Logistics and Supply Chain Management, 6th Edition

Delivering customer value

Ultimately the success or failure of any business will be determined by the level of customer value that it delivers in its chosen markets. Customer value can be defined quite simply as the difference between the perceived benefits that flow from a purchase or a relationship and the total costs incurred. Another way of expressing the idea is as follows:

Customer value= Perceptions of benefits Total cost of ownership

‘Total cost of ownership’ rather than ‘price’ is used here because in most transactions there will be costs other than the purchase price involved. For example, inventory carrying costs, maintenance costs, running costs, disposal costs and so on. In business-to-business markets particularly, as buyers ...