Value is created when people become aware of us, engage with our content or brand ambassadors, are influenced by this engagement, and take some action like recommending to a friend or buying our product. Value creation occurs over time, not at a point in time. Value lives on the balance sheet.

1. Value Creation is Output / Input
Recently I was discussing setting up Value Creation Centres with Dr
Jagdish Sheth of Emory Institute.
We discussed Value Creation for companies. Dr Sheth reminded me
that Value was a term popularised by the investment community,
where they talked about improving the value of the companies they
bought. Generally, value was created by cutting costs and improving
the bottom line.
Value Creation, as we define it, impacts the bottom line and the top
line. By creating value for employees, customers and partners we
reduce costs because we are more efficient, because we make fewer
mistakes, decrease repeat and unnecessary work, have better team
work and focus.
By focusing on customers, we are able to increase loyalty and market
share by using customer value management techniques and
therefore, we improve the top line.
The improvement in top line and bottom line increases profits and the
value of the company more dramatically, than by “cost cutting” alone.
To see the impact in Value creation, we should look at the effort, cost
and time in doing a particular activity, and see what output we get. As
the output/input ratio increases value is created.
Thus Indian companies can look at their CSR activities as being
something essential because the government in India mandates CSR
expenditure. It is viewed as a cost centre. But if designed and
implemented properly, where your customers start to prefer you for
Value Creation by Customer Value Foundation

2. your CSR activities, then increased value will be created. It is an
output/input thing.
That is why we have terms such as return on marketing investment,
return on assets, return on investments; all can be viewed from an
increasing value viewpoint.
Study after study has shown that increasing customer value increases
the profits companies make. Part of this is preference for the
company; part is because of higher prices you can charge when you
increase value.
If you are looking at transformation in your company, you can also
look at it as an output/input system. You put in an investment of time,
people and energy and maybe money. What do you get? And if the
output is greater than the input cost, then value is created.
Value is also created when you do things right for the customer.
Generally, the cost of doing things right is minimal. So returns are high
and the value created is high.
Social media and public relations programs create value and in some
cases generate demonstrable ROI. The two concepts are different in
important ways. They are related like the ellipse and the circle.
Remember that silly distinctions you learned in elementary school? A
circle is a ellipse, but a ellipse is not a circle. ROI is a form of value,
but not all value takes the form of ROI.
Don Bartholomew, SVP Digital and Social Media Research at
Ketchum warns, however, that ROI is a financial metric – percentage
of dollars returned for a given investment/cost. The dollars may be
revenue generated, dollars saved or spending avoided. ROI is
transactional. ROI lives on the income statement in business terms.
Value is created when people become aware of us, engage with our
content or brand ambassadors, are influenced by this engagement,
Value Creation by Customer Value Foundation

3. and take some action like recommending to a friend or buying our
product. Value creation occurs over time, not at a point in time. Value
lives on the balance sheet.
He defines value as increasing the number of people who are likely to
buy our products and services. Other programs may be designed to
improve or protect corporate reputation or to build and enhance
brands. Much of this value is said to be intangible. It is goodwill that
becomes tangible at the point in time a transaction occurs. When
buying decisions happen, your investments in marketing, brand and
reputation work together. They become tangible. You can measure
the ROI.
The point is that value can be created in many different ways and
measured by different metrics. The best metrics is Ray Kordupleski’s
Customer Value Added, the Value you add to your customers divided
by the value your competition adds to its customers and is measured
through customer’s perceptions using market research.
Your comments are welcome.
Call at (+91) 9971288580
Gautam Mahajan, President-Customer Value Foundation
M: +91 9810060368
Tel: 11-26831226, Fax: 11-26929055
email: mahajan@customervaluefoundation.com
website: http://www.customervaluefoundation.com
Customer Value foundation (CVF) helps companies to Create Value and profit by Creating Value for the customers, employee
and for each person working with the companies.
Total Customer Value Management (Total CVM) transform the entire company to focus on Creating Value for the customer by
aligning each person's role in Creating Customer Value and getting shareholder wealth and Value.
Value Creation by Customer Value Foundation