Customer value as a key performance indicator (KPI) and a key improvement indicator (KII)

Abstract

Purpose

The purpose of the paper is to develop existing tools or methodologies to measure customer value during acquisition and use, in such a way that the measures concurrently indicate the level of performance and more “accurately” identify the improvement opportunities.

Design/methodology/approach

The producer is the entity that creates the products that the customers acquire or consume. This view makes the “general agreement” that customer value is nothing other than customer perception in the market no longer relevant. Therefore, ValMEA (Value Modes Effects and Analysis) offers a “balanced” perspective on customer value, by recognizing that customer value exists in different “modes” in different stages of the product's life cycle. The link between different “modes” of customer value becomes an important basis to understand the contributions of producer activities on customer value.

Findings

Measuring customer value is necessary to capture the essential meaning of quality. However, the existing tools to measure customer value do not adequately manifest the concept of customer value itself. Therefore, the modification of these tools becomes the prerequisite to continuously improve quality performance. The measurement of customer value during acquisition and use is based on intangible aspects (cognitive judgement). Along the value stream, these measures are translated (transformed) into tangible aspects, which comprise aspects such as shorter lead‐time, reduced defects, and lower costs.

Originality/value

The customer value measures complement the existing methodology such as Six Sigma, Lean Production, and Quality Function Deployment (QFD).

Citation

Setijono, D. and Dahlgaard, J.J. (2007), "Customer value as a key performance indicator (KPI) and a key improvement indicator (KII)", Measuring Business Excellence, Vol. 11 No. 2, pp. 44-61. https://doi.org/10.1108/13683040710752733