Businesses are diverting their energies to a social cause aligned with the brand or are engaged in developing innovative technologies to drive growth. As a result, the focus is completely off a core business element – customer based brand equity.
If the business under such circumstances is not able to attract or retain customers in order to expand and create a solid brand in the long run, then it really should not come as a surprise to anyone.
The way forward is to invest in an honest evaluation of the core business objectives. This is what drives every business to offer value for customers. Over a period of time, developing customer values can translate into a sustainable investment generation steady ROI for all key business stakeholders.
What is Customer Value?
To put it simply, customer value may be generally defined as the “difference between the perceived benefits and the costs incurred to obtain the benefits of a product.”
Having said that, this barely scratches the core essence of the concept of customer value. There is more to customer perceived value than simply calculating the value against the amount of money spent. It is important to take into consideration the amount of time taken to complete the purchase and if the act involved any interactions and engagement with the customer service team.
These very simple principles have undergone a complete overhaul putting customer value as a subset of either direct or indirect social or environmental influences. A key driver of this transformation is a result of the market’s movement towards everything digital.
Today, value for customers is a complex subject that transcends and constitutes multiple hierarchies. The levels define and determine the importance of the services received by the customer and compare them to what was expected from the brand at the point of purchase.
Moreover, the foundation of the relationship between customer and business lies in gaining trust and building credibility. Creating value for customers is a significant part of this process. This is reinforced not at the product or service being functional but also ensuring that it hits the appropriate quality standards. Additionally, triggering positive emotions like confidence, reliability with an injection of ethics is absolutely fundamental when it is a question of generating
How To Measure Customer Value?
Every business must invest significant time and effort in measuring value for customers. It generates in depth insights that in turn enables the enterprise to assess its current health and how it is expected to perform in the foreseeable future.
The concept of customer value creation works both ways – for the business enterprises as well as the customer. The existence of imbalance in any form in the customer value equation may lead to the business operating at a loss. What is implies that the business is not running at its optimum and therefore is not able to service customers as per their expectations.
For any business focused on developing customer based brand equity, the strategy in the long term should be to concentrate on improving margins for their consumers. This can be achieved by calculating the financial, predictable and soft value for customers.
Let’s deep dive further.
Determining the Financial Value:
The business will be able to determine the financial value of customers by mapping the turnover and overall expenses. The expenses, in turn, can be further segmented into marketing and recruitment costs.
Let’s take a look at it in more detail.
Turnover Costs: To calculate the average turnover per customer on an annual basis you need to take into account the revenue generated per customer for a specific product or service for a defined number of years. To estimate the turnover costs, you need to spread that calculation across that many number of years.
Marketing Costs: There is a marketing cost involved in boosting customer satisfaction. This is a direct business expense that comes in the form of coupons, discounts, gifts, etc. that adds to the customer perceived value of the purchase. This helps to enhance the overall customer experience and retain long term loyalty towards the brand.
Recruitment Costs: Any expense that involves attracting new customers into the sales pipeline can be referred to as recruitment costs for the business. By mapping the cost of acquisition per customer from the time of the first touchpoint till the completion of the same helps to estimate the lifetime value of the customer.
Define Predictable Customer Value:
Reports find that acquiring new customers requires 5 times more in terms of marketing investment. Therefore, most enterprises map Customer Lifetime Value as an essential part of determining predictable customer value.
To measure customer perceived value, turnover and expenses are not the only parameters that play a vital role. Therefore, taking into account the customer’s future value addition to the brand is also a core parameter. You can map the estimated lifetime value and convert this into hard figures.
You need to segment your customers with the help of the RMF model into groups depending on their purchase pattern
Take a look at these three values:
- Has the customer made a purchase recently?
- What is the purchase frequency of the customer?
- What is the average monetary value of the customer’s purchase?
In order to calculate the value for customers, the business must identify and then analyse these individual customer segments using the responses from the questions given above.
Here is what you need to look at:
Calculate Soft Customer Value: This is possibly the most important parameter of measuring customer value as soft customer values take into account the client point of view as opposed to only focusing on the idea from a business perspective.
There are two methods of measuring soft customer value.
Customer Satisfaction (NPS): Net Promoter Score or NPS is the ideal method of calculating soft customer value. The simple question to ask here is – Will your customer recommend your brand? The goal of the question is not to deep dive into the ‘will’ but the ‘why’.
Customer Experience: To measure customer experience you need to take into account both the qualitative and quantitative value perceptions. Focus on the possibility of providing additional value to this overall experience through best in class service, attention and care.
