5 ways to identify Customer value

CustomerValue

As you have read in previous blog, Lean’s primary principle is to determine Customer value. Indeed, for who else than – either internal or external – customers is your organisation operating; or even existing? And how could you assess whether activities within your business processes are adding value or not – and thus how could you remove ‘waste’ -, without knowing the Customer value?

But how do you determine what is valuable for your customers? In this blog, I suggest 5 ways to identify Customer value. Let us first have a look at what customer value is.

Customer value defined

To clear up any potential misunderstanding, Customer value – according to Lean – is not about the value of a customer for the organisation itself, but rather the opposite: the value of your product or your service as perceived by the customer. Thus the value for the customer and not the value of a customer. But who is the customer and what is value?

Customer

Most people consider customers as the one buying the product or service. Even though external, final customers are the most important ones, the internal vs. external customermajority of an organisation’s business processes usually deliver services or products to internal customers. And also for internal customers, the process must deliver value; even if it is intermediate to the end value for which the external customer finally will pay. Nevertheless, this blog mainly focuses on value perceived by the external customers. Satisfaction of the final customer should belong to the highest goals to which an organisation aims at, while processing its products or its services – isn’t it?

Value

Generally speaking, value is something a customer wants to pay for, at least when this “something” fulfills his/her needs and wishes. But how do you assess the needs and wishes which your organisation fulfills? And how should you ‘translate’ these needs to your products & services and how should you take those into account in your business processes?

Value is not only subjective according to individual – or customer segments – needs. It also relatively depends on factors like place, time, timing, shape, function, interaction, markets (supply & demand), etc. Think of a fresh cola: isn’t it more valuable for the customer on a hot, dry summer day than during a cold winter day?

Value is also quite time bound: something valuable today may quickly become worthless; just think of electronic devices, like a smartphone. Hence, a current operational business process should not be assessed the same way as an R&D process, for which you should rather assess future value. It is clear that value seems to be quite dynamic; this implies that the journey to Lean(er) business processes will also evolve accordingly. A business process which is Lean today may not be Lean anymore after a while. This is also why an organisation should not only be Lean, but also Agile – known as LeAgile : it must be able to quickly respond to changing specific needs, while operating efficiently.

The 5 ways to determine Customer value

Here are 5 practical tools you may use to determine customer values for your products or services, whether they already exist or are yet to be developed.

1. Voice of the Customer (VOC)

VOCVOC is the rendering of a customer’s needs, requirements, expectations with regards to the product or service delivered by a business process; or by your organisation more in general. It is applicable for external and internal customers (any stakeholder) as well. These are the main steps to capture the Voice of the Customer:

a. Identify the customers or stakeholders

Customers – either internal or external – are those stakeholders using the process output. Be aware of the possibility of having many customer segments – for one same business process -, having each specific needs and expectations. In this case, you better categorise them.   

b. Assess the customer use requirements – or ask them:

    • what do they use the product or service for; why, when, where,…
    • which aspects of it may be improved in the future?
    • what is the expected and maximum delivery times?
    • etc.

c. Determine which process steps are “accountable”

Based on process diagrams or value stream maps, indicate the processes – or activities, tasks – impacting the requirements, to assure that measures are in place so that expectations will be met.

d. Define the specifications for the requirements

Though most specifications are quantitative, they may also be qualitative (e.g. of the boolean type). These specifications usually are also good candidates for KPIs, or at least for process indicators; more particularly those related to customer satisfaction.

These specifications are also known as CTQ or Critical-To-Quality criteria, which may be represented by a CTQ tree. Below figure illustrates an example of such a tree for a restaurant.

CTQ-EN

Notice that you may also consider to use the Quality Function Development (QFD) method to ‘translate’ needs into specifications, which often accompanies the Voice of the Customer.

