Value of the customer.

A customer may look at a market offering from two perspectives. One deals with the potential benefits of that offering and the other concerns what the customer has to give up to obtain those benefits. For example, consider someone who works at a very busy office who loves to take coffee breaks (don’t we all love those kinda breaks?). Our coffee loving, hard working friend might see this coffee break as a personal reward because he had worked so hard that day or even see this as a way to break the ice and get to know an attractive officemate. Clearly, there are different needs associated with these different benefits. The cost of acquiring these benefits would include the price of the coffee, but there might also be non monetary costs such as the time taken to travel to the coffee shop and the difficulty of finding a parking space near the coffee shop and also annoyance caused due to slow service.

As the above example suggests, both benefits and cost can take many different forms. Now we come to the concept of customer value (the difference between the benefits a customer sees from a market offering and the costs of obtaining those benefits). A customer is likely to be more satisfied when the customer value is higher, when benefits exceed costs by a larger margin. Someone who sees the costs as greater than the benefits is not likely to become a customer. A good or service that does not meet a customers needs result in a low customer value, even if the price is low.

The companies need to evaluate ways of improving the benefits, or reducing the costs, of what their company offers customers. However, customers do not stop and compute customer value scores before making a purchase. But it is the customers’ view that matters even if they have not consciously thought about it.