Value is an essential component of a customer's purchase decision. It's not enough to just have the right product; you also need to deliver value at each stage of the customer relationship.
You may even be able to charge a premium if your offering provides that much-needed extra something.
In this post, we'll discuss how you can identify and measure value and then use it to improve your market offerings and sales opportunities, both now and in the future.
Definition of Value
When we talk about value, we're not talking about the price of something. Value is subjective; it's different for every person and every situation.
Value is not the same for different people at different times or in different places, or even at the same time and place but with a higher or lower price.
For example, if you were to ask me how much I think one of those $100 bills should be worth to you (and I'm assuming that it's a genuine bill), my answer would depend on who else was in your group, whether we were sitting on a mountain top or in an aeroplane over Manhattan or in some other location altogether.
Value is subjective. It's a personal judgment about the worth of something to you, not to someone else. It's your own decision about what you think something is worth based on all the factors that affect it—not just price.
Building Customer Value Models
There are two main ways to build a customer value model. The first is to choose a product or service that you already offer and then estimate the value of each element in the customer's journey.
This can be done through interviews, surveys, or focus groups with customers who have chosen to buy from you in the past.
The second way is to build your own customer journey map and then identify all of the elements that make up that journey—including how many times they purchase from you during this period, what costs they incur as part of their decision-making process and where exactly those costs come from (for example advertising/marketing costs), etc.
Once you have identified these elements, it will be easier for them to enter them into their own models using simple tools such as Excel spreadsheets or Google Sheets spreadsheet applications.
Generate a comprehensive list of value elements
The value elements are the key components of your product or service that will appeal to your customers.
The value elements of your product or service include:
- The way in which your product or service improves the lives of your customers
- The time it saves your customers
- The money your customers save
- The peace of mind it provides your customers
- The emotional satisfaction it creates for your customer.
- How easy it is to use
- The impact it has on their lives
- How much it costs them
- How long do they have to wait before they receive the benefit of using it
Taking a look at all of these value elements is one way to ensure that you are meeting the needs of your target audience.
For example: if you're selling a car, it might be fuel efficiency, engine performance and reliability.
These are all things that people will notice when they are looking at different models of cars, so they can easily be identified as part of your marketing strategy.
Once you have identified your value elements, you can use them to help build your marketing strategy.
You will be able to highlight these key features in your advertising and promotions so that customers know that they are getting what they want from the product or service.
Building Customer Value Models
Customer value models are the heart and soul of marketing, especially B2B marketing.
They're a way to understand what your customers value, which in turn lets you understand how to create and deliver products and services that will keep them coming back for more.
But building a customer value model isn't easy—you need to know who you're talking about, what they care about and how much they care about it.
A customer value model (CVM) is a quantitative assessment of the monetary worth, or potential worth, of a company's customers of what that company does for those customers.
It's only valuable when it's built on solid research backed by data: doing this will allow you to build realistic estimates that account for all aspects of your customer's experience with your product or service.
Gathering The Data
There are many ways to gather data, but it all starts with understanding your audience and what they value.
You can use surveys, focus groups and interviews to understand what your customers want before you spend time collecting the data.
You can also use data from your website, CRM or e-commerce platform to see what information you have about your customers. This will help you understand how they use your product or service and what value it brings them.
You can also look at other sources of information that may be relevant or useful.
For example, if you're running a retail store, keep track of how often people come in and how long they stay so that you can better understand their purchasing habits.
Once you have collected the available data on your target audience, it's important to analyse it carefully so that you know how best to use this information for marketing purposes.
You must also keep in mind that the data you collect will only be as good as the sample size. You need to make sure that you have enough information available so that your analysis is representative of your target audience.
Validate the model and understand variance in the estimates
In order to validate the model and understand variance in the estimates, you will need to use a sample of customers.
This will allow you to test your model and see whether it works well in the real world. You may need to tweak your model slightly depending on the results of your validation, but this is a good way to ensure that your marketing campaigns are as effective as possible.