What is the Importance of Generating Customer Value for the Business?
The concept of value is a unique perception. It differs from individual to individual. Needless to say, that makes it important for the business to have clarity on customer based brand equity and how it helps generate long term value for the enterprise.
Besides that, the process can be streamlined in the following ways:
- Pinpoint specific segments and groups of customers that the business may invest it
- Identify new target markets and audience groups
- Come up with innovative product and service lines that offer more value for customers
- Revisit pricing structures to generate more value for the less or the same cost
- Find customers who are not contributing to the business revenue
- Plugin monetary leakages
- Isolate unprofitable growth areas
- Reduce unnecessary expenses and investments
You can only align your perceived customer value by uncovering your customer needs and expectations. This helps you to get a solid understanding of the lifetime value of each individual customer and potential growth opportunities for the future.
How Can the Business Generate Value for Customers?
Let’s take a look at some of the innovative ideas that businesses may implement to help generate value for customers.
Go the Digital Way to Increase Convenience: Even with the best products or services, it is quite possible that your customer may face an issue. While there is always the conventional option to contact your business via a phone call or email but where is the progression in that. By integrating new age media tools like a live chat service, you can increase the quotient of value addition by offering an avenue to derive an instant solution to their problems.
Promote Customer Intimacy: Customer intimate strategies are a leading trend today. Implementing these plans helps in elevating business systems, structures and the overall organisational vision. Providing an environment of efficient service to your customers, responding to customer queries, having a defined escalation process that is integrated with your CRM offers a 360 degree value addition to your clients.
Offer Instance Gratification Through Self-Service: Modern day customers are impatient. Therefore, be present where your customers are to engage and interact with them on a regular basis. This can be done using omni-channel platforms including the website and social media handles. Moreover, enable your customers to gratify their concerns and queries by developing a thorough knowledge base. This can include articles, blogs, demos and FAQs about your business, products and services.
Improve Your Brand by Conducting Soliciting Feedback: You may be under the impression that you are providing exceptional value for customers. The true sentiment may be quite the opposite. Therefore, in order to know exactly if your customers actually approve of your value additions via your offerings, you need to solicit feedback from your consumers on a regular basis. Gather honest reviews by striking genuine conversations that will help deepen customer relationships with your brand in the long run.
Evoke the Right Customer Emotions to Drive Value: Investing in digitisation and automation is a smart route to generate perceived customer value for businesses. Ensure that you understand the customer’s emotional journey and help motivate them by triggering the right emotion at the right customer touchpoint.
In the business landscape, it is absolutely a must-do to offer the right value for customers. Remember that the customers are fickle-minded and are ready to jump ship to your competition at the slightest chance you fail to meet their expectations. To stay alive in the game you should do everything in your power to deliver a world-class customer value experience.
For instance, you could explore the PG Programme in Management offered by IMT Ghaziabad in association with upGrad. There are multiple benefits such as alumni status offered by IMT Ghaziabad, industrial case studies and offline base camps with networking that would enhance your knowledge and equip you with useful skills to provide customer value.
A lot depends on how effectively and efficiently you manage their experiences, social impact, empowerment, and feedback. The strategy is to go direct by putting the customer centre stage which can work as an intelligent value lever. Having said that, there are new dimensions in customer based brand equity so make sure that you only focus on the ones that make sense for your specific customer segment. Your reward is that your brand will live long and prosper.
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What are customer value creators?
The entire concept of customer value can be quite ambiguous. That is because what one customer may perceive as the value may not fill in the same expectations for another consumer. The foundation of customer value creator depends on customer value perception. Typically, this comes into play post your customer has had an experience with your competitor and therefore has the basis to compare your brand with that of your rival. If the customer believes that your offerings deliver more in terms of value, then you have successfully done your bit as a value creator.
What is customer value analysis?
Customer value analysis or CVA is a research method that may be deployed to identify customer perceptions of the business in comparison to their immediate industry competition. The process offers a quantitative analysis where you are able to collect evidence through numerical data. This is done taking into account customer opinions on the value additions that the business offers compared to the industry rivals.
What are the types of customer values?
There are four types of customer values. The primary type is functional that generally helps in characterising the brand, product and service qualities. The second type is focused on emotions taking into account customer sentiments that are associated with the brand, product or service. The life changing customer values emphasizes the customers’ way of life being redefined by the brand, product, or service in any way whereas the social impact values map the shift in attention from the customer to the society and role that the brand, product, or service plays in transforming their lives.