What is Cost Per Value and Why Should You Care?
Have you ever wondered how much it costs to achieve a specific outcome, say, improving your customer satisfaction by one point? That's exactly what Cost Per Value (CPV) helps you figure out. In simple terms, CPV measures the cost required to increase a particular value by one unit.
Why should you care, you ask? Well, understanding CPV can help you budget more effectively, allocate resources smarter, and measure the efficiency of your investments. Are you investing $10,000 to see a significant boost in customer satisfaction or just burning cash? CPV tells you that.
How to Calculate Cost Per Value
Calculating CPV is quick and straightforward, promise! Here's the formula you'll need:
[\text{Cost Per Value (CPV)} = \frac{\text{Total Cost}}{\text{Change in Value}}]
Where:
- Total Cost (TC) is the overall expenditure you've made, in dollars or any other currency.
- Change in Value (V) is the amount by which the value you're measuring has increased.
For instance, if you spent $800 on a marketing campaign and it improved your customer satisfaction score by 4 points, you simply plug these numbers into the formula.
Calculation Example
Let's run through a quick example so you can see CPV in action. Suppose you spent $600 on customer service training, which in turn boosted your customer satisfaction score by 3 points. Here's how you do it:
- Identify the total cost: In this case, it's $600.
- Determine the change in value: Here, the customer satisfaction score increased by 3 points.
Now, apply these into the formula:
[\text{CPV} = \frac{600}{3} = 200]
Yep, it cost you $200 to raise your customer satisfaction score by one point!
Visual Example
| Initiative | Cost | Value Change | Cost Per Value |
|---|---|---|---|
| Training A | $600 | 3 points | $200/point |
| Training B | $1,000 | 8 points | $125/point |
| Training C | $400 | 1 point | $400/point |
Training B provides the best value for your investment at $125 per point!