You should also understand the variance in the estimates. This will allow you to see how accurate your model is, and whether it needs any improvements.
You may need to tweak your model slightly depending on the results of your validation, but this is a good way to ensure that your marketing campaigns are as effective as possible.
Adopt Value-based Pricing
Value-based selling is a process that focuses on creating value for customers before selling to them.
It's an important concept because it allows you to create sales tools that are useful and relevant for your audience rather than simply focusing on the benefits of your products and services.
Value-based pricing can be the difference between closing a deal and losing the sale.
It's important to let your customers know what their money will get them so they can make a more informed decision about which product or service is right for them.
This includes everything from creating contracts that maximize value to developing marketing materials that highlight key features and benefits of your products or services.
Value-based pricing can help you create a better customer experience, which will ultimately lead to more sales and repeat business. Not only that, but it's also one of the most effective ways to differentiate yourself from your competitors.
Putting an Understanding of Value to Use
So, now that you understand what customers value, the next step is to put this knowledge to good use. You can do this by focusing on delivering value to your customers.
If we return to our original definition of value: "The difference between what someone receives and what they pay for ." It's important to note that not all value comes in the form of price.
Customers are often willing to pay more for an experience than they would if they were just buying a product or service outright with no additional perks attached. Think about it like this:
You walk into your favourite restaurant and order a bowl of soup and some breadsticks—your total bill comes out at $12.
Now imagine instead if you went out with 3 friends one night and had dinner at another restaurant where you ordered exactly the same thing but additionally got appetizers included as well as unlimited refills on soda or water—your total bill ended up being exactly $12; however, the customer service was poor, and you spent more time waiting for the food before you were served.
So even though both restaurants' meals cost exactly $12, one offers significantly more value for its price point than does the other—convenience—and this example clearly illustrates how understanding customer needs can help you deliver better experiences overall!
Managing Market Offerings
In order to better understand your customers, you have to look at the way they value your offerings.
This is not always an easy task, but with a little bit of creative thinking and thorough analysis, it can be done.
There are three parts to this process: understanding the customer's value model, understanding the competition's value model, and understanding the market's value model.
Once you understand all three models for your product or service offering, use them as guides for determining how to make changes or improvements in order to create more value for your customers.
- Understand Your Customer's Value Model
The first thing that needs to be understood is how customers see their own values when using your product/service offering (or when considering buying it).
The best way to do this is through direct conversations with current or potential users on what they think are important aspects of their experience while using it.
This can take several forms; surveys are one method, but many companies conduct focus groups with individuals from different demographics so that people from different walks of life can provide input into what works well about their experiences as well as what could use improvement.
This is a great way to get a feel for what customers think about their experience with your product and how they feel it compares with their expectations prior to using it.
The goal here is to find out if there are any gaps between what people think they want and what they actually need once they start using your product or service; this can help you make improvements that will increase customer satisfaction.
You can also ask customers to fill out a questionnaire that asks them questions about their experience with your product or service.
This is a great way to get feedback from customers who may not be as comfortable sharing their thoughts in an unstructured conversation or interview.
You can even send out an online survey that allows people to respond anonymously if you're concerned about how they might feel if they know their responses are being tracked.
- Understanding the competition's value model
It is another way to help you create a value model of your own.
You can look at the prices of similar products and services and see if there are any trends in pricing. If you find that your competitors charge more for their product or service, ask yourself why this is the case.
If they're providing something additional to justify charging more money, then it may be worth incorporating those features into your own business plan.
If you find that your competition is charging less than you, ask yourself why this is the case.
If they're providing a lower-quality product or service, then it may be worth incorporating some additional features into your own business plan to help justify charging more money.
If you find that your competitors are charging the same amount as you, ask yourself how their business model differs from yours.
If their pricing seems reasonable, then it may be worth incorporating some additional features into your own plan to make it more appealing to customers.
