The customer is the most important asset of your company. Your performance and growth prospects depend on the success of your interaction with them. 

What is customer value, and what are the strategies to create one?

First, you must discover what is the real value that your product or service provides consumers, and how it helps them solve their problems.

Offering value to the client is one of the most effective ways to guarantee their satisfaction. However, many companies are still unaware of this concept and focus on price as the main driver of value delivery.

In this post we explain what customer value is, how to measure it, and the different ways to create value.

WHAT is Customer Value?

Customer value is defined as the perception of what a product or service is worth compared to alternatives. This determines whether the customer feels that he obtained a benefit from the product or service above the value he paid. The value of the customer can be determined by the following equation:

Customer Value = Total Customer Benefits - Customer Costs

These concepts take into account both tangible and intangible elements. You will need to determine what the value of benefits such as brand reputation, social status, and service convenience is compared to costs such as effort, energy, and investment of time a customer spends getting your product or service.

In addition, each consumer has a unique set of needs and resources, so there are no two consumers who give the same value to the same product or service.

Some consumers are willing to pay a high price for a quality product or a high level of service; others may feel that the same benefits are not worth that price. For a customer, the value may lie in the immediate delivery of a solution to an urgent need; for another, the value may be your long-term profitability.

WHY is Customer Value Important?

The value proposition that you create for your client can give your company a great competitive advantage. Not all companies have effective value propositions. One study revealed that 83% of marketers pay little attention to customer value propositions in their strategies, campaigns, and ads. Only 17% understand and accept what a customer value proposition is.

It is difficult to make changes if you only look at customer value from a business perspective. It is also necessary to consider the value that the customer perceives of your product or service.

The idea of ​​understanding and increasing the perceived value of a customer is often attributed to the marketing and customer acquisition teams. This way, various marketing strategies seek to improve the shopping experience of a product or service by improving some of its intangible characteristics to make the brand captivating.

If potential customers see a product or service as a solution without understanding its value, they are likely to put off buying. A well-defined value for the consumer, on the other hand, helps motivate them to buy.

In turn, customer value allows you to adjust priorities. It is essential to get new consumers, but that current customers increase their consumption is even more important since the costs are lower and there is a higher profit rate. Some research indicates that an increase in customer retention rates of just 5% increases profits between 25% and 95%.

HOW to Create Value for Customers?

The goal is to increase the value that is delivered to the customer, that is, the difference between the total value and the total cost to the customer.

According to Philip Kotler, considered the father of marketing, there are 3 practical ways to do this:

The first, the easiest, and the least recommended of them is to lower the price;

The second is to decrease the other elements of the Total Cost for the client, that is: stress, the cost of physical energy, and the cost of time;

The third is to increase the Total Value for the customer; that is the value of the brand, the value of the staff, the value of the services, and the value of the product.

In addition to being important for attracting and retaining customers, customer value has also become the key factor in the growth and expansion of a business. That's why forward-thinking organizations should focus on fine-tuning their value propositions. Creating value for customers includes:

  • Understand in-depth the needs and desires of the client;
  • Make your product or service easy to buy; offering different forms of payment, delivery, etc;
  • Offer a personalized shopping experience; there is always competition, but it is up to you to define a unique value proposition that communicates why a customer should choose you over your competitors;
  • Always be present and humanize the service; although the automation of various processes is extremely useful, customers value the human touch to guide them towards the most appropriate solution to their problem;
  • Create a genuine and emotional connection; strive to make your customers feel important;
  • Be transparent in the negotiation; seeks to build trust and maintain constant communication;
  • Build a relationship with the customer; a good relationship with a customer is synonymous with retention and loyalty and, therefore, a greater expectation of the life cycle of the business relationship;
  • Carry out excellent after-sales service; aim to maintain an excellent relationship with your client; After-sales service is as important as providing good service before and during the sale.

6 Tips to Increase Customer Value

Your customers are the source of your current profits and the foundation of your future growth. These tips will help you find more ways to grow your business by providing greater value to your customers:

1. Evaluate your customer's experience

To deliver value for your customers, you must start by analyzing your customer's experience. Create a customer journey that describes each step your customers take when buying from your company and look for interactions that can cause friction within the experience. Once you map every action taken by your customers, it is easier to identify opportunities to add value.

2. Understand what generates value for your customer

Understanding what your potential customers want is essential to find alternatives that add value to their experience. Capture data to discover what is important to your customers and what opportunities you have to help them.

For example, you can identify what value your products or services create, what particular benefits customers can expect from using them, and make your value proposition as clear as possible in all your communications.

3. Collect data from your competition

In a hyper-competitive market, uniqueness is more than relevant to the success of any company. Research your direct and indirect competitors. Understand why your offering is different and more valuable in the eyes of your target audience. Is it technically superior? How easy is it to use?

4. Don't compete on price

Set a price that shows your customers are receiving value and also maximizes your market share. While cost is a top factor for customers, many people are willing to pay extra for added benefits.

Dissatisfied customers who have not perceived the value above the price will leave even if you offer them a low cost.

5. Segment your customer base

Different customers and customer groups naturally have different perceptions of value. Since not all customers are the same, this creates discrepancies when measuring value in your business.

So instead of trying to offer the same value proposition to your entire audience, it's important to segment your customer base into specific target audiences.

Start with your already loyal customers and use the data to identify specific buying behaviors. Once the groups are established, you can measure the value of the customer for each one.

6. Focus your efforts on loyal customers

You may think that if a customer is loyal it is because they already receive value from your business. However, just because someone is loyal doesn't mean you can't increase the value you offer them. Including additional benefits, for example, loyalty programs, can generate even more value for these customers. This strategy not only allows you to retain your current clients but to conquer new ones.

The Blue Spark team is here to help you in creating exceptional value for your customers. We create tools and systems that can bring you the most benefit and help you grow your business. 

Think about making it easier for your customers to buy and pay for your product or service via your website or the app. Or, perhaps, a loyalty program that helps you build the relationship with your current customers.

Anything you can think of - let's discuss it!