Customer Value Analysis
Submitted by
T. Ravi Teja (IPG_200549)
T. Ganga Raju(IPG_200571)
Overview
• Customers are critical assets of any company, without
customers a firm has no revenues, no profits and no market
value.
• Customer Value Analysis helps to understand how its
customers experience value, and gain insight from its
customer’s decision-making criteria and purchase processes.
• It maps customer needs and objectives in terms of the
customer's value chain, and looks beyond end-user needs to
make known the total effect of the customer relationship on
all of the customer's processes, costs and benefits.
Why Customer Value Analysis?
• Many failed to determine the importance of customer -based
quality
• TQM emphasized the importance of product and service
quality keeping in view the mind of customers, but many
failed to determine the importance of customer-based quality
• Quality is important, but of what kind, at what level, relative
to what price and with regard to which competitors?
• Customer Value Analysis (CVA) is the step-by-step process for
answering the above questions.
Customer Value Analysis
• All business strategies are dependent on customers, so it makes
aware to be in accordance with what it takes to hold and attract
them.
• Customer Value Analysis is systematic, well structured, organized
set of tools designed to provide answers to what is value to the
customer.
• Of the elements of Customer Value Analysis, the single most
important is the market-perceived quality profile.
Customer Value Analysis(contd..)
• The market perceived quality
a. Identifies what quality is to customers in your market
area.
b. Tells which competitors are performing best on each
aspect of quality.
c. Gives you overall quality performance measures based
on the definition of quality customers actually use in
making their purchase decisions.
Improving the Current Tools
• CVA is a way to improve the traditional customer satisfaction
surveys.
• Its departure from the traditional method is to statistically
draw from the relative importance of those old traditional
measurements.
• This enables marketers to focus on what matters most – both
emphasizing the good, but overcoming challenges in
delivering on low performance areas.
(contd….)
• CVA provides an efficient means to benchmark by examining
competitors’ performance.
• In doing so, marketers are able to understand their
performance position in the market.
• It also provides real insights into how much better your
competitors may be and why they are stealing market share.
The Central Questions of Customer
Value Analysis
Analysis of survey data helps the firm answer the following
questions:
• Does the firm offer superior value?
• What actions would be necessary to offer superior value?
• Where is the firm’s market share headed?
• Does the firm provide the level of Customer Value needed to
achieve its financial goals?
Value map
Value map(contd…)
• Value Map is one of most valuable tools of Customer Value
Analysis .
• The line of equal value or fair value line on the Value Map
shows how the market trades off quality for price.
• Most firms tend to line up along this Line of equal value
• Some firms intentionally position themselves in the lower
right diagonal, which Dr. Gale calls the “grow-and-prosper”
zone.
• Other firms find themselves in the upper left diagonal, which
Dr. Gale calls the “wither-and-die” zone.
Value Model
• The Value Model is a tree diagram that represents the
customers’ value construct.
• It depicts how the quality attributes drive the overall quality
rating, and how the overall quality and price ratings drive the
customers’ value perceptions.
• Each attribute should have two characteristics:
a. They are derived from customer needs, and
b. They are clearly and unambiguously related to a specific
process within the firm that attends to the identified need
Value Model(contd…)
The Process-Attribute Model
The Process-Attribute Model(contd..)
• In the Process-Attribute Model, the attribute, which is the key
dimension of customer satisfaction, is on the left, and Key
Measures of Quality are on the right.
• Key Measures of Quality, sometimes called Direct Measures
of Quality, are those measures of process performance that
are derived from customer needs and tend to predict
customer satisfaction.
• The equations that allow a firm to validate its KMOQ, and to
determine the extent that the performance levels reflected in
these measures drive customer satisfaction, are called
Performance-Satisfaction functions.
The Process-Attribute Model(contd…)
• These functions have the following form:
Attribute Rating = f(KMOQ1 ...KMOQn)
• The Attribute Rating is the firm’s average customer
satisfaction rating on a particular dimension of customer
satisfaction
How Customer Value Analysis helped
AT & T?
• CVA helped AT & T Long Distance Services turn around a
potentially disastrous situation
• The company’s stocks were losing market share value even
though it was well among residential and business customers
in its customer satisfaction surveys.
• Many executives anguished over maintaining AT & T’s
premium priced position and recommended cutting costs and
starting a price war with MCI and Sprint.
• AT & T used CVA techniques to analyze the problem and
discovered that its customers were willing to pay for quality in
long distance service.
(contd…..)
• Even as AT & T lost market share value, customers still
considered its technical quality to be better than its
competitors.
• Customer’s perception of AT & T’s price premium was higher
than it was in reality
• AT & T’s lead in perceived quality was narrowing. The
company had to improve its quality relative to its competitors
if it wanted to continue charging the premium price for its
services .
• The traditional customer satisfaction surveys didn’t give
AT & T the information it needed on what its customers is
valued
Conclusion
• Customer Value Analysis is a discipline that can allow firms to
identify where they need to strengthen their “value
propositions
• The CVA approach focuses on how people choose among
competing suppliers (attraction, retention, customer and
market share gains).
• It is especially powerful if you conduct separate Customer
Value Analysis for various customer industry segments of
your markets.
• Thus, a properly calculated market-perceived quality profile
provides an objective, impersonal measure of how the
customers in any given marketplace judge products.
