Question

This is question is more in line with the book Designing and Managing the Supply Chain 3rd Edition

I need a response on the merits of customer value, I need as much info as possible. Different strategies, what is customer value, how is customer value measured, how does the supply chain contribute to customer value, how can a company add value to its offering in order to compete, how do you match the supply chain to product characteristics and sales strategy etc.

Thank you in advance

Answer 1

Solution –

Customer Value is the value that the customer perceives from your company offering. The customer value can be fragmented into various aspects –

1. Customer experience
2. How well the requirements are met
3. Price
4. Brand value
5. Value added services
6. Ease of customer product selection
7. Personal equity with the customer
8. Contribution to the relationship with the customer

To measure the customer value one has to understand what value the customer perceives of the offering. Let’s say the customer for instance perceives a value of $100 for a particular offering and the cost probably of the offering that the customer has to pay is $80. This means that the cost of value added services that the customer perceives is of $20 for your offering. To calculate the whole value of $100 for the offering one has to identify the value that the customer attaches to each part of the offering.

The supply chain from upstream to the downstream all add value to the offering and the aspects that the supply chain can add value on are –

1. Quality - The supplier provides a specific quality
2. Cost – The supplier allows for low cost on inventory which contributes to low cost at the end of the product
3. Timeliness – The downstream integration helps to allow for timely delivery
4. After sales services – the downstream integration allows for effective maintenance services.

The supply chain allows for standard offering at low costs. The upstream integration allows to fulfill orders and add to the customer experience. The downstream effective deliveries and installations allow for again increasing the customer experience with the product and help to ensure to maintain high customer delight.

A company can add value to the customer through all the following –

1. Customer Contact
2. Customer sales talk
3. Delivering on the promised service and product
4. Maintaining the customer expectation
5. Allowing flexibility for customers on exchange
6. The company extends certain loyalty programs to ensure higher perceived value by the customers

The supply chain and the company product offered are all in sync to ensure a complete customer experience. If the supply chain buckles under the consumer pressure, this can lead to deterioration and erosion of the consumer value. What customers want is always a complete delivery experience. A gap in upstream or downstream supply chain integration can destroy this experience and result in decline in the brand value. The whole of sales strategy depends on the product delivery life – cycle and to ensure this the supply chain plays an integral part. The supply chain ensures that the sales brochure is answered otherwise this can lead to customers accusing suppliers for false promises and lead to legal issues as well. The supply chain contribution to the sales strategy is in the following ways –

1. Sales brochure is answered
2. Sales areas are defined on the basis of the logistics strength
3. The reach as defined in the sales strategies are contributed by the supply chain
4. The formulation of the sales strategy to ensure repeat sales is contributed through the after sales services handled by the supply chain network

So all in all supply chain and sales strategy necessarily go hand in hand to elevate the customer value.