There are several ways to deliver customer value. For example, it can be by quality, design, or other product attributes. Or, it could be through branding, superior after-sales service, and pricing.
Each customer will have different considerations on these aspects. Some like the brand. Or, they buy for quality. Others just buy it because it’s cheap.
What is customer value?
By definition, customer value is the difference between the perceived benefits and costs incurred by the customer. Therefore, the higher the difference between the two, the higher the value given by a product.
The customer perceived value is completely uncontrollable by the company because it often involves customer perception. Only customers know how much a product is worth to them. Companies can only strive to provide a unique selling proposition. The marketing team uses it to influence how consumers perceive the company’s products.
How high the perceived value is, only the consumer knows. If customers believe a product can satisfy their wants and needs, it’s worth it. Therefore, they view the product as providing better value than other available alternatives. As a result, they will react positively to the marketing message. Then, they also respond by repurchasing it later or recommending it to their friends or family.
Customer value is dynamic.
Customer value is dynamic; it can change from time to time. It can change during using the product. For example, a customer may find a product not performing as advertised. It represents a psychic cost and irritates them.
Finally, customers are reluctant to repurchase the product in the future. In fact, they may be reluctant to deal with the same company and not buy other products. Or they give negative reviews on social media.
Values can also change due to market dynamics such as competition. Rational consumers will compare the benefits and costs among products available in the market before deciding to buy. Benefits and costs may change as the company’s competitive strategy in the market changes.
Take price as a simple example. Say your company caters to price-conscious consumers. For example, your company offers lower prices than your competitors. As a result, customers will see your company as offering better value than your competitors.
But, at some point, your competitors may innovate. Or they adopt an aggressive competitive strategy. It makes their product cheaper than yours. Finally, the value proposition you provide is no longer valuable compared to your competitors.
How to deliver customer value?
There are several ways to deliver customer value. And, broadly speaking, increasing value requires companies to increase perceived benefits or lower costs to consumers. Of course, the ideal is to combine the two.
Prices represent monetary costs. When buying, customers have to spend dollars to get the product. Thus, offering products at lower prices is one way to deliver customer value. They have to spend less money to buy.
Such a strategy is usually appropriate when the product on the market is standard. The players offer benefits similar to each other. Thus, price becomes a way to provide value and attract customer purchases.
But, offering lower prices is not always successful. Some consumers actually prefer when prices go up for some reason.
Take the case of luxury goods. Some customers perceive price, not as a cost. But, they perceive it as a benefit. So, when the price goes up, they are more and more interested in it because it gives them a higher image and prestige. In economics, we call them Giffen goods.
Customers buy for reasons such as features, durability, reliability, model, and product design. They think these elements can satisfy them. Or, in other words, such elements provide benefits to them.
For example, customers who like to take photos and capture everyday moments will buy a smartphone with a high-resolution camera feature. It gives them more benefits.
Providing service is another way to provide deliver customer value. For example, people decide to buy a product because they get free shipping. Or, the company provides them with an installation service, making it easier for them to place the product in their homes.
Consistently superior customer service doesn’t just increase sales. But, it also encourages customer loyalty. Customers are also more likely to repurchase the product and recommend it to friends and family.
How staff handles customers contributes to customer benefits. For example, their communication skills and expertise influence customer perceptions. Likewise, their speed, thoroughness, courtesy, and friendliness provide value for customers.
Sales staff assist customers in making the right choice. For example, staff are good listeners and explain how products can help in satisfying their needs.
It is related to how brand name and image affect customer perception. Consumers are often attracted to certain brands because they are considered, for example, innovative or quality. Or, buying it could make them self-actualize. Finally, it creates confidence in consumers, for example, when wearing it in public places. So, buying it is the right decision.
For example, a company maintains its consistency in providing fresh food. It contributes to its strong relationship with consumers. For consumers, buying products from the company is the right choice. They will always get fresh food and are unlikely to be disappointed.
It refers to the time invested by the customer through the buying process. Costs also include time spent learning and using the product. Time is a cost because, as the saying goes, time is money.
For example, consumers have to spend time choosing the right kitchen cabinets. They compare prices, quality, and specifications for several available alternatives.
Then, having decided, they may have to go to the vendor’s shop. Finally, after bringing the product home, they should take some time to place it at home.
The longer the time involved, the higher the cost. But, in fact, customers can use it for more productive purposes.
It refers to the energy spent by the customer to get the product. For example, they may have to take a trip to the store to buy. The farther the store is from where they live, the more energy they expend.
Hence, one way to provide value to customers is to improve product accessibility. It requires proper planning and selection of distribution channels. Ideally, the product should be available in a location close to the consumer.
Moving things from one location to another also consumes energy. Thus, weight may be a consideration when consumers choose a product.
Psychic costs are related to feeling annoyed or happy during the process of buying and using the product. For example, taking long trips to the store or taking a long time to learn how to use it properly can cause stress to the customer. Hence, it does more than just incur energy and time costs but also affects their psychology.
Or, in other cases, customers buy because they see an ad. But, after buying, it doesn’t live up to what is being promoted.
Thus, one way to reduce psychic costs is to make the product easy to access, use, and perform as the company promises.
- Customer Value: Definition, Importance, Examples
- Creating Value – Why Does It Matter?
- 6 Benefits of Creating Value for Customers
- How Do Companies Create Value Along the Value Chain?
- Value Creation: Definition, Shareholder Value, Customer Value