Today, more than ever, brands must create and communicate value in all the actions they take. Faced with increased competitiveness, consumers have more and more options to choose from, with high expectations and low loyalty if established criteria are not met. Therefore, to communicate value to our audience, we need to understand what value really is and, most importantly, what it is not. To do this, in this article we explain what is the customer value and how to improve it. Don’t miss it!
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What is the customer value?
We could define the Customer value such as the satisfaction that the customer experiences or expects to experience when performing a certain action relative to its cost. The action is usually a purchase, but it can also be a registration, vote or visit, for example. Cost, on the other hand, refers to everything the customer has to “lose” to receive the desired benefit. It can be money, data, time or knowledge.
The internal supply chain, which encompasses both operations and processes, sales, marketing and customer service, contributes to the creation of value. Also other departments such as human resources or accounting. All the components of a business directly or indirectly affect in a way, creating a perception among the consumer.
The results of a company’s effort to create value are measured in the perception that customers have of that value. In summary, customers compare their perceived value with that of other similar products when making a decision.
In other words, customer value measures the value of a product or service and compares it with the rest of the possible alternatives. This metric determines whether the customer feels they have received enough value for the price they paid.
The value of the customer can be seen as an idea of buyer’s repentance. If customers feel that the price of an item exceeds its benefits, they will regret their purchase. Especially if a competitor makes a better offer for a similar product or service. Understanding customer value and how to calculate it helps companies evaluate products fairly and reduce friction within the Client experience.
Why is customer value important?
Value is created by developing and improving processes, among other things. It is also a subset of a company’s culture and vision. In fact, while the culture and mindset can be difficult to change, it is entirely possible to transform these concepts to put much more emphasis on creating customer value and improving the business. its customer experience.
On the other hand, it’s important to keep in mind that value, or perceived value, can change throughout the customer journey. When a product or brand is first presented to them, they have or create an idea about it, and this will change once they start interacting with the business.
There are many reasons to create customer value. Next, we highlight the most notable:
Loyalty of the clientele
The consumer loyalty it is the result of excellence and attention to detail. Both are fundamental to a business and should be the primary goals of any organization in its day-to-day operations, regardless of industry. Oddly enough, even small improvements in customer retention can have a huge impact on a company’s bottom line.
Satisfying customers to the point of recommending one company over another comes naturally to them. For an organization, this can lead to changes in its market position. Consumers become advocates or advocates of the brand by doing the work of the marketing team for free. Public enthusiasm for the business will help attract new potential customers, which will contribute to the long-term growth of the company.
How to measure customer value
For many organizations, the Customer value it’s about money. However, it is essential to keep in mind that customers place more importance on the business than the price of the label itself. There are costs in time, energy, emotions, etc. Everything that customers weigh when making the buying decision.
Various formulas can be used to measure customer value. The easiest is the following:
Perceived value = Perceived benefits / Cost
In other words, for a set of benefits, as the cost increases, the perceived value decreases.
On the other hand, there are also different types of benefits that influence customer decisions. Some are tangible, like the product, or intangible: will wearing this product change my social status in the eyes of others?
Here are the benefits you should consider:
- The reputation of the brand
- The quality of the product you are selling
- The social benefits of partnership with the brand
- User experience
- The quality and predisposition of the team attention to the customer
- The ability to react quickly to incidents
Now that we know the benefits, let’s analyze the costs to the customer, both tangible and intangible. Let’s start with the tangibles:
- The price of the product
- The cost of access to the product
- Installation or incorporation costs
- Renovation costs
- Maintenance costs
Now let’s take a look at the intangibles:
- Physical or emotional stress induced by the purchase or installation of your product
- Time invested in purchasing the product
- Time spent understanding how your product or service works.
- Non-existent brand awareness
- Bad user experience
How to increase customer value
Now that we know what customer value is and the different factors that influence it, let’s take a look at how to increase this metric.
1. Analyze the customer experience
If you want to increase customer value, the best way to start is to analyze the customer experience. You can do this by creating a customer journey map that describes each step and the actions they take when they go to buy a product from the company. Look for interactions that can cause friction within the experience of consumers. Once you can visualize all the steps they take, it will be easier to identify opportunities to add value.
2. Price is not everything
There are sectors with more competition than others. In fact, it is difficult for many companies to compete on price alone. Sometimes the cost of making a product is fixed and there is no room for variation. But that doesn’t mean you can’t create a competitive deal. it will be necessary to seek alternative ways to add value to the customer experience. Keep in mind that consumers’ needs are not just based on price, but that there are many variables that will make them choose one option or another.
3. Collect customer data
It will be difficult to transform an organization if we rely solely on the business perspective of customer value. We need to focus on the customer perceived value of the product and for that we will need to collect qualitative and quantitative data. Managers will be able to make decisions with confidence knowing that expected results will be achieved.
4. Have the most loyal customers
Just because a consumer is loyal to a business doesn’t mean the organization can’t, or shouldn’t, overstate customer value. The inclusion of additional benefits by customer loyalty programs it can generate even more value. This approach not only keeps the most valuable audience, but also acquires new customers. For example, you can ask customers to submit comments or write a review that shares their positive experience.
5. Segment the database
As we mentioned, customer value can vary depending on the interviewee and a customer’s needs and goals influence their definition of value. Since all clients are not the same or have different interests, this can create discrepancies. Therefore, it is very important to segment the customer database into specific audiences.
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