience of the customer mind. All customer are suppliers as well in most of the instances. Individual empolyees in organanizations may not have this experience as their role is compartmentalized and have not access to the paradigm of the other side In summary the easiest way to understand the customer value is to have customer experience. Organization that does compartmentalization need to realized this fact and devise mechanism to provide customer experience to the supply side staff.
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Ellen Domb Suggested that I should write a paper after studying all the responses on Customer Value. I hope to do that.

Nevertheless thanks a lot to all for wonderful inputs.

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