Customer Value

In principle, customer value is a very simple concept. It is the difference between the benefits

that a customer receives from a product or a service and the costs associated with obtaining that

product or service.Total customer benefit refers to the perceived monetary value of the bundle of

economic, functional, and psychological benefits customers expect from a product or a service

because of the products, services, personnel, and images involved. Total customer cost, the

perceived bundle of costs that customers expect to occur when they evaluate, obtain, use, and

dispose of the product or use the service, include monetary, time, energy, and psychological

costs. In short, it is all about what customers get and what they have to give up.

In reality, the creation of customer value will always be a challenge—particularly because it

almost always needs to be defined on the customer’s terms. Nonetheless, “the number one

goal of business should be to ‘maximize customer value and strive to increase value

continuously.’ If a firm maximizes customer value, relative to competitors, success will follow. If

a firm’s products are viewed as conveying little customer value, the firm will eventually atrophy

and fail.” This will certainly be true for the small business that is much closer to its customers

than the large business.