I work for a large complex company, I delibrately do not want to say, which business it is in, in order to make this discussion general. In this company, as in many others, there are lots of departments that deliver questionable value, and could be described as fat that could be cut away.
When trying to consider whether a department is delivering real customer value or not, I have to realize that I do not have a clear definition of customer value. My best guess so far is to define customer value as something the customer is willing to pay for. This is a very clear definition, which is quite measurable, by asking customers how much they are willing to pay for something. There are, however, several cases that I believe should be included in the definition as well. And I am looking for a definition, which enables the calculation of customer value also in these special cases.
- With the definition, basically all online news paper would be considered to deliver a so low value so they should be considered fat, and cut away. The reason for this is that there are so few customers that are willing to pay for online news.
- How does one calculate the value of making an advertising campaign, with the purpose of increasing brand recognition and image?
- How does one calculate the value of having very satisfied customers compared to just satisfied customers. In other words, what is the added value by offering a service, which customers are not willing to pay for, but makes them very happy (a stupid example is a free bottle of champaign in their new car).
- How does one calculate the value of a department, which only contributes to destroy the value of a competitor. Say, Oracle contributing to the development of OpenOffice in order to reduce the income of Microsoft (I know there could be other reasons for them supporting the development, but let's say that this was the only reason).
I believe all upper management are able to have an opinion about these issues, but I am not sure they have a clear conseptual way of thinking about the issue.
How can customer value be defined so that all these special cases are considered to deliver customer value. The definition should be so clear that one can make a calculation of customer value where the output will be money.