Creating value is perhaps the most important aspect of any leader’s job. So crystal clear clarity about what it is and how it’s made should definitely be paramount. Shareholder value is fueled by customer value; Shareholders leave when customers leave, not the other way around. Customer value is an ambiguous term as it can be used from both a company and customer perspective. Few companies understand the lifetime value of their customers or collective customer value, and more importantly, even fewer understand how much customers value their brand and why.
Why should you care how much customers value your brand? Because the customer’s view of the company’s value is a predictor for market shares and shareholder value. Graham Maher, Managing Director of Vodafone, says: “The Customer Value Management (CVM) score is a leading indicator of Vodafone’s market share. We were able to predict market share with CVM data to an accuracy of 1% in a quarter! Finance director said the CVM score is more robust than any of our finance scores.”
Customer Value Management (CVM) is a proven method for predicting customer behavior and business outcomes used by 3M, AT&T, BP, BT, Chase, Disney, GE, HP, J&J, Kraft, Lucent, Nokia, Philips, Roche, Sonoco, S&P , Tata, TI, Vodafone, Whirlpool, Wisconsin Energies and many other companies. “If you can create value, you can raise your prices. In fact, nobody talks much about values anymore,” explains Gautam Mahajan, President of the Customer Value Foundation. “They worry about competitors lowering the price and whether they should match it or advertise special discounts. You don’t have to lose money to create customer value; You simply have to understand how much customers value the range of customer experience components, and act. The moment you start thinking about pricing your product, you have a commodity product and it’s a dice roll for customers to choose your brand to decide customer value.”
Clarity about the customer benefit
Untapped value for all parties is common because the customer’s perception of value is not clear, which is made up of his or her functional and emotional judgments about your product, service, brand, culture, processes, policies and business model – – all relative to what the client is aiming for. A thorough understanding of customers’ subconscious value equations and perceptions is essential to focus management efforts and achieve the highest return on investment (ROI). However, most customer research focuses on brand recommendations and sentiment or new product development. Customer value is usually implied or circumstantially derived from price expectation questions, or simply assumed. However, Customer Value Management offers proven methods to find out how customers feel about a specific value in comparison to your competitors and their expectations.
Customer Value Chain
Another reason for untapped value is poor management of interdependencies between entities in the value and supply chain. Traditional thinking burdens R&D with value creation, but in reality the customer experience is even influenced by the internal and external policies of your support functions. In fact, everyone in the organization, including suppliers and alliance and channel partners, plays a role in the snowballing of decisions and handoffs that ultimately shape the entire customer experience. The CEO is the main value creator and balances the common interests of all stakeholders.
By seeing value as customers see it, leaders gain the context for shared value creation that provides sustained differentiation and is rewarded by the market.