Customer value and total cost of ownership( 200 words Essay)

Customer value

Customer value is a preference perceived by customer through an evaluation of product attributes, attribute performances, and consequences arising from use that facilitate achieving the customer’s goals and purposes in use situations (Gardial et al. 1994). The concept of customer value suggests a strong relationship to customer satisfaction. Both concepts describe assessing decision about products and emphasize on the use situation.

The concept of customer value could also be seen as an important management tool only if and when it is shared and used within an organisation. Stakeholders engaged in creating and implementing customer value delivery strategies need a common framework for thinking about customer value (Woodruff, 1997)

 

Total Cost of ownership

Total cost of ownership (TCO) addresses all the costs associated with the acquisition, installation and operation of asset (Snelgrove, 2017). TCO aimed to provide the best available information about actual costs throughout the life cycle of a product or service. In the acquisition phase, for instance, one compares unit price, shipping, taxes, handling, currency exchange/hedging costs and minimum order quantities between offerings. TCO analysis saves companies money and help businesses purchases the best, most cost-effective assets to meet their needs (Parametech, 2019). 

In order words, getting the big picture of TCO directs consumers to be smart about their purchase decision. TCO is also used in industries beyond information technology to measure the lifetime cost of new solution. For instance, industrial companies compare the TCO impact of an offering to the current state: In medicine, total cost of care is being more commonly measured, and the energy and renewables markets use levelized cost of energy.

 

 

Real-life Example

A very relatable real-life example is when comparing a used car to a new car. The used car that appears to be a good bargain because of the low cost of purchase might eventually have a higher cost of ownership that is higher than that of the new car if the used car requires many repairs and maintenance cost while the new car has a three-year warranty that could cover repair charges.  

 

 

Reference

 

Gardial, S. F., Scott, R.B., Woodruff, D. W., and Mary, J. B. (1994) Comparing Consumers’ Recall of Prepurchase and Post-purchase Evaluation Experience. Journal of Consumer Research. 20(1). pp. 548-560.

 

Patten, B. (2019) What is TCO? Total Cost of Ownership and hidden costs. Parametech [online]. Available from: https://www.parmetech.com/total-cost-ownership/ . [Accessed 07/12/2020].

 

Snelgrove, T. (2017) Future View: Evolving the Measurement of Best Customer Value from Using Total Cost of Ownership to Total Profit Added Methodology. Sage Journals. 

 

Woodruff, R. B. (1997) Customer value: the next source for competitive advantage. Journal of the Academy of Marketing science. 25(2). p. 139.