Monday, 24 March 2014

Logistics and Customer Value

Although we understand customer plays a huge role in the success or failure of a business but do you know what is customer value?

Customer Value = Perceptions of Benefits/Total Cost of Ownership

It’s the difference between the benefits of the purchase as perceived by the consumer and the amount they have paid.  The total cost of ownership is used instead of the single price that has been paid so all costs can be taken into account, including the inventory costs, running, disposal and maintenance costs for example. This is important especially in business to business markets the total cost of ownership is important as buyers are becoming increasingly sophisticated.  The total cost plays an important role in helping buyers to decide whether or not to buy.

It’s not only the total cost of ownership that is greater than the purchase price, the benefits that customers receive are also greater than what the product offers in features and functionality. Therefore even though there might be only a slight difference between the two often one might be superior compared with the other because of the customer service that’s also offered.

Logistics and Customer Value:

Customer Value = Quality/Cost of Time

Logistics management has an impact on the customer value ratio. There are four elements involved:
  • Quality – Function, performance, technical specification
  • Service – Availability, support and the commitment customers receive
  • Costs – Transaction costs including the price and the life cycle of the purchase for the customer
  • Time – Customer response times such as delivery lead times 
The four elements require constant work to ensure they remain on top, using innovation, improvements and investments to remain competitive in the market. 

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