Offering greater Value to Customers using the ‘Indicator’ Approach

By definition, ‘Customer value’ is the difference between ‘what a customer pays’ and ‘what he gets’

The larger is the difference (with the latter exceeding the former), more are the chances of that product being in demand. It goes without saying that customers would flock towards the brand which they see as offering the ‘maximum customer value’. Consequently, it presents an interesting opportunity for businesses to make their offering the ‘most preferred one’. One can develop this parameter as an important way of combating competition. Further, this phenomenon helps in establishing higher customer loyalty, gaining greater market share and deliver better services.

Owing to the many benefits brought by this thought, organizations spend considerable amounts of energy and resources in pulling up the ‘customer value’ of their offering. However, developing an exact understanding about this subject is a must before one can shape it in a ‘battle- winning weapon’. The managerial group should get to the nerves of customers’ thought process. This needs to be kept in mind that customers define value in terms of ‘utility’ which the product/service provided to them.

The challenge which surfaces immediately, when one deals with the subject of ‘Customer Value’ relates to the ‘number to be assigned to this parameter’. In other words, the highly ‘intangible’ and ‘relative’ nature of this concept creates hurdles in proceeding further. Further, value in this regard is itself multi-dimensional in nature. This is to say that in addition to the ‘functional’ and ‘economic’ aspect, customers attach ‘emotional’ value to the entity they paid for. To further add to this complication, the task of assigning value has to be done from customer’s viewpoint. Consequently, the client’s perception as to ‘what he expects’ and ‘what he gets’ becomes the most important question and striking a balance between these two is the ‘eventual aim’ of the organizational management.

The trade-off between ‘costs’ and ‘benefits’ is a double edged sword on which the managerial group needs to tread. The act should be carried out extremely carefully to successfully claim the resources that went into ‘creating value’.

However, the hindrances can be well taken care of using the KPI approach. One can put indicators under perspectives like-

Analysis Perspective, Operations and Benefits Perspective, Framework Perspective and Performance Evaluation Perspective.

Analysis is possible with KPIs like- Number of dimensions considered, Number of Buying Factors’ covered, Benchmarks and value of the customer ratio. Performance Evaluation can be done using indicators such as- Interactive Relationship Index, Customer Assistance Level, Customer Profitability Jump and Satisfaction to value perceived improvement. Operations and Benefits can be obtained with metrics such as ‘% increase in retention’, ‘Drop in Customer complaints’, ‘Customer Attrition rate’ and ‘number of techniques used for analysis’. Eventually, Framework perspective can be attained with Customer Intimacy Ratio, Customer Value Increment and Quality Conformance Ratio.

Following such a quantitative and measurable strategy, one can be assured of the success of the whole task of evaluating and analyzing Customer value.