2. Customer Utility Map

Also known as Buyer Utility Map, this is a matrix devised by Kim & Mauborgne, authors of theBlue Ocean strategy, initially meant for strategic positioning; but it can be used to identify value criteria along the entire customer experience life cycle as well. It consists of

  • six phases - of the customer experience life cycle about which you may ask following respective questions:
    • Purchase: How important is it for the customer to find and to buy the product / service easily? Is the way of ordering (comfort, convenience, location,…) important for customers?
    • Delivery: How important is the delivery time? Is there any installation or configuration needed, and how easy is it expected to be?
    • Use: Is there any explanation or training needed? Which are the most valuable functions of the product or service? And does it also offer worthy options?
    • Supplements: Does it require other elements (products or services) to enable the use of it? And how expensive are these to acquire – and to use?
    • Maintenance: Does it require maintenance? How easy is it? How costly is it?
    • Disposal: Does the product – or its use – generate waste or does it have harmful impacts on the environment? What about residual value and opportunity to sell it? How easily can the customer dispose it?

Blue Ocean table

  • six utility levers: productivity, simplicity, convenience, risk, fun (attractiveness), environmental sustainability of each phase for the customer.

You should not necessarily try to fill in each cell of the matrix. Reflecting on the many aspects (cells) will help you to find out what may be at stake for your customers; and thus what you may improve in your business processes.

3. Kano model:

Kano Model (EN)Once you have identified the criteria through which customers perceive your product or service as valuable, the Kano model helps to categorise these.

Since the Kano model already has been explained in a previous blog on Quality, I just want to add that once you have identified what is valuable to your customers, you can consider these ‘customer value elements’ as quality criteria.

Because it is not always very easy to find out whether quality criteria are either a “must be” (= dissatisfier), a “delighter”, or a “performance” (= satisfier), here is a simple way to do so:

  • When customers feel bad while a characteristic is absent, though feel neutral in presence of it, then it is a must be factor.
  • If customers feel neutral in the absence, but feel good in the presence of this same characteristic, then it is a delighter factor.
  • When the answer is ‘it depends’, then it is most probably a performance factor.

4. Customer Journey Maps

This method can be used to increase even more the understanding of customer needs & expectations, by modelling the process that customers go through when considering, buying, using,… your product or service, hence the Customer’s journey.

It is usually applied for business processes where interactions with customers – the so called Touch points – are important and have a considerable impact on the customer experience and satisfaction.Customer Journey Map - example

Although this is not (yet) common practice, you may ideally have 1 map including your (internal) business process and the customer’s process as well – obviously in distinct lanes -, where touch points are indicated. Even though this seems to be a shortcoming in the BPMN standard, that advocates to use “black boxes” rather than to model customer’s processes in details.

From a Business Architecture point of view, you may even use ‘touch point diagrams’ to document how touch points are related to: 

  • Roles: who of your organisation is supposed to deal with it, when, where
  • Risks & improvement opportunities, enabling to optimise the customer experience for a specific touch point
  • Objectives, KPIs or SLAs which are possibly impacted by a touch point
  • Communication channel used for the correct execution of the touch point
  • Information (system) or other possible equipment needed for the good execution of the touch point
  • etc.

5. Empathy Maps

An empathy map aims at obtaining an even deeper insight into customers or customer segments. It illustrates a face surrounded by 6 sections, enabling people oEmpathy-Mapf your organisation to tell what they think & feel, hear, see, say & do while – imaginatively – using the product or service offered; and what they experience as pain and as gain from the use of it.

This is usually an exercise you apply in a group, where each participant is supposed to give his/her answer by means of a sticky note in each section.

Other ways

Though there undoubtedly exist yet other ways to identify Customer values – e.g. customer interviews, surveys, check lists, etc. – the above described methods are quite simple and practically useful. Notwithstanding I fully will agree that the most effective way to assess customer needs & expectations is to hear it from customers themselves, my experience is that it is hard to get representative feedback through written or online surveys – let alone to obtain enough response.

On the other hand, whatever method you use, identification of customer values, needs, requirements,… is an on-going task as well. E.g. each customer complaint should be considered against existing quality criteria, to possibly complete the “list”. Obviously, each contact – or ‘touch point’ – with clients should be an opportunity to seize any interesting input for further, continuous improvement.

What is your experience with any method for identification of Customer value? Share it through below “Comments” box, and receive a check list containing more than 100 parameters to assess Customer Experience.

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  • Mark Davis

    For 12 years my company used primary marketing research to elicit the variety and strength of customers’ value drivers. Telephone IDIs, focus groups, and various qualitative and quantitative survey techniques provided the data for analysis and allowed us to not only report key findings but to also to make well supported recommendations.