Customer Value Framework

The value concept is one of marketing theory’s basic elements. Identifying and creating customer value (CV) – understood as value for customers – is an essential prerequisite for future company success (Graf & Maas, 2008). Identifying and creating customer value is considered a fundamental requirement for a company's long-term survival and success (Huber et al., 2001; Payne & Holt, 2001; Woodruff, 1997).

Due to competing definitions, conceptualizations, frameworks, and typologies, the customer value construct has been difficult to use in practice or marketing research. In 2007, J. Brock Smith and Mark Colgate developed the Customer Value Framework for generating customer value, making it valuable for shaping marketing strategy and gauging customer value in marketing research efforts.

The Consumer Value Framework from Smith and Colgate (2007) identifies four types of value:

  1. Functional/Instrumental value: Correct, accurate, or appropriate features, functions, attributes, or characteristics; appropriate performances; appropriate outcomes or consequences (Woodruff, 1997).
  2. Experiential/Hedonic value: The extent to which a product creates appropriate customer experiences, feelings, and emotions. Hedonic values are non-instrumental, experiential, and affective, often related to non-tangible retailer/product attributes (Hanzaee & Rezaeyeh, 2013).
  3. Symbolic/Expressive value: The extent to which customers attach psychological meaning to a product. It embodies a product or service’s personal and social significance for the customer. It reflects the utility derived from a product or service to enhance the customer’s social self-concept, which is related to symbolism (Roh et al., 2022; Sweeney & Soutar, 2001).
  4. Cost/Sacrifice value: Cost refers to the degree of effort required to gain the offering, which includes time, inconvenience, uneasiness, and inconvenience as well as money. One can increase customer value by reducing or removing various cost factors in terms of content and context (Han & Han, 2001).

The framework also outlines five major sources of value associated with central value-chain processes:

  1. Information (e.g., advertising, PR, brand management)
  2. Product (e.g., new product development, market research, R&D, production)
  3. Interactions (between customers and organizations’ employees or systems created by, for instance, activities related to recruitment and training, service quality, and operations)
  4. Environment (e.g., facilities management, interior design, and merchandising)
  5. Ownership (e.g., accounting, delivery, transfer of ownership such as contracts)

The framework for customer value creation strategies is a tool that describes generic marketing strategies and identifies sources of competitive advantage. It is based on the work of Treacy and Wiersama (1993) and suggests four value-creation strategies: product leadership, customer responsiveness, brand image/brand equity, and operational excellence. The framework highlights that few firms create just one type of value and that organizations must be competitive across all four dimensions of value. It also emphasizes the importance of understanding how customers perceive value and offering pre-emptive value propositions to meet their needs. The framework can describe an organization's value creation strategy, and it is essential for marketers to create value for customers, particularly when developing new products and services or starting new businesses. It also emphasizes the importance of understanding how customers perceive value and offering pre-emptive value propositions to meet their needs (Shanker, 2012).


Graf, A., & Maas, P. (2008). Customer value from a customer perspective: A comprehensive review. Journal für Betriebswirtschaft, 58(1), 1-20.

Han, J., & Han, D. (2001). A framework for analyzing customer value of internet business. Journal of Information Technology Theory and Application, 3(5), 4.

Hanzaee, K. H., & Rezaeyeh, S. P. (2013). Investigation of the effects of hedonic value and utilitarian value on customer satisfaction and behavioural intentions. African Journal of Business Management, 7(11), 818-825.

Huber, F., Herrmann, A., & Morgan, R. E. (2001). Gaining competitive advantage through customer value oriented management. Journal of Consumer Marketing, 18(1), 41-53.

Payne, A., & Holt, S. (2001). Diagnosing customer value: Integrating the value process and relationship marketing. British Journal of management, 12(2), 159-182.

Roh, T., Seok, J., & Kim, Y. (2022). Unveiling ways to reach organic purchase: Green perceived value, perceived knowledge, attitude, subjective norm, and trust. Journal of Retailing and Consumer Services, 67, 102988.

Shanker, A. (2012). A customer value creation framework for businesses that generate revenue with open source software. Technology Innovation Management Review, 2(3), 18-22.

Smith, J. B., & Colgate, M. (2007). Customer value creation: A practical framework. Journal of Marketing Theory and Practice, 15(1), 7-23.

Sweeney, J. C., & Soutar, G. N. (2001). Consumer perceived value: The development of a multiple item scale. Journal of retailing, 77(2), 203-220.

Treacy, M., & Wiersema, F. (1993). Customer intimacy and other value disciplines. Harvard Business Review, 71(1), 84-93.

Woodruff, R. B. (1997). Customer value: The next source for competitive advantage. Journal of the Academy of Marketing Science, 25, 139-153.