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Customer value

In this step, we define the concept of customer value.
© Coventry University. CC BY-NC 4.0

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:
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.

© Coventry University. CC BY-NC 4.0
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