Customer value is the perception of the value that a customer sees in your product or service. It involves a mental calculation where customers consider the benefits of buying / using your product, the costs, and the comparison of other possible alternatives. Customers often do these calculations unknowingly, but the result is experienced in a real way.
- If a customer sees no value, they may regret their purchase and feel the buyer’s remorse. As a result, they will not buy again and may also share their negative experiences with others.
- On the other hand, when customers see value, they are happy and proud of their purchase. They have the feeling of “winning” and the cost seems justified. As a result, they will probably buy again and tell others to do the same.
Because customer value is a mental calculation, entrepreneurs who understand the components can strategically create value for the customer or increase the existing value of their products and services. In this article, we’ll share the basics of creating value for the customer, along with four questions to ask about your business, products, and services to increase customer value.
Understand customer value
A simple formula for customer value can be written as:
Benefits – Costs = Customer Value
You can actively shape perception and increase customer value by learning to address these intangible concepts.
Benefits are the positive rewards customers receive for using your product or service. They include:
- The quality of your product or service.
- The ability of your product or service to solve the customer’s problem.
- The quality of your customer service.
- The overall customer / purchase experience.
- The ability to provide a superior solution (product / service / function / etc.) Compared to competitors.
- The reputation of your brand (and the social benefits of partnering with your brand).
Costs are what a customer has to pay, both tangible and intangible, to buy and use your product or service. This includes:
- The price of the product / service.
- The price compared to competitors.
- Additional costs such as installation, incorporation, maintenance and renovation.
- The time they spend buying the product.
- The time they invest in learning the product.
- The commitment of time to continue using the product.
- Negative experiences in the buying process, such as poor customer service or stress.
As customers weigh in on the costs and benefits of their shopping experience, they come up with a value: the perceived value of your product. Although the general formula is Benefits – Costs = Customer Value, this does not work like standard mathematical equations. Some benefits and costs will be heavier for customers, changing the equation for or against.
Once you understand the factors that go into the customer value equation, you can work to increase profits and reduce costs so that you can increase the customer perceived value of your product or service.
Increasing customer value: 4 questions to ask
When thinking about customer value in relation to your product or service, ask yourself these questions to find specific areas where you can create more value for your customer.
1. What are you good at?
Look for the value of the existing customer by asking these questions:
- What is the signature service in your company?
- What do you do better than your competitors?
- What are your basic services?
As you answer these questions, write down your answers and start highlighting these highlights in your marketing messages. Don’t let customers determine where your product or service offers value; tell them directly! Everyone in your business needs to know what makes your business unique and different from the competition.
2. What are your target customer’s problems?
To sell your product or service to a specific audience, you also need to identify their issues. What issues or challenges are you facing right now? What are they struggling with right now? What are they complaining about? What keeps them awake at night?
Your ability to solve your customers’ problems will help your product earn BIG points in the “benefits” column of the customer value equation! So first, clarify what these issues are, and then think and articulate how your product or service addresses these issues.
3. What is your set of solutions?
You are offering more than one product or service. You are offering a complete solution to the problems you have identified above. So how does this play out in the stories of people who currently use your product or service? Your product will sell itself when your marketing talks about the large-scale possibilities that your product unleashes with a combination of benefits, results, and stories.
It is also important to look at your solution from the point of view of whether it is cheaper, better or faster than the other options on the market. If so, these are valuable points to highlight in your marketing! But if you don’t, don’t shy away from the conversation. For example, “we may not be the cheapest option available, but we offer better technology support than other vendors.”
4. What does the competition do?
He competition factors in the customer value equation, as the customer looks at both the benefits and costs of your product compared to others. Therefore, to understand where you can stand out (or fall short), you will need to do some serious research on the competition.
In your search, you will look for things that differentiate your brand from others. No one is looking for a “me too” brand; you want to show how unique you are and a better solution for your target market. To find out what sets you apart, you’re basically looking for the answer to why people choose to do business with YOU compared to anyone else.
When evaluating competition, you can compare products and services, features, cost, customer service, industry knowledge, reputation, and more.
Creating value for the customer
The four questions in this article will guide you through where to look to create more perceived value for your customers. What benefits should you highlight about your product / service? Where can you increase the benefits you offer? What costs are associated with your product / service, and how can you reduce or justify them? How is it different from the competition? Finally, why should customers choose you? By learning to create value for the customer, you can improve the customer’s perception of your product and the reputation of your brand.