In order to stay in business with you for the long term, the customer has to constantly realize the value of your product. It is the job of a customer success manager to constantly demonstrate how your product is adding business value to the customer. Hence, customer value creation is an integral part of a business strategy.
Customers often pay for the perceived value of the product. The benefits they obtain from the product must always outweigh the cost they are paying for it. This keeps them satisfied and bolsters customer retention. The whole purpose behind implementing the customer success strategy is to help customers succeed in achieving their goals. And their goals cannot be measured until they articulate them in terms of value. So, let’s understand this concept in detail and see how we can increase the value a customer receives.
What is Customer Value Creation?
You must have heard of the common term “value for money” that implies the value a customer obtains for the money they pay for it. This value is an abstract term for any benefit they are availing from your product or service. It can be a solution to their problem, a convenience, or simply a feature that enhances the quality of their daily lives. It is the worth, importance, or usefulness of the product for which the customer has bought it in the first place.
When it comes to the value one can obtain from common products like a car, TV, iPod, etc., it is pretty straightforward. But it gets more complex when we try to understand the value from the B2B products. Customers have various needs and different paint points for which they buy a business product.
Hence, your product has to fulfill their needs in their own context and more importantly, they need to see that happening and realize it. By realize I mean, they need to be able to measure the outcomes and realize the tangible benefits from it. Hence, even though your product has a set criteria for resolving an issue, you need to show this in their terms. You need to create a customer value proposition for them to realize how your product is helping them grow.
What are the key benefits of customer value creation?
Few of the important benefits of customer value management include:
Trust and loyalty
When customers find continuous value in your product, they tend to become more loyal to your brand. Their trust develops slowly as they realize the benefits behind the cost they are paying for your product.
Conducting business with strong ethics lets you develop deeper bonds with your customers. When your product becomes an integral part of their business, they become dependent on you for the value they are getting from your product. This increases the customer lifetime value that has a greater impact on your business valuation.
Customers who are already satisfied with your primary product tend to buy more products from your company. Through value creation, you are able to win their confidence in the solutions you provide. This removes any barrier they have towards trying out your new products as well. Hence, upsells and cross-sells become more feasible for you to offer them.
How to measure customer value?
To measure the customer perceived value, you need to know the total customer benefits and total customer costs. Then you must be able to equate both to find the overall value.
Total benefits of the customer includes:
- Personnel benefit: How easy it is for them to conduct business with you? Does your relationship management team or the customer success team have the ability to empathize and have a deep understanding of their pain points and challenges?
- Product benefit: The ability of your product to provide a solution.
- Service benefit: How great a customer experience can you offer them while resolving their issues?
- Image benefit: What is the image your brand carries in your niche? Does owning your product enhance their brand reputation?
The cost that a customer pays for your product goes beyond the monetary costs. It includes:
- Monetary cost: The overall price of your product and subscription.
- Psychic cost: Time and effort needed for understanding how your product works.
- Energy cost: The stress induced by purchasing, onboarding and using your product.
- Time cost: Time needed to fully adopt your product for a seamless experience.
When you take into account all of the above benefits and costs, then you can finally calculate the customer value through below formulae.
Customer value = (Total customer benefits) – (Total customer costs)
How to create or increase customer value?
Consumer value creation needs many factors under consideration. You need to examine all your touchpoints with customers and see how you can optimize them. Below are few of the areas to look into for value creation.
Optimize your customer experience
Analyze all the touchpoints you are making with customers during their entire customer journey. It starts from the first time they hear about you to the final point when they renew their contract. Replay every single interaction between the customer and your brand and you would find gaps that you can fill to provide greater customer experience.
Focus on quality
Lowering down the price may not be always feasible to give benefit to the customers. Instead you can focus on providing better quality of the product when compared to your competitors. This quality can be in terms of better performance, enhanced features and easier adoption of the product.
Gather customer feedback and understand them more deeply
The best source of knowing what brings value to the customers are customers themselves. Conduct timely surveys with them to understand what matters most to them. Customers often don’t mind paying a higher price for a greater customer experience. In fact, to be more precise, they are willing to pay 16% more for a better customer experience. Hence, instead of guessing what is most valuable to them, ask them directly and work towards that.
Identify and leverage the customer segments
Identify what is most valuable for the customers from different segments in your customer base. To mention an example of customer value proposition, one customer segment may find a particular feature of your product more attractive than your competitors. Knowing this would allow you to leverage that feature in various business strategies like customer marketing or creating value propositions.
Focus on your most valuable customers
Allocating more time and resources to the customer segment that is most profitable is also a good strategy towards customer value creation. Give as much personalized customer experience to these customers so that they feel privileged to do business with you. For example, your service team can know their details beforehand when they call for any technical help. This would save their time from identifying themselves through their credentials and would boost your relationship with them.
For creating value for your customers, you must have a thorough understanding of your customer’s business. You must have deep insights as to why they want to buy your product. Matching their expectations with your product offerings then becomes a piece of cake.
Most of the new ambitious companies are so possessed with their own offerings that they fail to connect with their customers. They tend to overemphasize the product features and capabilities without showcasing how it solves the customer’s challenges.
Honestly, customers don’t care how great your product is. They only want someone to understand their pain points and challenges. And if you are able to connect the dots between what they want and what you can offer, the customer value creation happens automatically.