Customer Perceived Value or CPV and Building Customer Value

Traditional Organization vs. Modern Organization 

Traditional Organization AND Modern Organization

Managers of the firm belief that customers are a company’s true and only “profit centre”, believe in a traditional organisation chart which according to today’s date is obsolete.

This traditional organisation chart shows the President at the top of the pyramid, management in the middle and front line people and customers at the bottom. However in the new age, if a company wishes to be successful, they need to invert the pyramid.

At the very top are customers, next in importance are frontline people who serve and satisfy the customers, under them come to the middle managers with a job to support the frontline people and at the base its top management whose job is to hire and support good middle managers.

The traditional organisational chart takes a 180° turn and thus they become the apex.

The idea that managers at every level must engage in knowing, meeting and serving customers is indicated in the diagram by customers along the side.

In the modern world, the marketing process starts with the question, “what was the customer like or want?”

Example – Listening to Customer

Tesla’s Elon Musk

Elon Musk the CEO of Tesla is someone who takes quick decisions. He regularly reaches tesla drivers on Twitter to solve their queries. Recently he committed to implementing a new feature On the basis of only a single tweet.

One Twitter user, Paul Franks, had an issue with the wearing of the steering wheel while getting in and out of his car. He tweeted to Elon musk suggesting a feature to move the wheel once the car is put in Park. It caught the attention of Musk. Thinking it was a good idea, he decided to implement it on a large scale.

McDonald’s

After pressure from a customer-led campaign which at the time had almost half 1 million signatures, McDonald’s in the UK ditched plastic straws and rolled in paper straws instead.

Bringing about this change was a massive project, as the restaurant chain supplied 1.8 million straws to UK customers each day.

Value and Customer Perceived Value

Value, when simply put, is the relationship between perceived costs and perceived benefits.

It goes by the expression

Value = Benefits / Cost.

In Marketing, Value is known as Customer Perceived value.

Definition: Customer Perceived value or CPV is the difference between a prospective customer’s assessment of the gained benefits of a product/service and the cost incurred when compared to other products.

Total Customer Benefits

It is the perceived monetary value of the package consisting of economic, functional, and psychological benefits customers expect from a given market offering.

Total Customer Costs

It is the assessed bundle of costs customers expect to incur in evaluating, obtaining, using, and disposing of the product or service, including monetary, time, energy, and psychological costs. The marketer can increase the value of the product/service by raising economic, functional, or emotional benefits and/or reducing one or more costs.

Example – Increased Customer Benefit

One Plus 8 Pro

One Plus 8 Pro bagged the T3’s Best Phone Award in 2020. With first-rate hardware, software and the latest features, the OnePlus 8 Pro deliver an all-around premium smartphone experience making it the users delight.

Over the past five years, up until the launch of the OnePlus 8 Pro,  the company offered phones with such core functionality that they often matched or bested flagship phones from big makers. This earned them the status of “flagship killer” producers.

With the launch of the OnePlus 8 Pro, it delivers Competition in terms of performance, Screen tech, advanced features and sets a new benchmark for all to look up to.

Example – Reducing Customer Cost (Time & Energy)

Amazon Prime

Launched as a loyalty program in 2005, Amazon Prime has made it both easier and cheaper to be a customer at Amazon. Amazon changed from a traditional transaction-based e-commerce business to a one of a kind successful subscription business in a very short time.

Amazon prime offers – Prime Now 2-Hour Delivery, Same-Day Delivery, One-Day Shipping and Two-Day Shipping. According to CIRP’s research, Amazon prime members spend $1400 per year on the e-commerce platform, While non-prime members spend $600 annually. The analysis estimates that the prime memberships will grow from 47.4% of US households in 2018 to 56.9% in 2021.