What Is a Customer Value Chain?

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  • Written By: John Lister
  • Edited By: S. Pike
  • Last Modified Date: 15 March 2013
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A customer value chain is a business concept that represents the creation of value for a customer. It is similar to the supply chain, which charts the various stages of production and supply from raw materials to the sale of the final good to the end user. The big difference is that while a supply chain often measures costs, the customer value chain is based on the increase in value to the end user. Another interpretation of a customer value chain puts the emphasis on steps taken to retain existing customers.

One example of the difference between simple supply chain analysis and a customer value chain is delivery of a bed. From a purely supply chain perspective, the delivery is a relatively small factor: it doesn't make any tangible change to the bed itself, and for a large company with its own delivery network, the costs are relatively low. From the customer's view, however, the value of the delivery is high. Most customers don't have the facility to transport a bed and without a delivery service; they would be left to choose between the bed being useless to them, spending the time money to hire a self-drive van, or paying a high cost to have a third-party company pick up and transport the bed.

Customer value chain analysis involves breaking down every step that contributes towards the end satisfaction of the customer. A company can use such analysis to identify all the incidences when its activities contribute towards this satisfaction. The company can then improve its position in two ways: improving existing incidences to create better satisfaction, and finding new incidences where it could play a contributory role. For example, a manufacturer could take over either a raw materials supplier or a distributor in order to extend its presence in the value chain. It could also refine its manufacturing process to improve the quality of the goods.

Another response to the customer value chain is to concentrate on the steps that lie between the finished product and the customer. This tactic is designed to make the most of existing customers rather than concentrate on marketing to win new customers. Examples of such steps include building up good relations with customers, for example through after-sales care and support, and offering discounts for repeat customers. Such activity can even result in existing customers recommending the product and manufacturer to friends and colleagues.

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Post 5

The customer value chain has changed a lot since the days of brick and mortar and catalog sales. Today, the customers is much more savvy, they often do their own research on products they are interested in.

Companies have to be attuned to how and where the customer buys, whether it be in person, online, or by phone. Companies are much better at keeping good inventory and watching supply and demand. That way, they can usually fill orders immediately.

Companies can look at other sites so they can offer best offers and discounts. The customer review forum gives the company lots of information to improve products and service.

Post 4

@turkay - I'm afraid that what you say is basically true. Customers don't enjoy doing surveys, especially if they are lengthy. I don't know what it is - either they can't think of a quick answer or they won't take the time.

What can be done to get feedback and improve your customer service value chain? You could try calling your customers and have a very short friendly conversation with them, embedding some questions into the conversation.

Then maybe follow up with a mailed card offering a "thanks for shopping with us" and perhaps a discount coupon. I think that I would like that kind of approach.

Post 3

I've always thought that customer value chain and supply chain are kind of confusing and vague.

I finally read a very simple explanation of it. It said that the customer value chain is about the value of a product or service for the person who is receiving it. Supply chain, on the other hand, is the value of a service or product for the person giving it.

Isn't this a great basic explanation?

I've also learned from this that the value for each customer will be different because each customer has different expectations and notions about that product. This must make value chain management difficult because you are basically comparing different value systems to one another and trying to reach a conclusion about it.

Post 2

@turkay1-- I think that having a website and an email address is a must if you want to use the customer value chain to improve customer relations and increase profits.

If you had an online store, you could design a feedback window immediately after purchases to get feedback about their experience. But since you don't have that, you can still set up a website where customers can submit feedback, questions and suggestions to you. You can also email them for feedback via your website.

The other option would be to keep in touch with customers through online social media sites.

I think you are on the right path, the customer value chain will give you a lot of good insight. I have an online store as well and I've noticed that we often miss our customers' point of view about our services and products We need to go out of our way to learn about it. Good luck!

Post 1

So the customer value chain is determined by getting feedback from current customers?

How can we go about doing this more effectively?

I have a small shop and I would like to explore our customer value chain further to determine if we are doing anything wrong and what more we can do to satisfy and impress our customers.

We have a local physical shop (no online shop) so our sales really depends on loyal customers. We have tried getting feedback from them through phone before, but we weren't able to get much feedback.

What else can I do to learn about our customer value chain better?

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