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Customer value

We begin this week by focusing on the concept of customer value, as this forms an important part of a successful supply chain strategy.

Customer value is related to two main factors: perception of benefits and total cost of ownership. This can be represented by the following equation:

Customer value = (Perception of benefits)/(Total cost of ownership)

There are several factors that affect product/service costs (total cost of ownership), which include management, operating, inventory, maintenance, technical, training, disposal and acquisition costs.

Some strategies that can create a better perception of benefits to the customer include reducing prices, making it easier to buy and receive products, making products easier to us and maintaining a good brand reputation.

The diagram below provides a framework for how to link customer value to supply chain strategy:

Flow diagram representing how to link customer value to supply chain strategy. Firstly, identify value segments and consider what our customers value. Secondly, define the value proposition and consider how to translate these requirements into an offer. Thirdly, identify the market winners and consider what it takes to succeed in this market. Finally, develop the supply chain strategy and consider how to deliver against this proposition.

Adapted from Christopher (2016: 40)

Your task

Consider a product you’ve recently purchased. Discuss the perceived benefits and what you paid for it.


Christopher, M. (2016). Logistics and supply chain management (5th ed.). Pearson.

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This article is from the free online course:

Introduction to International Logistics

Coventry University