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This topic becomes more and more apparent in the world of consulting. It attacks the core of the phrase “Give what the customer wants, not what the customer asks”. So unless you’re a mind-reader you need to apply some strategy to figure out your customer.  Defining the customer value before the value creation process is a good approach. But then there is the customers perceived value to make the whole game even more intruiging…


Value:

First a thing about value. There are, in my mind, two ways to go about value:

  • A way to identify your, or your company’s, core beliefs to easily communicate that identity. Values may be “righteousness”, “Customer focus”, “Honesty” and “integrity”. All nice words but not really what I’m talking about in this post.
  • A way to measure the increase in important resources. Some increasing value means increasing some kind of resource. For instance, doubling the profit of a company has a measurable value to stockholders and stakeowners. The action that was put in place to double this profit is what delivered this value.
    • Value is not necessarily measured in money. Increase in security, compliance, product support, knowledge or simply a social outcome can very well hold value. In many cases, these types of values may again lead to improved profit but let that be an indirect outcome and outside the scope of my definition.
    • Value must be created. Hence, there must be some kind of work to create value that will boost the customers resource need.
    • Value must be delivered. The value is dependent on the form of the delivery. Delivery form may be a piece of software, a document, a tape or simply a meeting or conversation.

Hence, by following the idea of improving value, the customer should be happy!That statement holds true, but only if you understand perceived value.

Perceived value:

Perceived value is simply put how the customer experiences the value he/she is receiving. To be able to perceive, the customer must be someone with senses and a certain value set, where received value can be matched with the customers values or needs.

For instance, a software developer understands the customer needs a website to promote his business. The software developer eagerly attacks the task by creating a highly dynamic web site with CMS functionality, flash design and intra/extra-net capabilities. While the software developer presents the new website along with a new logo he came up with, the customer looks cross-eyed. A static web site with an existing web site would have sufficed and would have been a lot cheaper. The customer perceived the value recieved a lot less valuable than what the software developer created.

The customer should strive to optimize the created value in accordance with the perceived value.

perceived_value
This leads us to some important questions.

  • How is it possible to identify what value driver the customer is looking at and how to optimize this perceived value?
  • Who is really the customer? Is it the company or the person working for the customer who’s hiring the customer?
  • What happens when the customer-in-person has value drivers that are in direct conflict with the company he/she’s working for?
  • In what way will price affect the perceived value of the customer (think about a luxury airliner versus a low-cost airliner taking you to your next destination - what would be your perceived value with or without considering the price?)
  • How does competition affect perceived value? Does delivery form become the dealbreaker?

I will try to look into and answer these questions in the future and also provide some examples of how creating value versus perceiving value plays out in real life. Stay tuned :-)