Consumers will only purchase when they believe the goods or services are worth the price. In business terms, this is what we call customer value.
What is Customer Value?
Customer value measures a product or service’s worth in comparison to the effort put into purchasing it. In other words, it is for customers to decide whether your goods or services are worth the buy.
When doing business, you would not want your consumers to have buyer’s remorse. Buyer’s remorse is the feeling of regret when one purchases an expensive item.
Customer value helps to determine whether the total cost of an item is reasonable to the benefits of the item. If they find the cost outweighing the benefits, it is very likely that the consumer will experience buyer’s remorse.
There is also a possibility for the consumer to turn to your competitors, as their products or services contain higher customer value.
Formula for Customer Value
The basic formula to calculate customer value (CV) is:
CV = Perceived Customer Benefits – Total Customer Cost
Ideally, your CV should be a positive number. It means that the customer benefits outweigh the total cost, making your products or service worth the buy.
However, keep in mind that customer value deals with both intangible (customer benefits) and tangible elements (customer cost).
- Perceived customer benefits: brand reputation, social status, service convenience
- Total customer cost: time investment, emotional stress, physical commitment
Different segments of the target market will have a different customer value. Therefore, it is important to analyse each value to identify aspects for improvement.
READ MORE: B2B Lead Generation Facts & Tactics
Customer Value Proposition
Identified your customer value? It is time to appeal to the customers on why your products are worth the purchase.
Customer value proposition (CVP) helps to communicate the unique benefits of your products or services to the customers. Hence, it is crucial for the business to present what customers need and want instead of the features of the product.
For a marketing campaign to succeed, it is important to have a comprehensive customer value proposition strategy.
Your customer value proposition strategy should be able to answer: “why should we do business with you?”
Elements of B2B Customer Value Proposition
There are five categories into defining and meeting customers’ needs, in which it is arranged in the form of a pyramid. The further up you can get, the better your CVP strategy will be.
The following elements are listed from the lowest to the highest layers of the pyramid.
- Consists of basic aspects of customer value propositions. This includes meeting specifications, regular compliance, reasonable pricing as well as ethical practices.
- Meeting functional needs of the customers. You can achieve this element by producing and innovating good quality products or reducing costs.
Ease of doing business
- This element is how you run your business to the customers. It is very likely for the customer value proposition to increase if your sales process runs smoothly.
- When planning a customer value proposition strategy, this is where most people stop at.
- Tackling your customer’s individual value can help to increase your customer value.
- You can do this by appealing to the buyer’s personal and career goals, such as network expansion, growth and development opportunities and so on.
- You can also increase your customer value by inspiring people through your visions, hope as well as social responsibility.
How to Improve Customer Value Proposition Strategy
Let us now discover several steps in improving your customer value proposition strategy.
1. Understanding The Target Audience
Firstly, it is essential to understand the needs and wants of your target customer. Your customer value proposition is based on your customers’ expectations and motivations.
As mentioned before, every target market has different customer values. Therefore, it is important for you to have a customised strategy for every target market.
2. Defining the Problem
In order to provide solutions to your customers, it is important to have a great understanding of the product or services you are offering.
This is so that your customers perceive you as a solution provider rather than just a seller. This can help in building a long-lasting relationship between your business and customers.
3. Consider Solutions in the Eyes of Customer
A continuation from the previous step, try to provide solutions according to the eyes of your customers. Understanding and acknowledging your customers’ worries is essential when showcasing products or services that can address pain points.
Other than that, you can also build a better CVP if you know the customer’s pain points.
4. Analyse Your Competitors
It is also important to analyse your competitors’ CVP, especially businesses with a similar product and service with yours.
As aforementioned, consumers have the choice to choose a company with a better customer value. This is to avoid buyer’s remorse after investing in the product or service.
Therefore, it is important for your CVP to be as unique as possible. You should be able to define why your company is a better choice for your customers.
5. Draft Value Proposition
It is now time to draft your CVP. To start, try using a template to write down your ideas into a clear, concise sentence.
Here are some simple key elements to follow when drafting your CVP:
- Products or Services
- Target Market
- Customer’s Goals
- Solution 1
- Solution 2
This is how your draft will look in a sentence:
“Our products or services can help the target market who wants to achieve customer’s goals, by solution 1 and solution 2.”
A reminder to fill in your blanks according to the key elements mentioned.
During the drafting process, keep your company or brand identity in mind. Your CVP should be consistent with the image of the company, as it will help to solidify your brand.
Other than that, do not worry about writing the perfect CVP at your first try. The drafting process should be an ongoing process, so keep drafting until you perfect your CVP.
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