In today’s busy marketplace, many businesses want your attention. What makes you pick one over another? It’s all about Customer Value.
Customer value isn’t just about product features or service quality. It’s about what customers think your offer is worth. Do they feel it’s worth their money, time, and effort? Let’s learn about customer value, the heart of every successful business.
What is Customer Value?
Simply put, “Customer value is what your customer thinks your product or service is worth.” “Worth” can mean two things:
- Does it help them? Does your product solve a problem or make their life better? Is it useful to them?
- Is it worth the price? Are they getting a good deal for their money?
Basically, customers ask themselves, “What do I get vs. what do I pay?” If “what they get” is more than “what they pay,” then customer value is good.
Why Does Customer Value Matter?
Understanding customer value isn’t just helpful; it’s essential for any business that wants to last. Here’s why:
- Get and Keep Customers: People choose brands that give them the most value. Good customer value attracts new customers and keeps the ones you have. As we said before, it helps you “attract potential customers and better service existing ones.”
- Loyalty and Less Churn: If customers see high value, they won’t easily switch to another brand, especially if you’re not just competing on price. If your main thing is low prices, you might lose customers to even cheaper options. But if you’re known for quality, and you lower that quality, customers might leave. Knowing customer value helps you keep it high, so customers stay.
- Better Products and Services: When you know what customers value, you can improve your products and services to match what they want. This focused approach is much better than just guessing what to do. Knowing “why customers are coming to your brand” helps you make things better for them.
- Trust and More Sales: When you always give good customer value, trust grows. Customers who trust you buy more often, try new things from you, and even tell others about you. Meeting or exceeding expectations, by understanding customer value, builds trust and gets you more sales.
- Shape How People See You: Customer value changes. By knowing what affects it, you can change how customers see you. Make sure you always meet or go beyond what they expect. Being proactive is key to long-term success.
Understanding Customer Value: Benefits and Costs
To really understand customer value, we need to look at two main parts: customer benefits and customer costs.
Measuring Customer Benefits: What Good Things Do Customers Get?
Customer benefits are the positive things customers get from your product or service. These can be things you can touch and things you can’t:
- Product or Service Quality: This is a big one. Good quality products that work well and last give customers a lot of value.
- Brand Image and Values: Today, people care about what companies stand for. Customers like brands that share their values and have a good reputation. This adds to the feeling of value.
- Better Than Others: Offering something better or different from competitors is important. It could be better features, performance, new ideas, or just a better deal overall.
- Customer Experience (CX): If buying from you is easy and enjoyable, that’s a big benefit. Happy experiences mean higher value.
- Customer Service (CS): Helpful and friendly customer service is super valuable. Knowing help is there if needed is a big plus.
- Value of Choosing You: Sometimes, just choosing your brand gives customers a good feeling. It could be because of your brand’s reputation or because they feel good supporting your business.
Measuring these benefits can be simple or tricky. Surveys with simple questions can help you check customer experience and product quality. But understanding things like social value needs more digging and understanding of what customers think.
Measuring Customer Costs: What Do Customers Give Up?
Customer costs are everything a customer gives up to buy and use your product. Like benefits, costs aren’t just about money:
Tangible Costs (Easier to Count):
- Price: The money they pay for your product or service.
- Setup Costs: Money for things like installation or getting started.
- Maintenance Costs: Money to keep the product running over time.
- Renewal/Replacement Costs: Money to keep using the service or buy a new product later.
- Access Costs: Money to get access, like membership fees.
These costs are easy to track with numbers and records.
Intangible Costs (Harder to Count):
- Bad Experience: A bad experience is a cost. It can be frustrating and waste time.
- Time to Buy: If it takes too long or is too hard to buy, that’s a time cost.
- Emotional Cost: Dealing with a brand can sometimes be stressful or annoying. Negative feelings lower customer value.
- Social Cost: Choosing your brand might have a social cost in some cases.
- Learning Curve Cost: If your product is hard to learn, it takes time and effort. This learning time is a cost.
Measuring these harder costs needs customer surveys, feedback, and looking at customer feelings. Real feedback and customer opinions are key here.
Calculating Customer Value
While customer value is a feeling, we can use formulas to get a clearer picture. Here are two helpful formulas:
Formula 1: Basic Value Equation
Total Customer Benefits – Total Customer Costs = Customer Value
This simple formula shows the main idea: for value to be good, benefits must be more than costs. The bigger the difference, the better the value. This isn’t a perfect number, but it helps you:
- Make Better Decisions: It reminds you to make benefits bigger and costs smaller.
- Think Like a Customer: It helps you see value from the customer’s point of view.
Formula 2: Value Compared to Others
(Value¹ — Price¹) > (Value² — Price²)
- Value¹: How much customers value your product.
- Price¹: Your product price.
- Value²: How much customers value a competitor’s product.
- Price²: Competitor’s product price.
This formula is about being better than competitors. It means customers will choose you if the value they get from you, minus your price, is better than what they get from competitors, minus their price.
Customers compare choices. You need to offer better value than others to win.
Important: These are guides, not perfect calculators. Customer value is personal and changes. But these formulas help you think about value in a structured way and make smart choices.
How to Boost Customer Value
Making customer value better is ongoing work. You need to always think about your customers. Here’s how to do it:
- Make Customer Experience (CX) Top Priority: CX is often the biggest way to improve value. Make every customer interaction good and easy. Good CX means higher value.
- Know Why Customers Pick You: Understand why customers choose you. Ask them! Look at surveys and data. Are they here for price, quality, or something else? Do more of what works.
- Think Beyond Price: Price is important, but not everything. Improve quality, service, new ideas, and the whole experience. Find out what makes you special besides price and make it even better.
- Remove Problems: Fix anything that makes it hard for customers. Slow payments, confusing websites, etc., hurt value. Make it easy for customers to get what they need.
- Care for Loyal Customers: Reward your loyal fans. They already value you a lot. Keep learning about what they want and keep giving it to them. They can also help you attract new customers by telling others how great you are.
- Group Your Customers: Not everyone wants the same thing. Divide your customers into groups and give each group the value they want most. Different customers need different things.
- Always Get Feedback and Change: Customer needs change. Always ask for feedback to see what customers think. Change your products and services to keep up with what they need. Improving customer value is never finished.
Conclusion
Customer value is always moving. It changes as customers change, competitors change, and markets change. Generic surveys and basic metrics only scratch the surface. Mihup’s AI-powered Conversation Intelligence empowers you to move beyond guesswork and leverage the untapped goldmine of your customer conversations.
Unlock actionable insights, optimize your offerings, and create customer experiences that truly resonate.