- Understanding the market's value model
It is the first step in determining your own pricing model.
You want to make sure that you're charging enough money for your product or service that it will be profitable, but not so much that customers are turned off by the cost.
The key is to find a balance between what customers value and what they're willing to pay for it.
Guiding the Development of New or Improved Products and Services
Many companies find it difficult to develop new products and services that will appeal to customers. The challenge is often in the translation of consumer needs into something concrete that can be turned into a product or service.
In this case, it's important to have a clear idea of what your customers value and how they use their products or services.
For example, if you're selling plumbing supplies, then you might want to focus on quality rather than price because people don't mind paying more for higher-quality items when they know they'll last longer.
- Understand the value of what customers want
- Understand the value that customers are willing to pay for
- Understand that this is not an exact science, and don't expect to nail it every time
Being able to predict exactly what customers value and how much they are willing to pay for it is not easy—especially when your product or service is unique.
So, don't beat yourself up if you get something wrong. Instead, try again with different information and see if that changes your results.
If no one knew about your company's offering, there wouldn't be any reason for them to purchase from you at all!
But how do you go about gaining new customers? How does one go about actually getting people interested in what you have to offer? Here are some tips for gaining new leads:
- Make sure that the value proposition (i.e., what makes a customer want to buy from you) is clearly stated on all social media platforms and web pages related to your business—you don't want anyone else stealing those potential sales!
- Conduct market research on competitors' pricing structures so that theirs aren't better than yours
- Create a social media marketing campaign that highlights the benefits of your products/services over those of competitors
- Make sure to have a strong call-to-action button that allows users to easily purchase from you.
- Make sure that your prices are competitive.
- Finally, make sure that your website is designed in such a way that new visitors can easily find what they're looking for
Sustaining Customer Relationships
Sustaining customer relationships is the key to long-term success. After all, you can't build a brand without a long-term strategy.
If customers love your product or service, they're more likely to buy again and refer others—that's what we call loyalty.
And loyal customers are the best kind of clients; they'll keep coming back time and time again, even if there are cheaper alternatives available.
The best way to build loyalty is by providing your customers with an exceptional customer service experience.
Take the time to get to know them and learn what they expect from your brand.
Then, make sure that you meet those expectations whenever possible—and go beyond if you can.
If your product or service isn't perfect, don't be afraid to admit it.
Your customers will appreciate your honesty, and it can actually help build trust as well.
Be sure to resolve any issues quickly, offer a refund if necessary, and learn from the experience so that you don't make the same mistakes again.
Delivering Superior Value and Getting an Equitable Return
According to Steve Jobs: "some people say to give the customers what they want, but that's not my approach.
Our job is to figure out what they're going to want before they do." If you understand your customers' values, you can deliver superior value and get an equitable return for your work.
There are two kinds of people in the world: those who create value by offering goods or services for money and those who consume it by paying for those goods or services.
As an entrepreneur or a business, you have to be able to see both sides—the side that creates value and the side that consumes it—and appeal to both in order to succeed in business.
You should spend most of your time focusing on creating value because creating something valuable will help grow your business faster than anything else you could do (and consumers want things that are useful).
For example: If someone asks me if I would like a cupcake right now (I am not hungry), I would say yes because I know how tasty cupcakes are!
But if someone asks me if I would like a piece of paper with some random words written on it right now (I already have enough paper), then I might hesitate before saying yes since this particular piece of paper doesn't seem very useful compared with other options available at this moment in time.
The lesson to be learned from this is that there are many ways to deliver value, but it's important to understand what your customer values and how much they value it.
By doing so, you can develop strategies for delivering more of whatever they care about most while also providing them with an equitable return on investment in their relationship with your brand or organization.
If you can do this, you will have a valuable customer that is more likely to recommend your brand and repurchase from you in the future.
Subscribe to our email newsletter and unlock access to members-only content and exclusive updates.