Many businesses think of giving customers a reasonable price for a quality product when they hear the phrase “customer value.” However, customer value is more than the cost. Customer value entails offering a product or service that solves customer needs or problems.
It dives deep into the customer’s journey with the product or service, from buying intent, shopping, actual purchase, usage, and re-sale. The more businesses offer value in each buying step, the better customer satisfaction and performance.
What is customer value?
Customer value incorporates the benefits customers derive from buying a product or service. Today’s customers care less about quality and price. They are looking for a product or service that will solve their problem or meet their needs.
They are looking for companies that consistently deliver value and improve their lives by improving their overall sense of well-being. Businesses should understand that customer value is more than monetary costs. It includes all the non-monetary benefits customers receive.
For example, time and energy saved increase productivity or customer satisfaction. Customer value has different definitions for each customer. So, businesses need to understand how each customer perceives value to ensure they do not go to the competitor to make a purchase.
For instance, two customers may find value differently when buying the same products from a company. Customer one finds value when offered free shipping services for all orders over $400 as they save on transport costs. On the other hand, customer two finds value when they order the same goods online as they enjoy the convenience of online shopping.
In this case, value creation is necessary for businesses to succeed with their clients. Success isn’t solely determined by a company’s sales or profit margins but by how they meet individual customer needs.
Customer value and marketing
The baseline for creating customer value lies in understanding customer needs. Your business marketing team must have the skills and knowledge to conduct an in-depth customer needs analysis to gain valuable insight into what the customer wants.
They must think outside the box to determine ways to provide value to the customer. Consider everything you do to give value to your customers and audience.
Understand the market deeply so that you can divide it into specific sections with uniform characteristics that correlate to a particular value proposition, as discussed below:
- Find new opportunities and outcomes to create innovative propositions
- Find a way to convey this value at the right time and place
- Listen to your customers and gain knowledge concerning their understanding of your offer
- Find ways to add value to customer service and successful teams
By enrolling in a Digital Marketing & Analytics program from a reputable university such as Aston University, your marketing team will be equipped with the right skills that drive success in all your marketing approaches. Through this program, students learn critical thinking and how to analyze essential business data, understand industry trends to fully deliver clear campaign messages, and apply data-driven marketing skills to increase customer value.
Types of customer value
The five main types of customer value include functional, emotional, social, conditional, and epistemic.
- Functional value includes the value customers receive from the functional aspect of the product. It represents how good the product is at delivering its objective.
- Emotional value represents customers’ benefits when a product evokes certain emotions.
- Social value includes the value a product delivers from being associated with a certain social group.
- Conditional value refers to the value that depends on a particular context or sociocultural situation.
- Epistemic value refers to the value a product creates by inspiring consumers’ curiosity and providing them with enjoyable experiences.
How to measure customer value
When measuring customer value, your marketing team should keep these three important steps in mind:
Ask your customers several vital questions
Communicating directly with your target customers is important when measuring customer value. For instance, ask them how your business provides value and any suggestions on how it can improve. Through customer feedback received from regular surveys, calls, or emails, your business can gather crucial data that can help you increase your customer value.
Determine customer benefits and customer costs
Identify customer benefits or the value customers receive when buying your product. Customer benefits may include the quality of your product or service, brand reputation, unique customer experience, and ability to provide a better solution.
When measuring customer costs, you should consider both tangible and intangible costs. Tangible costs may include the price of your product or service, the cost of accessing the product or service, maintenance costs, installation or onboarding costs, and renewal costs.
Intangible costs may include poor customer service, time and energy invested in buying the product or service, emotional or physical stress undergone during the buying process, or a poor brand reputation.
Determine if the benefits outweigh the costs
Check if the benefits outweigh the costs. While measuring customer value, you will gain many invaluable insights that will help you connect better with your customer and offer more personalized service that leaves them happy and satisfied.
Customer value is calculated as follows:
Customer value = total customer benefits – total customer costs.
Note that you must be able to consciously determine how much a benefit such as brand reputation is worth compared to costs such as time investment. Also, customer value will vary depending on the customer segment you are analyzing.
Remember that each customer has unique needs, goals, and expectations, so customer value might be inconsistent. Try and segment the customers into different personas and calculate customer value for each group.
Importance of customer value
There are multiple reasons why building customer value is crucial for any business. Here are several reasons why your business should embrace it:
Increases customer loyalty
For businesses to succeed, they must create loyal customers who believe in their brand and drive their sales margin. However, success isn’t solely determined by a company’s sales or profit margins.
