Friday, October 10, 2008

Delivering Customer Value

One of my friends got laid off today -- the economy is hitting people and companies hard. He took it well and in stride, figuring now was his opportunity to do some consulting. We chatted about how to best position himself and it reminded me of the importance of thinking in terms of delivered customer value.

In business we talk about customer value all the time. But what rarely happens is the quantifiable approach to seeing what we actually deliver. (Not to mention the fact that often what we think of as value is merely functionality and features to the customer.) This formula, originally created by marketing sage Philip Kotler, is a foundational approach to determining and delivering customer value.

The formula is easy -- each item is worth five points for a total of 20 potential points of value and cost. From a customer perspective, rate each item between 0 (zero) and five. Do the simple math of addition and subtraction and you can figure your delivered value. Now, complete the exercise with your competition in mind -- again from the customer's perspective. If you can't be objective, go out there and find some customers to do this for you. It's bare naked truth time!!

Once you have your delivered value score, well, then the real work begins to increase value and reduce costs.

-- David Kinard, PCM

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