Customer Value: The 5 Principles of Lean Customer Value (+4-Page PDF)
Value Stream Maps and the practice of distinguishing value-added and non-value added activities both immediately come to mind.
‘Voice of the customer’ (VOC) also helps the company look at its products and services through the eyes of its customers.
Many of these concepts, though, are much more powerful when you have a deeper understanding of how customers determine value.
This article lists several ‘Customer Value Principles’ to keep in mind when looking at how your processes in a Lean company affect the value that your customers receive.
Consider an item like batteries. When you go to the store, you base your purchasing decision on a variety of factors like reputation, prior experiences with the product, or price.
I’ll bet you never even consider whether one manufacture has a lower cost structure than another. So, if customers never link waste to value, why do companies?
How much would you pay for a candy bar? A price probably jumped into your mind. But I didn’t give you any context. What if I asked this question instead: How much would you be willing to pay for a candy bar in a movie theater?
Some customers would be willing to pay more money without blinking an eye. Some would never, on general principle, pay $4.00 for something that normally costs $0.50. Some people would only be willing to pay it if they were trying to impress a date or to quell a pleading child.
The point is that value has to be considered in context, or it is meaningless.
Article continues after the form
Far more gets passed back and forth in an exchange than currency. Some of these things have value to a company—customer contact information, word-of-mouth marketing, and brand loyalty.
Other things that a customer pays, though, might not matter as much to the business. A customer might give time (willingness to wait in line for the best restaurants), reputation (do business with a shady company, and be guilty by association), and energy (every winter, parents chase the latest ‘must-have’ toy around town).
But regardless of how the company values the ‘payment’, it goes into the customers’ evaluation of whether they are making a good trade.
Customers have limited resources and unlimited demand. So, they have to pare down what they want into a bucket that gives them the optimum value based on their own set of criteria.
If a customer buys a big house, she has less money left over for other products, and less time left over for entertainment. If the rents a small apartment, he has less space to put big furniture.
Every choice a customer makes about one product or service affects every subsequent choice.
Emotion plays a big role in value. Consider a product that has following of loyal supporters. The feelings that a person gets from owning that product can play a large role in the purchasing decision. When emotions play a role in decision making, customer behavior is harder to predict.
This emotion can drive people to make uninformed decisions. Late night TV is filled with miracle cures for baldness and get-rich-quick programs that all have the standard ‘results not typical’ disclaimer on the bottom of the screen. And yet, those companies sell a lot of product.
So, what do these customer value principles mean to you?
On the shop floor, they mean making sure that you focus on the things that add value to the customer before you look at reducing waste. Waste reduction helps you, not the customer.
In the Lean office, especially customer facing areas, they mean you should be looking at the little things that set you apart from your competitors and make your customers more likely to choose you.
If you like the Gotta Go Lean Blog, please help us spread the word about it!
By Jeff Hajek
October 6th, 2009
© 2009-2016 by Velaction Continuous Improvement, LLC. All rights reserved.
Copyright © 2009-2016, Velaction Continuous Improvement, LLC | Legal Information