What Is Customer Value Added?
Customer Value Added is a metric developed by Don Sexton,
based on his education and training in the disciplines of economics,
marketing,finance, and statistics and based on his experience wor-
king with numerous organizations on their marketing and branding
strategies.
Customer
Value Added is the difference between perceived value -
the maximum a customer will pay for a product or service - and
the incrementalcost of providing that product or service.
Customer Value Added is the net value that an organization provides society -
as perceived by customers. The higher Customer Value Added, the more contribution
an organization can expect; the lower Customer
Value Added, the less contribution.
If perceived value falls below incremental cost, then Customer Value Added
becomes negative and an organization will go out of business because it is using more of society's resources as inputs than it
is producing as output.
Customer Value Added is a leading indicator of contribution. Both theory and empirical
work demonstrate the relationship between Customer Value Added and future contribution. Customer Value Added is a practical
tool that can be used to evaluate marketing expenditures in terms of their expected financial results.
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