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What Is Customer Value and How Can You Create It

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21 views4 pages

What Is Customer Value and How Can You Create It

Uploaded by

Lagoona Blue.
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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What is Customer Value and How Can You Create It?

Gautam Mahajan
218,740 views in Customer Think plus 27,529 downloads in 2021 at Journal of Creating Value alone

Contact [email protected] for comments

Value has many different meanings. To some Value means price (what is the
value of this car?) to others it means benefit (the value I got from this car). It
also means the worth of something. That is why you hear some people saying
“value for money” (meaning they are price sensitive); and others who prefer
“money for value” (meaning they are willing to pay for what they consider as
benefits, as from a brand or a better product, or more convenience etc.)

The dictionary meaning includes: The regard that something is held to


deserve; the importance, worth, or usefulness of something. Synonyms are:
merit, worth, usefulness, use, utility, practicality, advantage, desirability,
benefit, gain, profit, good, service, help, helpfulness, assistance,
effectiveness, efficacy, avail, importance, significance, point, sense.

No wonder, the reader is confused about the value word that s/he uses so
often. When used in the vernacular it does not matter, but when used as a
technical term, like Customer Value, the meaning of Value must be precise,
so that everyone understands what it means, as shown below:

Customer Value is the perception of what a product or service is worth to a


Customer versus the possible alternatives. Worth means whether the
Customer feels s/he or he got benefits and services over what s/he paid.

In a simplistic equation form, Customer Value is Benefits-Cost (CV=B-C).

What the Customer pays is not only price (cash, cheque, interest, payment
during use such as fuel and servicing for a car) but also non-price terms such
as time, effort, energy, and inconvenience).

The benefits include the advantages or quality of the product, service, image
and brand of the company or the brand of the product, values, experience,
success one gets in using the product and so on.

Values are distinct from Value (the plural of value as defined above is Value).
Values are what someone or a firm stands for: Honesty, morals, ethics,
sustainability, integrity, trust.
Consumers are distinct from Customers. Consumers use the product or the
service, but in all cases do not buy the product/service. The value the
consumer perceives influences the buying evaluation and perception of the
decision maker or the Customer. The Customer is someone who buys or
makes the decision to buy. A Non-Customer is someone who could buy from
us, but is buying from someone else.

How is Value Created and What Does It Do?

Value is created just as much by a focus on processes and systems as much


as it is by mind-set and culture. Mind-set and culture are much more difficult
to change, and also difficult to emulate. It is easier to copy products and
systems than to change mind-sets and culture. Therefore, for long term
success, mind-set and culture are important and lasting. These, along with
systems create great experience and value.

Value changes during the use of a product or during the Customer Journey.
Value is perceived during the purchase intent, the shopping, the actual
purchase or buying, the installation or start-up, the use and even the re-sale.
We sometimes call this the waterfall of needs. Needs change during the
Customer Journey.

Creating Customer Value increases customer satisfaction and the customer


experience. (The reverse is also true. A good customer experience will create
value for a Customer). Creating Customer Value (better benefits versus price)
increases loyalty, market share, price, reduces errors and increases
efficiency. Higher market share and better efficiency leads to higher profits.

How to Create Real Value

You first have to understand the Customer Value concept, what a Customer
perceives as value, and how a customer’s value needs change over time, and
how to get Customer feedback. You must realise that people buy a product or
service that creates the most value over competing options.

To create real value, you must recognize what a Customer perceives as


value. You must understand how the Customer views your competition’s
product. What is important to the Customer in his buying decision? Is price
more important or are benefits? Are you good at delivering what the
Customer believes is important? Are you able to deliver more than your
competition on these factors?
I understand these are general terms, but they will help you to create value
as you understand your Customer’s need and perceptions. Let us take some
examples on how to create Customer Value:

1. Giving a price that makes the Customer believe he is getting more than he
pays for the benefits he gets versus competitive offers

2. Reducing the price, or keeping the same price and giving something extra
over competition (this could be service, better attention, an add on to the
product)

3. Making it convenient for the Customer to buy, and how he wants to buy
and pay.

4. For B2B getting a proper price justification, not just a price.

5. For dealers, the feeling the company will grow and offer new products for
the dealers to sell. These are things that the dealer may not have an
experience of, but needs to Create Value

6. The image of the company, including the brand and the trust in the
company or when the Customer appreciates the Values of the company
including sustainability. These create Value for the Customer

7. Giving the Customer a product that works as it is meant to (as perceived


by the Customer) and easy for him/her to understand and use (so that no
unnecessary time or energy has to be expended)

8. Making the Customer feel valued. For example:

 Smiling at and being attentive to a Customer creates value for him.


Ignoring him/her destroys value for the Customer
 Making it easy for the Customer to contact the company, and an
assurance that an answer will be given when and how promised
(how many times do you have to wait to talk to someone and how
often does s/he promises to call back and how often do you get a
call)
 Not making you repeat questions or answers, and keep relating the
problem
 Receiving a call from a service person confirming his/her visit (the
Customer is not kept wondering whether the service visit will take
place)
 Not answering queries destroys Value
All readers have real life examples of Value creators and Value destroyers
and can add many more examples. Do add yours. Answer the following:

 What could I do to create Value for my Customer?


 What can destroy Value for my Customer?
 Does experience create Value?
 List things that you do not experience that can create Value for you.
 Do I look for and solve customer problems not only one by one but
also systemically for all customers having same problem.

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