Would not it be nice if you owned the only shop selling your product in town? However, unfortunately, for most businesses, when it comes to buying a product or a service, your consumers have plenty of choices. Hence, in order to make your customers interested in your product or a service, your customers need to see value as the key deliverable from your business to get them motivated to purchase.
Now, it does not mean that your product or service needs to be least expensive. Since the price tag, you place on your product or service is only a small part of the value.
Actually, the value of any product or service reflects the importance, usefulness, or the worth of something. When used in business context, a value is worth in monitory terms of the product or service, as well as the social benefits the consumer gets in exchange for the money or price they pay.
According to Peter Druker as it is laid down in his famous book on practices and principles of management Management Challenges for the 21st Century:
The starting point has to be what customers consider value.
To create a way to measure this metric, we need to be clear by what is meant by value. The president of Customer Value Foundation Gautam Mahajan defines customer value as:
The perception of what a product or service is worth to a Customer versus the possible alternatives. Worth means whether the Customer feels s/he got benefits and services over what s/he paid.
How to Solve the Customer Value Equation
At its most basic level, a professor at Northwestern University’s Kellogg School of Management, James Anderson, and a professor at Wake Forest University suggested the following equation to define customer value:
Customer value = Benefits - Costs
Therefore, values and prices are the values and prices of the supplier’s market offerings. Now, the difference between value and prices equals to the customer’s incentive to purchase. Hence, this customer value equation conveys that the consumer’s incentive to purchase a product or service must exceed the incentive to purchase the next best alternative.
To formulate a customer value metric you will need to be able to answer these four questions:
· Which of our existing customers buy repeatedly and how often?
· What do our customers breakout by frequency, volume, and number of products owned?
· What is our customer defection rate?
· What is the ranking your customers by likelihood to buy again?
The answers to these questions may take some digging and maybe some research. It is a worthwhile investment. The answers to these questions provide valuable actionable metrics that enable you to make better decisions about your customer investments.
Customer relationship value is an essential leading indicator. Once you have the data you can create a customer relationship value metric. Start with these three variables:
· The set of all customer interactions between your customers and your company,
· The cost of each of these interactions
· The degree and direction of each interactions impact on moving the relationship forward or backward
How to Define the Fundamental Mission of Marketing
Marketing develops, communicates, and then delivers value to the customers. Therefore creating customer value is the fundamental mission of marketing. It is your marketing department’s job to build and communicate the value element of your offerings and your organization. Value elements are anything that affects the benefits and costs of your products or services.
While a product which is of low cost and good quality represents great value, there are also non-price value elements to consider in the benefits side of the value equation, which include (but are not limited to):
· Customer service and experience
· Subject matter, domain, industry expertise
· Warranties and guarantees
Hence, in other words, marketing plays a very important role in your company’s ability to create customer value. As a marketer, you must reflect in terms of how everything that you do must deliver value to your customers.
Given the fact that marketing should focus on finding, keeping and growing the value of the customers if you find that your marketing team cannot connect what they must do to create customer value, you may need to ask yourself why they are feeling this.
An easy to use CRM or Customer Relationship Management software is one of the best platforms that can help marketers understand the markets and your customer segments by gathering data and deploying analysis.
It has been noticed that different value propositions are relevant to different customers, so your marketing team needs to develop these propositions by using CRM database of previous sales and create supporting messages for your future customers, to communicate the value of your offering through the right channel and at the right time.
This implies everyone in your marketing team must understand the various customer personas and buying processes, which can be analyzed even better by using a QuickBooks CRM like ConvergeHub, which can provide your marketing team with purchase history of your customers along with their other information, as QuickBooks CRM help integrate customer relationship management with a bookkeeping and accounting software.
Does Customer Value increase Customer Lifecycle Management
Customer Lifecycle Management or CLM is the measurement of multiple customer related metrics, which, when analyzed for a period of time, indicate the performance of a business. The overall scope of the CLM implementation process encompasses all domains or departments of an organization, which generally brings all sources of static and dynamic data, marketing processes, and value-added services to a unified decision-supporting platform like a CLM CRM through iterative phases of customer acquisition, retention, cross, and up-selling and lapsed customer win-back.
It is true that creating customer value grows your CLM metrics and market share. Hence, if you want to see increased consideration and consumption of your products, consider seeking an objective expert.
Always remember, at all cost, you must focus on and invest in creating customer value, as your market and shareholder value are derived from it.