Valuing Value

Organizations that don’t consider value, and what value they’re providing will have a tough time making it. We usually break the Customer Value Imperative into three parts:

  1. Cost
  2. Customization
  3. Service

You may have heard this as cheaper, better, and faster.

And you can’t major on all three…but you probably figured that out pretty quickly. Think of any successful brand and you’ll find that there is one of those three that they excel in, a second that they’re just fine at, and you probably can’t even think of a place where they emphasize the third.

Consider Walmart: Always low prices. Cost is their big deal. Customization is a secondary concern (they carry a lot of products, but not a deep line of any product. Compare the number of flavors of Breyer’s Ice Cream at WalMart to what you find at Kroger or another grocery store). Service? Nope. Nothing. There’s a person handing you a cart when you walk in the door, but between there and the checkout, unless you stop by the deli, you’re not likely to find a blue smock anywhere close to you when you need it. Before too long they’ll have technology where you pass the cart under a reader and they won’t even need checkout people or self-check lines.

There’s a “chain” of considering and delivering value that needs to happen when a firm works through the value delivery choices. Skipping one of these steps could lead to a poor decision and the wrong value for the chosen customer segment:

  1. Market Analysis. Considering where you’ll be and who you’ll be serving and who your (direct and indirect) competition will be.
  2. Product Development and Design. You base this on what you’ve learned from market analysis, and you design a product/service that will meet the wants of the customers you want to serve and deliver value to.
  3. Sales and Marketing. Get out there, find and grab the customers, and get them to pay money for the product. ‘Nuff said.
  4. Procurement, Production and Distribution. Buying what you need for the product you’re delivering (including hiring the right staff) and putting it all together and delivering it to the customer. #3 and #4 go back and forth.
  5. After-Sale Customer Service. This could be a survey, a follow-up call, or in some cases warranty provisions. Depending on which of the three imperatives you’re majoring on, this will look very different, but it’s going to affect your retention and therefore the lifetime value of your customer base.

Management accounting spills over from cost accounting into delivering customer value and maintaining satisfaction. When you make managerial accounting decisions you’re deciding based on cost and value. Delivering value to the customer is necessary for delivering value to the firm, and as a manager that’s the responsibility you’ll have.

I don’t have much more on our business plan, but rest assured we’re considering the chain of value and which imperatives we’re going to focus on for the customer’s perceived value.

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