Customer value is the perception of worth that a customer sees in your product or service. It involves a mental calculation where customers consider the benefits they get from buying/using your product, the costs, and the comparison of other possible alternatives. Often customers do these calculations unknowingly, but the result is experienced in a real way.
- If a customer does not see value, they may regret their purchase and feel buyer’s remorse. As a result, they will not purchase again and may tell others about their negative experience too.
- On the other hand, when customers see value, they are happy with and proud of their purchase. They feel like they ‘won,’ and the cost feels justified to them. As a result, they will likely purchase again and tell others to do the same.
Since customer value is a mental calculation, business owners who understand the components can strategically create customer value or increase the existing value of their products and services. In this article, we’ll share the basics on how to create customer value, along with four questions to ask about your business, products, and services to increase customer value.
Understanding Customer Value
A simple formula for customer value can be written out as:
Benefits – Costs = Customer Value
You can actively shape perception and increase customer value by learning how to address these intangible concepts.
Benefits are the positive rewards customers get from 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/buying experience.
- The ability to provide a superior solution (product/service/feature/etc.) compared to competitors.
- Your brand’s reputation (and social advantages of partnering with your brand).
Costs are what a customer has to pay – both tangibly and intangibly – to purchase and use your product or service. These include:
- The price of the product/service.
- The price as compared to competitors.
- Additional costs like installation, onboarding, maintenance, and renewal.
- The time they invest in buying the product.
- The time they invest in learning the product.
- The time commitment to continue to use the product.
- Negative experiences in the buying process, such as poor customer service or stress.
As customers weigh the costs and benefits of their buying experience in their head, they arrive at a value – the perceived worth of your product. Although the general formula is Benefits – Costs = Customer Value, this doesn’t work like standard math equations. Some benefits and costs will weigh more heavily for customers, shifting the equation either for or against you.
Once you understand the factors that go into the customer value equation, you can work to increase the benefits and decrease the costs so you can increase the perceived customer value of your product or services.
Increasing Customer Value: 4 Questions to Ask
As you think about customer value related to your product or service, ask yourself these questions to find specific areas where you can create more customer value.
1. What are you good at?
Look for customer value that already exists by asking yourself these questions:
- What is the signature service in your business?
- What do you do better than your competitors?
- What are your core services?
As you answer these questions, jot down your answers and begin to highlight these value points in your marketing messages. Don’t leave it up for customers to determine where your product or service offers value—point it out to them directly! Everyone in your company should know what makes your company unique and different from the competition.
2. What are your target customer’s pain points?
To sell your product or service to a specific audience, you also have to identify their pain points. What problems or challenges are they facing right now? What are they struggling with right now? What are they complaining about? What keeps them up at night?
Your ability to solve your customers’ pain points will help your product score BIG points in the ‘benefits’ column of the customer value equation! So first, get clear on what these pain points are, and then think about and articulate how your product or service addresses those pain points.
3. What is your solution set?
You are offering more than just a product or service. You’re offering a full-packaged solution to the pain points you 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 full-scale possibilities that your product unleashes with a mix of benefits, results, and stories.
It’s also important to look at your solution from the standpoint of whether it is cheaper, better, or faster than the other options on the market. If it is, these are valuable points to bring up in your marketing! But if it isn’t, don’t shy away from the conversation. For example, “we may not be the cheapest option available, but we offer better tech support than other providers.”
4. What is the competition up to?
The competition factors into 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 may excel (or fall short), you’ll need to do some serious research about the competition.
In your research, you will be looking for things that differentiate your brand from others. No one is looking for a ‘me too’ brand—you want to show how you are unique and a better solution for your target market. To find out what differentiates you, you’re essentially looking for the answer to why people choose to do business with YOU versus anyone else.
In evaluating the competition, you can compare products and services, features, cost, customer service, industry knowledge, reputation, and more.
Creating Customer Value
The four questions in this article will guide you on where to look to create more perceived value for your customers. What benefits should you be pointing out about your product/service? Where can you increase the benefits that you offer? What costs are associated with your product/service, and how can you lower them or justify them? How are you different than the competition? Finally, why should customers choose you? By learning how to create customer value, you can improve the customer perception of your product and your brand reputation.