However, to maintain loyal customers, a business must consider how much value it generates for its clients. Offering customer value through products or services that meet their needs motivates consumers to stay loyal to the brand and avoid switching to competitor products.
Promotes customer support
Customer loyalty brings forth customers who are pleased with your business. Speaking about your products or services to their friends and family becomes easy. Promoting your products or services results in a long-lasting marketing position for your business and offers your marketing team a free hand. Additionally, their enthusiasm for your company greatly aids in generating more leads, resulting in more sales and a higher profit margin.
Helps meet customer satisfaction and customer experience
Creating customer value means understanding the needs and expectations of your customers and how they evolve. This helps you understand how people feel about your products or services and allows you to work hard to ensure they enjoy what your brand offers. As a result, you create products or services that leave customers happy and satisfied.
Keeps your business ahead of the competition
In today’s hyper-competitive marketplace, uniqueness and standing out from the rest are vital for any business. Understanding how your products or services meet customer needs encourages your business to develop strategies to make your brand more valuable in the eyes of your target audience.
Offering customer value can differentiate your business from the competition. By identifying what value your product or service offers and the benefits your customers can expect from using them, you gain a competitive edge over numerous similar products or services on the market.
How to increase customer value
Customer value can have various benefits if done correctly. These help a business stand out from its competitors. Here are some of the tips that businesses should apply when increasing value:
Personalize your support interactions
Your customers will not be impressed if your support staff recites the same script on every call. Your customers need to feel more valued to show them that your business caters to their unique needs and tailors their support experience.
To offer a personalized experience, gather customer data such as past purchases, recent shopping activities, and support requests. With this information available to your support staff, they won’t repeat themselves. Customers will feel the company understands their needs, thus increasing customer loyalty.
Enhance employee training
Your employees are the face of your company. They deal with customers and run the business behind the scenes. Your customers see your company at its finest thanks to the dedication and professionalism of your employees.
You should value each staff member and invest in their professional growth.
Businesses can create a great workforce by providing the right training and encouragement. Consider implementing performance measurement strategies to create a baseline for your employee’s strengths and weaknesses and to develop a strategy for continuous improvement.
Invest in technology
You can increase customer value by automating certain aspects of your business operations. Technological advancement has allowed businesses to streamline their operations toward meeting customer needs.
From time management, data management, customer data collection, and analysis to sending crucial company data to different departments in real time, technology can change how your business increases customer value.
Define your clientele
Businesses that believe that their products or services are suitable for everybody are making huge mistakes. They target a huge market and do not strongly target anyone. They need to target suitable clients that truly value what they do.
Understanding the type of consumers your business caters to most is the first step in increasing customer value. It means identifying the demographics of your customers and constructing a clear clientele that your business constantly serves with diligence and commitment.
Identify your customer’s needs
Customers expect businesses to meet their expectations and their needs. When businesses understand what customers want, they can develop products or services that solve the problem and offer a satisfying solution.
Once businesses identify customer needs, they also improve their products or services. They develop a unique selling position as they set themselves apart from the competition. They learn what motivates their customers and work towards exceeding their expectations.
Choose fundamental areas to improve
Customers typically search for three crucial elements in goods and services: low cost, high quality, and speed. Your business can increase customer value by improving in any or all of the mentioned areas.
For instance, you can reduce production costs and provide cost-effective products by automating operations.
Alternatively, your business can introduce online services to make the buying process seamless and fast. However, your business should first identify its clientele to modify the fundamental requirements to suit the target customer’s demands.
Acknowledge and reward customer loyalty
Customers love to feel appreciated and recognized, which makes them feel that they are part of the brand. As a result, they do not shy away from praising your products or services to their friends and family.
Consider offering discounts or promotions to your loyal customers as a way of saying thank you for their trust and commitment.
You can also launch a loyalty reward program to show your appreciation. For instance, you could offer a point for every dollar your customers spend. They can then use the collected points to purchase or choose a gift.
Collect customer data
For your business to develop effective marketing strategies, it must look at customer value from a customer perspective. The focus must be centered on the customer’s perceived value of your product or service.
To achieve this, quantitative and qualitative customer data must be analyzed by the marketing team. Facts and statistics must be used to justify the proposed marketing strategies. This tangible data helps develop customer value that aligns with a business’s customer base.
Businesses must deliver customer value for them to succeed. Today’s customers have so many choices in the market that they have a say on what deserves their money and attention. So, to ensure your business meets its bottom line, your marketing team must define the benefits and costs customers incur when buying your product or service to determine if your brand offers the value your customers require.