Before customers make a purchase, they need to believe that the product or service is worth its cost.
The concept of customer satisfaction is a driving force for sales and an integral part of modern business operations. Additionally, this phenomenon is commonly referred to as customer value.
What is Customer Value?
Firstly, understanding customer value is crucial for any business in Malaysia. It helps to minimise the regret that customers often experience after buying an item.
Customer value measures the worth of your product or service against consumers’ time, money, and effort to purchase it. For that reason, if customers find these rewards inadequate compared to the cost incurred, buyer’s remorse may kick in and cause them to look elsewhere.
Undoubtedly, buyer’s remorse will drive customers directly to your competitors, who might offer better value for money.
The formula for Customer Value
In marketing, almost all value has a metric system to quantify it for analysis purposes. Similarly, there is a metric to measure customer value (CV).
Generally, your CV is calculated by subtracting ‘total cost’ from ‘perceived customer benefits’. Additionally, it should ideally be a positive figure, as it indicates that your products or services are worth the investment.
Moreover, it is essential to consider the roles intangible (customer benefits) and tangible elements (customer cost) play in customer value.
Some perceived customer benefits include brand reputation, social status, and service convenience. On the other hand, customer costs cover time investment, emotional stress and physical commitment.
Customer value varies by target market group, so companies must analyse each value to identify areas for improvement.
Customer Value Proposition
Did you know that a customer value proposition (CVP) is key to communicating the unique benefits of your products and services?
In other words, it helps customers understand why they should choose your business over competitors. Crafting an effective CVP strategy requires answering one fundamental question:
“Why should customers choose you?”
Answering this question can ensure a loyal customer base and encourage repeat visits from new or existing customers!
Elements of B2B Customer Value Proposition
There are five categories, represented by a pyramid, many marketers use to define and meet customers’ needs. The higher up you can get on this pyramid, the better your CVP strategy will be.
The following elements are listed in order of their position on the pyramid, from lowest to highest.
- Table stakes
This refers to the basic aspects of a customer value proposition, including meeting specifications, regular compliance with regulations, and ethical pricing and practices.
- Functional value
Meeting the functional needs of customers requires producing and innovating good quality products or reducing costs.
- Ease of doing business
This element focuses on the customer experience you provide to your clientele.
The customer value proposition will likely increase if your sales process runs smoothly. The most common mistake made by businesses in developing their customer value proposition strategy is to stop at this point.
- Individual value
Appealing to the individual value of your customers can help increase overall customer value.
You can cater to a buyer’s personal and career goals by discussing network expansion, growth and development opportunities and more. Customers will indubitably recognise your efforts in furthering their best interests.
- Inspirational value
For example, an SME in Malaysia selling bamboo-made socks and undergarments can emphasise its sustainable business practices. Besides, its CVP must include visions of how the customers can be part of the sustainable consumption movement.
How to Improve Customer Value Proposition Strategy
Now, let’s look at some steps you can explore to fortify your customer value proposition strategy.
1. Understanding The Target Audience
To best serve your customers, it is essential to identify their wants and needs.
Crafting a customer value proposition based on these expectations will give you an edge in each market segment. This will ensure that your marketing strategies are customised for long-term success.
2. Defining the Problem
Providing exemplary customer service first starts with a deep understanding of your product and services.
In that case, customers will perceive your business as one that offers solutions while creating meaningful relationships over time. This is a foolproof way to set your business apart from your competitors.
3. Consider Solutions in the Eyes of Customer
Once you have identified your customers’ issues, it’s time to create solutions to address their needs.
Put yourself in place of your customers and think of ways to improve the customer value proposition by targeting these pain points directly. Developing a product or service tailored to resolve customers’ difficulties is an effective way to gain their satisfaction and loyalty.
4. Analyse Your Competitors
In addition, it is pivotal to analyse the competition’s customer value proposition (CVP) carefully.
Your CVP should stand out from competitors that provide similar products or services to avoid buyer’s remorse after investing in you. Therefore, aim high when defining why your company offers a better value than any other!
5. Draft Value Proposition
Take the stress out of crafting your customer value proposition (CVP) with a simple, effective template!
All you need to do is incorporate information about your products or services, target markets, customers’ goals and constructive solutions. Your draft should look like this:
“Our [products or services] can help [the target market] who wants to achieve [customer’s goals], by [solution 1] and [solution 2].”
You’ll know you’re on the right track when your CVP perfectly reflects your company identity while still showcasing its unique offerings. The drafting process should be an ongoing one, so keep revising until the final product aligns with your brand’s vision.
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