Is your company having a hard time understanding your customers? Are you unsure of their demands and wants?
Don’t worry; your business isn’t the only one; several small businesses miss out on sales and loyal customers because they don’t understand who they’re targetting.
My name is AJ! I recently sold my business for multiple seven figures. Today, I focus on helping other entrepreneurs like YOU through Small Business Bonfire (SBB).
After running a business for several years, I’ve learned a lot, one lesson being the importance of understanding your consumers and prioritizing customer value.
Keep reading if you’re ready to meet your customer’s needs and improve retention rates!
Key Takeaways
- Customer value is how much a product is worth in a customer's mind.
- Customer value considers psychological, monetary, social, and functional values.
- Creating surveys and gathering feedback helps determine customer value.
Related Reading: Best Small Business CRM
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What is Customer Value?
Customer value is how much a company’s product or service is worth to a specific customer.
Further, customer value is a way to measure all the costs and benefits customers associate with a product or service.
Some examples of details that factor into the customer value equation include the following:
- Price
- Quality
- What the product or service can do for that specific person
In addition to the factors I just mentioned, customers also have time, energy, emotional, and monetary costs they consider when evaluating the significance of a future purchase.
Why is Customer Value Important?
Creating customer value is necessary because it helps businesses develop long-term relationships with existing customers.
A positive customer value also increases the likelihood of repeat business and loyal customers.
Meeting each customer’s needs and expectations is critical to learning how they change over time, as this helps you build personalized selling and marketing experiences.
When you understand how customers feel about your products or services, you can create customer loyalty and increase overall lifetime value.
Why is creating a personalized customer experience critical? Here are a few reasons:
- Customers spend more money when companies offer their preferred option to reach customer service.
- Excellent customer satisfaction leads to growth in every business process
- Increasing customer value improves customer retention
- Excellent customer service leads to more cross-selling opportunities
How to Measure Customer Value
There are four steps to measuring customer value.
Below, I’ll break down each step and show you how simple acquiring a higher customer value is!
Step 1: Create a Customer Survey
The first step in measuring your products or services’ perceived value is creating a customer survey.
Gathering customer feedback helps you and your team understand what aspects of your products or services resonate with your target audience.
Also, these questions highlight improvement areas, ensuring each customer experience is excellent.
Most companies gather customer feedback by sending surveys via email or SMS text.
To get started, create a small set of questions that will help your team gauge the value you’re offering to existing and new customers.
Step 2: Determine Customer Benefits
After you’ve collected customer feedback, the next step is to determine the customer benefits that stand out from the data.
By creating a list of customer benefits, you can identify what’s working well and what areas need improvement.
Gathering data will help you focus your efforts on tailored experiences for each segment of customers you interact with.
Further, this step encourages you to track and collect all the benefits of your products or services (convenience, quality, brand reputation, etc.).
Step 3: Determine Customer Costs
Determining the total customer costs is essential to figuring out customer value.
Typically, businesses ask customers to rate their product or service on a scale of one to five or one to ten.
Taking the average numerical rating allows you to determine whether or not your products or services deliver higher customer value.
Tangible Costs
Tangible costs associated with buying a product or service are straightforward and easily quantifiable.
They encompass the explicit costs that a customer incurs during the purchasing process.
The most apparent tangible cost is the price of the product or service.
But, it can also include other financial aspects such as the following:
- Shipping fees
- Installation charges
- Taxes
- Additional costs for accessories or supplementary services
Intangible Costs
Intangible costs refer to more abstract expenses associated with the purchasing process.
For example, intangible costs can be the time it takes a customer to research a product or service and its associated delivery fees and taxes.
Additionally, intangible costs encompass stress levels and emotional states during the purchasing journey.
Step 4: Determine if the Benefits Outweigh the Costs
Lastly, you must determine if the benefits of your product or service outweigh the customer costs.
Remember, the benefits include the convenience of buying something, product quality, and your brand’s reputation.
Regarding the costs, these include things like:
- Overall price (tangible and intangible)
- Time invested
- Emotional costs (stress, anxiety, etc.)
It takes a lot of time to track consumer value accurately.
However, tracking these data points ensures you cater to customer values and deliver a personalized shopping experience.
Customer Value Formula
Calculating the customer value is more straightforward than many people assume. To find this value, use the following formula:
Total Customer Benefits – Total Customer Costs = Customer Value
When adding the benefits, consider the following metrics:
- Social value
- Personal value
- Psychological value
- Product or service value
- Service experience value
Benefits and costs tend to be qualitative, so assigning a metric to the various benefits and costs is essential to see if specific metrics outweigh the costs.
Tips to Increase Customer Value
What are some easy ways your company can improve its customer value??
Let’s look at nine ways to increase customer value so your team can enjoy more sales!
Personalize Your Customer Support
First and foremost, you MUST personalize customer support interactions in any way possible.
Gathering customer data is the best way to start customizing customer support interactions.
