A customer value chain is a business concept that represents the creation of value for a customer. It is similar to the supply chain, which charts the various stages of production and supply from raw materials to the sale of the final good to the end user. The big difference is that while a supply chain often measures costs, the customer value chain is based on the increase in value to the end user. Another interpretation of this value chain puts the emphasis on steps taken to retain existing customers.
One example of the difference between simple supply chain analysis and a customer value chain is delivery of a bed. From a purely supply chain perspective, the delivery is a relatively small factor: it doesn’t make any tangible change to the bed itself, and for a large company with its own delivery network, the costs are relatively low. From the customer’s view, however, the value of the delivery is high. Most customers don’t have the facility to transport a bed and without a delivery service; they would be left to choose between the bed being useless to them, spending the time money to hire a self-drive van, or paying a high cost to have a third-party company pick up and transport the bed.
Customer value chain analysis involves breaking down every step that contributes towards the end satisfaction of the customer. A company can use such analysis to identify all the incidences when its activities contribute towards this satisfaction. The company can then improve its position in two ways: improving existing incidences to create better satisfaction, and finding new incidences where it could play a contributory role. For example, a manufacturer could take over either a raw materials supplier or a distributor in order to extend its presence in the value chain. It could also refine its manufacturing process to improve the quality of the goods.
Another response to the customer value chain is to concentrate on the steps that lie between the finished product and the customer. This tactic is designed to make the most of existing customers rather than concentrate on marketing to win new customers. Examples of such steps include building up good relations with customers, for example through after-sales care and support, and offering discounts for repeat customers. Such activity can even result in existing customers recommending the product and manufacturer to friends and colleagues.