Customer Value Analysis

 

Ultimately, a customer buys based on the value they can extract from a product or service. Value follows a simple formula: 

                                                 Product Quality  +  Service Quality

                                                             Total Delivered Cost 

 

Product quality includes the physical product itself (e.g. appearance, smoothness, color, material, absence of defects) and how the product performs (e.g. adherence to specification, run-ability, meeting or exceeding performance standards). Service quality includes all the support activities necessary to ensure that the product is available and does what the customer intended, such as on-time delivery, technical support, sales representation, and customer service. Total cost includes the price, credit terms, freight or handling charges, and anything else that may impact the total price paid.

 

Working through a simple framework, PMG can develop a complete assessment of how value is created and delivered, and identify ways to increase value and profit at the same time. Companies who understand this can deliver more value, improve customer loyalty, and widen the gap between themselves and competition—all while maintaining or improving margins.