Are Customer Value Management (CVM) and Customer Experience Management (CXM) Different? Are Their Metrics Appropriate?

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CVM focuses on creating value for customers. To do so, one must understand what customers value. What is important to them? Why do they buy from one company versus another? What is important in the buying decision? Price or Benefits (where price includes price and non-price terms such as price justification, effort spent etc. And benefits include the benefit from the product, the service, the people, the brand, the experience and values of the company).

Customer Value is always measured versus competition by a metric called Customer Value Added (CVA), which is the ratio of the Value your company is perceived by the customer to add vs the value your competitor provides. If CVA is greater than 1, customers tend to buy from you. The measurement tells you what is truly important to the customer in the buying process, and the relative importance of price and benefits and their sub attributes. Thus you can tell whether brand is more important than the product or the service or vice versa. And so you can focus on those items important to your customer.

Then you can work on those where you have poor scores, and communicate (tell the customers) where your scores are high. You can ignore the not so important attributes. Very often in commodities, the product is not a very important ​ part of benefits (it may be 0-30% of the benefits)

Loyalty is measured by the questions on ​”​​are you likely to rebuy” or ​”​​are you ​likely to ​ recommend​,”​ both used by NPS and Customer Value Management. NPS has been debated quite a lot over the years. It’s a popular but imperfect measurement because it does not go into depth on customer’s buying tendencies or on what creates value. Typically the higher the value you create the greater loyalty you get.

The other product of the CVA study is value maps that tell you whether you are giving away value. If you are giving away value, then you can decide whether you should increase price or decrease ​benefits. Such thinking can be applied to both new products or in changing the rules of the game in selling or market positioning.

CX has a large following and rightly so, because the Customer experience is important. However, experience like satisfaction is measured after the fact. So items such as price justification or for dealers asking them whether new products that the company may come up with cannot be measured by experience or satisfaction because they look beyond transactions.

CX is one aspect of creating value. But in the case of a CVA measurement, the questions are asked of the decision maker, not the user who has been in the transaction. The decision maker may not have had transactional experience, but he has an impression of the difference between competing offers. And the decision maker makes the decision. In many B2C sales, the decision maker and the user are one and the same, and the first-hand experience becomes more relevant.

CSat can be used as one measure of CX, but also re-purchase likelihood along with willingness to recommend, which are standard loyalty measurements. CSat and NPS together are good, though it has been proved that satisfaction does not relate to loyalty (it is more of a necessary condition than a sufficient condition).

Measuring loyalty (correctly) is not the same as measuring the value the customer receives, because there are many other factors to be taken into account, and loyalty is an end result. NPS does not focus on the underlying causes for loyalty.

In a recent study, most companies are using a mix of metrics, including CSAT, NPS, willingness to recommend, willingness to purchase, and custom indexes. CVA is less used.

So my questions are:

  • Do you see a difference between CVM and CXM?
  • Does that difference suggest different measurements should be used.
  • Are the present measurement techniques adequate
  • What is most important to the customer (am I being measured for my loyalty, or are people worried about the experience I get or the value I perceive?)

You know my views. What are yours?

Gautam Mahajan
Gautam Mahajan, President of Customer Value Foundation is the leading global leader in Customer Value Management. Mr Mahajan worked for a Fortune 50 company in the USA for 17 years and had hand-on experience in consulting, training of leaders, professionals, managers and CEOs from numerous MNCs and local conglomerates like Tata, Birla and Godrej groups. He is also the author of widely acclaimed books "Customer Value Investment: Formula for Sustained Business Success" and "Total Customer Value Management: Transforming Business Thinking." He is Founder Editor of the Journal of Creating Value (jcv.sagepub.com) and runs the global conference on Creating Value (https://goo.gl/4f56PX).

2 COMMENTS

  1. I don’t agree with your statement about Customer experience being only measured after the fact. It doesn’t need to be and it shouldn’t only be measured after the fact. It can be measured before the fact, by customer churn rates, customer growth rates, complaint numbers and other operational performance indicators. Customer Experience is one of those concepts like “Culture” or “Digital Marketing” that sound simple but which in reality describes a complex and multi-faceted phenomenon. Customer Experience is really all about the perception we create, deliberately or by accident. It’s goes beyond satisfaction to how we create mutual value. To create mutual value in this marketplace requires an organisation to continuosly improve, consistently deliver and innovate (create new value).

    There’s no silver bullet to how you measure it or improve it, it’s going to be unique for every organisation. People form their view of an organisation through the lens of both feeling and meaning, that’s why customer experience management is so complex, it’s about influencing human beings, that means it’s multidisciplinary and holistic by nature, running counter to the way organisations typically run.

  2. Eb, what a discerning and thought provoking act.

    Churn rate, customer growth rates, complaint numbers and other operational performance indicators are all a result of something. These somethings include Customer Experience, Customer Value etc.

    They are a measure/result of the experience.

    So Customer Experience is measured after it happens. Don’t you agree.

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