These days brands have to battle harder to instill value in whatever they do. Customers have overabundance of choice. An overwhelming number of products hit the markets each day. Customers, therefore, have sky-high expectations and little to no loyalty if your brand fails to impress them. The market has gradually turned into a buyer’s market. You must communicate value to your customers if you want to survive the competition.
What Customer Value Is?
The phrase, customer value, can be defined as the satisfaction that a customer experiences by taking an action. The level of satisfaction ought to be relative to the cost that the customer pays to take that action. Usually, the action can be defined as the purchase of a product, but its scope is not limited to that alone. The action can be a sign-up on a website, a vote in favor of a product, or a physical visit at the retail outlet. The cost refers to anything such as knowledge, money, data, and time that a customer has to pay if he or she wants to enjoy the desired benefit.
“Customer value can also be defined as the level of satisfaction that a customer exhibits toward your business.”
If you are successful in communicating value to your customers, you get the space to market your company to reach out to more customers. This brings us to the definition of marketing. Marketing can be defined as something which nurtures and communicates value to your existing and new customers.
The operations of your business, certain processes, the number of sales, and the quality of customer service have a single objective which is to add their bit to create and nurture value for customers. Similarly, the human resource and accounting sector operations perform the same job. All vital organs of your business tend to make an impact on your customers either directly or indirectly in one or the other way. They add to their perception of your business. That’s why the outcome of your struggle for creating value translates into how a customer perceives that value.
The fundamental point is that people don’t buy products because you like the products. They will only buy them if it fulfills their needs. How a customer has perceived value in different competitive products in the market will greatly affect which product they will choose to buy. So, customer value is directly proportional to an increase in sales of a product.
Whether a customer has to decide on buying a new car, dining in a restaurant, or choosing a marketing agency to advertise your services, he gets to select from many choices. Apart from that, many factors influence your decision.
Customer value revolves around and is based on subjective perceptions that you can influence but cannot control. An in-depth understanding of customer value and the method to calculate it can help you set a fair price for your business and wipe out friction in the customer experience.
Measuring Customer Value
Each business perceives customer value in its way. For some, it centers on dollars and cents. However, you should keep in mind that customers give much more to your business than the price they pay for your products. The other costs include their time, energy, and emotions when they are about to make a decision. Therefore you must respect the values of customers.
Different models and equations have been invented to measure customer value. The simplest of all of them are as under:
Value = benefits/ cost
The equation means that as the cost of a product rises, for a set of benefits, the perceived value of the product drops. This is a very important point as value usually doesn’t refer to the price of the product. This generally refers to the perceived benefits that a customer can gain relative to the price.
Take the example of two identical products that also have identical exposure. These products will compete only on cost. However, two products that are different from each other don’t have to necessarily compete on cost. The common opinion is that products differ by features but they also differ by the nature of the brand. A customer is more likely to buy a product from Honda even if the market is full of cars with identical features from different brands, having the same cost and the same level of reliability. As Honda has marketed itself and established itself as a reliable carmaker, customer perception of Honda is more positive than that of other carmakers.
What Drives Customer Value?
Here is a rundown of the list of factors that drive customer value.
- Quality of the product
- How the product functions
- What are the points of differentiation?
- Nature of service
- Intensity and efficiency of marketing
- Pricing
- How you have branded your products
- Past and present experience
- Presence of personal bias from upbringing or experience
These are the drivers that can impact the perception of a customer. While you can control some of them, you have no control over others. All these factors change from one customer to another. Some people are brand-conscious while others are price-conscious. If we view customer value from the lens of content marketing, we can say that some people love to view short-form content while others love to read long-form content.
Similarly, audience segmentation is also important. Segmentation originates from the fragmentation of the customer value. You can identify groups of people who share a set of values. In this way, you can create new products and marketing messages that would resonate among a particular segment of customers.
What You Should Do
- You need to think of communicating value to customers with an in-depth understanding that you are not the solitary choice for customers.
- You should be able to understand the market and break it down into individual segments that would respond to a value proposition in the same way.
- You should always look out for opportunities to create fresh value propositions no matter how successful you are in your past ventures. Keep creating new value propositions.
- Communicate the value at the right time and place.
- Always lend an ear to what your customers are saying. Tell yourself that the customer is always right.