What is Customer Value?

Product and price are still important. However, selling solely based on these attributes is no longer enough to succeed in today’s hyper-competitive business environment.

In fact, a study by Gartner found that most solution providers focus too much on their product features and technology, rather than the benefits. What consumers really want from organizations is understanding the real value the product promises to deliver. And how it can help them solve their problems.

So, what is customer value? Customer value is defined as the perception of what a product or service is worth to a customer against the possible alternatives. Worth means whether the customer feels they got the benefits over what was paid.

Some benefits:

  • quality of the product or service
  • success from using the product or service
  • advantages of ownership
  • points of differentiation
  • quick access to a solution
  • image and brand of the company or the product
  • existing relationships or experience

Customer value equation:

customer_value_equation

Another customer value definition suggests that there are two aspects of customer value. These two aspects are the desired value and perceived value. Desired customer value refers to what the customer wants to receive from a product or service. Perceived value is the benefit the customer believes they actually received from a product or service after it was purchased.

When making purchasing decisions, consumers typically compare their perceived value of similar products and services. After that, they opt for those with the highest customer lifetime value among all the available offerings in the marketplace. Since every consumer has a unique set of needs, wants and resources, no two consumers will place the same value on the same product or service. 

The highest quality of products or services does not necessarily mean the highest consumer value. Consumers evaluate the benefits against the offered cost. While some are willing to pay a higher price for a high level of quality, others may consider that the same benefits are not worth the price.

When creating customer value, businesses need to take into account the following:

  • Consumers assess value at two stages; before and after the purchase.
  • Value is perceived at various levels, therefore it needs to be delivered at various levels.
  • Consumer value means different things to different customers.

Customer value proposition definition

A customer value proposition is a statement that outlines why potential customers would benefit from buying a product or using a service. It is the keystone of an effective product marketing strategy. Basically, it’s the total sum of benefits that should convince consumers why a product or service will be of more value to them than similar offerings on the market. 

The value proposition usually consists of a block of a short text (a headline, sub-headline, and one paragraph of text) and a visual (photo, graphics, hero image). An efficient value proposition clearly explains how a product helps to solve customers’ problems. It describes its specific benefits and tells prospects why they should choose your product instead of others. 

Why is customer value important?

If done right, a customer value proposition can give a business a huge advantage over the competitors. However, very few businesses have effective value propositions. A recent study revealed that  83% of marketers pay little attention to the customer value propositions in their strategies, campaigns, and ads. But, only 17% really understand and embrace what a customer lifetime value proposition is.

Another study found 58% of deals end-up in no sales because the value has not been proven. If prospects are looking at a product as a potential solution without understanding its value, they are likely to delay buying. A well-defined consumer value, on the other hand, helps to move sales-forward and motivate potential customers towards purchasing.

How to create value for customers

Apart from being important for attracting and retaining customers, customer value has also become the deciding factor of the market share and shareholder value of every company. That is why forward-looking organizations are focusing more on creating consumer value and sharpening their value propositions. 

Core customer value creation principles:

Understand what drives value for your customers

Consumers are not specifically looking to buy your products or services. They are searching for solutions that fulfill their needs. Understanding what your potential customers want, what is important to them, and what they are trying to accomplish by purchasing your products is the first step in delivering customer lifetime value.

Clearly define and communicate your value proposition

With numerous similar products available on the market, customers are subjective in their choices. This is where your value proposition can stand out and differentiate your business from the competition. Identify what value your products or services create, which particular benefits customers can expect from using them, and make your value proposition as clear as possible in all your communications. 

Research competitors and make your value proposition unique

In a hyper-competitive marketplace, uniqueness is extremely important for any business to grow efficiently. Research your competitors; including startups. Understand how your offering is different and more valuable in the eyes of your target audience. Is it technically superior? How easy it is to use? Is it readily available? 

Segment your customers and adjust your value proposition accordingly

Different customers/customer groups naturally have various perceptions of value. Values could vary based on geography, demographics, season, or certain product characteristics. Instead of trying to deliver the same value proposition to your entire audience, consider breaking it down into individual customer segments. Thus, you are able to adjust your message to each of them.

Set a win-win price that brings value to both your customers and your company

Competing on price alone is generally a poor strategy. Set a price for your products. This makes it clear that customers are getting value while also maximizing your profitability. Satisfied customers that perceive value in your offerings and feel like they’re getting their money’s worth are willing to pay more. Whereas unsatisfied customers who haven’t seen the value are likely to leave even if you offer the lowest price.   

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Frequently asked questions

What is customer value?

Customer value is defined as the perception of what a product or service is worth to a customer against the possible alternatives.

What is a customer value proposition?

A customer value proposition is a statement that outlines why potential customers would benefit from buying a product or using a service. It is the keystone of an effective product marketing strategy. Basically, it’s the total sum of benefits that should convince consumers why a product or service will be of more value to them than similar offerings on the market.

Why is customer value important?

If done right, a customer value proposition can give a business a huge advantage over the competitors. However, very few businesses have effective value propositions. A recent study revealed that 83% of marketers pay little attention to the customer value propositions in their strategies, campaigns, and ads. But, only 17% really understand and embrace what a customer lifetime value proposition is.

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