Within
customer relationship management
Customer relationship management (CRM) is a process in which a business or other organization administers its interactions with customers, typically using data analysis to study large amounts of information.
CRM systems compile data from a ra ...
, 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.
[Siphamandla Ernest nhlebela:]
Using Customer Value Models to Improve B2B New Product Development
, Siphamandla Ernest nhlebela,0637867845 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
In marketing, customer lifetime value (CLV or often CLTV), lifetime customer value (LCV), or life-time value (LTV) is a prognostication of the net profit
contributed to the whole future relationship with a customer. The prediction model can have ...
models, which seek to quantify the value of a customer to its suppliers.
Firms using customer value models
Many firms have been reported to use customer value models, including
General Electric
General Electric Company (GE) is an American multinational conglomerate founded in 1892, and incorporated in New York state and headquartered in Boston. The company operated in sectors including healthcare, aviation, power, renewable energ ...
,
Alcoa
Alcoa Corporation (an acronym for Aluminum Company of America) is a Pittsburgh-based industrial corporation. It is the world's eighth-largest producer of aluminum. Alcoa conducts operations in 10 countries. Alcoa is a major producer of primary ...
,
W.W. Grainger,
Qualcomm
Qualcomm () is an American multinational corporation headquartered in San Diego, California, and incorporated in Delaware. It creates semiconductors, software, and services related to wireless technology. It owns patents critical to the 5G, 4 ...
,
Sonoco
Founded in 1899, Sonoco Products Company () is a United States-based international provider of diversified consumer packaging, industrial products, protective packaging, and packaging supply chain services and the world's largest producer of co ...
, BT Industries Group,
Rockwell Automation
Rockwell Automation, Inc. is an American provider of industrial automation whose brands include Allen-Bradley, FactoryTalk software and LifecycleIQ Services.
Headquartered in Milwaukee, Wisconsin, Rockwell Automation employs approximately 26,000 ...
, and
Akzo Nobel
Akzo Nobel N.V., stylized as AkzoNobel, is a Dutch multinational company which creates paints and performance coatings for both industry and consumers worldwide. Headquartered in Amsterdam, the company has activities in more than 80 countries ...
.
Uses of customer value models
#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.
[Lindstedt, Per and Berenius, Jan, (2003), "The Value Model: How to Master Product Development and Create Unrivaled Customer Value", Nimba Publishers]
#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. CVMs also can help firms to determine the more rational promotion cost.
Customer value model methods
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.
References
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Value
Value or values may refer to:
Ethics and social
* Value (ethics) wherein said concept may be construed as treating actions themselves as abstract objects, associating value to them
** Values (Western philosophy) expands the notion of value beyo ...