Customer value model

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A customer value model (CVM) is a data-driven representation of the worth, in monetary terms, of what a company is doing or could do for its customers.[1][2][self-published source?] Customer value models are tools used primarily in B2B markets where the choice of a given product, service, or offering is based primarily upon the amount customer value created. Customer value is defined as Value = Benefits - Price. Thus, customer benefits are quantified in a CVM - product features and capabilities are translated into dollars. Customer value models are different from customer lifetime value models, which seek to quantify the value of a customer to its suppliers.

Firms using customer value models[edit]

Many firms have been reported to use customer value models,[3] including General Electric, Alcoa, W.W. Grainger, Qualcomm, Sonoco, BT Industries Group, Rockwell Automation, and Akzo Nobel..

Uses of customer value models[edit]

  1. New product and service development and refinement: The dialog and customer immersion that is part of a CVM is used to discover and determine which potential product features and functionality would create the most value for customers. This on-site interaction can be used to frame and define those features and functionality. Often a key is to focus on product or service capabilities rather than on features. Successful CVM efforts change the basis of the customer-supplier product conversation away from features and functions and toward problems, benefits, and value.[2][4]
  2. Sales tools: CVMs can serve as a quantified statement of value and benefits for a customer that is used by the vendor sales staff to both sell into a new account, as well as to reaffirm and validate value created for current customers as a means to retain and grow current customer.[2]

Customer value model methods[edit]

There are several methods and approaches used to create customer value models. All of these approaches appear to depend on substantial customer interaction and on-site interviews and observations of customers' challenges related to the product or service being valued. The CVMs are of varying complexity. One consulting firm has found it useful to reverse-engineer customer P&Ls (profit and loss statements) to establish a clear connection between the product benefits and the customer bottom-line.[2]

References[edit]

  1. ^ Anderson, James C; and Narus, James A, (1998), "Business Marketing: Understanding What Customers Value", Harvard Business Review, March, p 53-65
  2. ^ a b c d Dupuie, Jeff: Using Customer Value Models to Improve B2B New Product Development, OakStone Partners
  3. ^ Anderson, James C; Narus, James A; and van Rossum, Wouter, (2006), "Customer Value Propositions in Business Markets", Harvard Business Review, March, p 91-99
  4. ^ Lindstedt, Per and Berenius, Jan, (2003), "The Value Model: How to Master Product Development and Create Unrivaled Customer Value", Nimba Publishers