For example, some of the information you can use to personalize customer support interactions include the following:
- Transaction history with your company
- Previous support requests
- Recent web browsing activity
- Recent shopping cart activity
- Basic information such as demographics, interests, etc.
When your team gathers several pieces of customer data, it ensures everything runs smoothly, and customers aren’t forced to repeat themselves.
Additionally, personalized customer support helps customers feel like your team truly understands them!
Create a Sense of Customer Community
Creating a sense of community among your customers is also an effective way to increase customer value.
Using various social media platforms such as Facebook, Twitter, and Instagram allows you to create tailored content for existing and new customers.
These messages should reflect your company’s values, mission statement, and products or services.
If done correctly, this helps customers feel like they belong to a specific community and makes them more likely to buy from your company again.
Further, you can create a community forum on your website to build a sense of community, including product support, FAQs, and feedback.
Reward Customer Loyalty
Rewarding customer loyalty is always a good idea to increase your customer value.
Reward programs can come in various shapes and sizes, depending on the type of product or service you offer.
For instance, if you run an e-commerce store, you can offer customers exclusive discounts and free products for each purchase.
Similarly, if you offer a service-based product such as software development, you can reward customers with free upgrades and additional services for loyalty.
Whatever format your rewards take, it’s essential to thank loyal customers for their support and make them feel valued.
Surprise and Delight Your Customers
Surprising customers is an effective way to increase customer value because who doesn’t love an unexpected surprise from your favorite brand?
It’s also a great excuse to show your best side!
You can surprise your customers by sending them unexpected gifts, which can be as simple as a handwritten thank-you note or a coupon code for their next purchase.
Delighting customers involves going above and beyond their expectations.
Ensure Customers Feel Heard
Another easy way to improve customer value is to ensure customers feel heard.
For example, when a customer sends a support request, ensure they get a response immediately, even if your team is out of the office.
Using automation features on CRM software allows you to respond to customers even when you’re away from the office.
Nothing is worse than a customer being left in the dark when they have a question or concern about a service or product.
Timely customer support responses can be the difference between a loyal customer and a lost sale!
Address Support Issues
When a customer has an issue with your product or service, ensure they get the help they need as soon as possible.
The longer you take to address customer support issues, the more likely customers will move on to another company.
Ensure your team is trained and equipped with the right tools to address customer problems.
Further, ensure your customer support team is easily accessible. For example, some ways your team can offer customer support include the following:
- Via telephone
- Via an FAQ page
- Via email
- Via live chat
- Via automated responses
If customers have issues with customer support, they’re less likely to buy your products or services.
Therefore, handling these issues is critical to success!
Prioritize Customer Success
Customer success is an effective strategy to increase customer value.
Your team should prioritize customer success by helping customers get the most out of your product or service.
For example, you can offer videoconferencing sessions to guide customers through installation or onboarding processes.
Regardless of your tactics, you should always look for ways to improve the customer experience, which is critical to boosting sales.
Create a Bomb Customer Onboarding Program
Creating a comprehensive customer onboarding program is another effective way to increase customer value.
Onboarding programs help customers understand how to use your product or service, as well as the features and benefits of it.
The best onboarding programs provide personalized content that helps customers reach their goals quickly and easily.
Provide Multi-Channel Support
Lastly, you must provide multi-channel support, giving customers numerous ways to connect and solve problems.
Sometimes, customers want to avoid speaking to a customer service rep over the phone.
In these instances, having a live chat or email support option is efficient!
Offering multi-channel support improves customer value because your consumers know and trust they can reach you in whatever way works best for them.
What are the Four Types of Customer Value
The four types of customer value include the following:
- Functional
- Monetary
- Social
- Psychological
Let’s learn what each of these types of customer values brings to the table!
Functional Value
Functional value is determined by the service or product itself.
For example, this value measures whether or not the item meets the customer’s needs and wants.
Basically, functional value determines the usefulness of the products or services and how long they can be sustained.
Monetary Value
Monetary value is the type of value we most commonly think of when we think of customer value.
Monetary value refers to the value of the product or service measured in terms of money or dollars.
For some customers, monetary value is the most important factor. And for others, it’s not.
Determine how monetary value impacts your target audience and base the prices or rates on their demands.
Social Value
Social value emphasizes how a product or service is associated with a particular social group or status.
For instance, luxury watches are naturally associated with wealth and status, bringing owners a sense of social value.
Social value is created by the following things:
- Design
- Branding
- Marketing
Psychological Value
Lastly, psychological value relates to the psychological or emotional benefits a customer enjoys after having a product or service.
These factors include the following things:
- A product’s aesthetics
- Sensory appeal
- Self-expression
- The emotional response it receives from a consumer
Typically, customers value psychological value because it satisfies their emotional and self-expressive demands.
Final Thoughts on Customer Value
There’s everything you need to know about customer value!
Not only does improving customer value increase the likelihood that new customers will be loyal, but it also boosts sales in the long run.
What strategies does your company use to boost customer value? Let us know in the comments section!