Manilka Ediriweera says improving customer value must be a key strategy

Think of the buzzwords you hear in business such as ‘customer centric’ and ‘customer value.’ Many businesses claim they are customer centric – even when they’re not. So it’s essential to question if this is true… or whether customer centricity has become a mere cliché.

This makes us question how a business can truly be customer centric, and how such customer centricity can be measured and improved.

Though not many address these questions, the answer lies in customer value. For a business to be genuinely customer centric, it must focus on delivering value to its customers and all those in its ecosystem.

The main focus of this article will be on the importance of customer value and how orga­nisations can transform it into a key strategy that provides the business with a competitive advantage.

Before we move on to customer value, let’s understand the general sense behind the latter of these words.

Value has to do with how much something is worth in comparison to the price paid or asked for. In basic terms, value is the difference between the cost of something and its benefits. In business markets, value is the worth of the technical, economic, service and social benefits (in monetary terms) a customer receives in exchange for the price paid for a particular market offering.

Similarly, customer value can be defined in straightforward terms as how much consumers perceive your products or services to be worth.

For there to be value, buyers should feel that the benefits outweigh the costs incurred. If they think that costs outweigh benefits however, they’ll regret the purchase and may turn to an alternative of the same product or service.

This is why it’s important to be aware of customer value when pricing and improving the consumer experience. Knowing the value that consumers place on goods and services is crucial because of high expectations, availability of alternatives and changes in business models.

Now that we’ve established what customer value means, let’s take a brief look at how we can measure it. The basic formula to measure it is: customer value equals perceived benefits minus the total cost.

What’s important is that customer value is not limited to monetary terms. In the context of costs and benefits, there are other tangible and intangible factors also at play. For instance, let’s consider customer benefits such as societal advantages or the impact on one’s social status, how the product will help the consumer achieve his or her goals and the quality of the product.

When it comes to customer costs similarly, in addition to monetary costs, also include energy, time and emotional costs.

All in all, for consumers to want to buy your product or service, they must feel that what you are selling has a greater value than its price tag. They won’t purchase, or use your product or service, if that isn’t the case.

It’s clear that for a business to be successful therefore, it is important to create value for buyers. Why? Because when they see value in purchasing your product or service, they become loyal customers. And building loyalty is the ultimate way to run your business sustainably. Therefore, it’s important to make customer value a strategic priority in your business.

So how can you make this a strategic priority? Firstly, it’s important to understand the customer’s perspective. That means that you should know what they would consider valuable. Buyers are the only parties in the ecosystem who can define what value means to them.

Based on this knowledge, define some metrics that you can measure. After all, you can improve only what you’re able to measure. In any organisation, customer value must be prioritised and that information must be accessible to all – because delivering value insights is a responsibility across the business.

Therefore, it has to be made a key strategic priority  of the entire organisation. Then it can be used as a benchmark that will provide a clear focus.

Here are some tips on how you can improve customer value…

Develop a ‘customer journey map’ and identify areas where you can add value. Find alternative ways to increase the value of your clients’ experiences. Collect data to understand your buyers’ perceived value and segment your customer base to target the loyal ones.

The first step to true success lies in providing or adding value to your market offering. It’s about giving your customers what they perceive as valuable and improving on what they would have been expecting.

With customer value as a key business strategy, your organisation will naturally become a customer centric enterprise and eventually improve client loyalty. In business therefore, success is not only about your organisation growing; but also, how you add value for your customers.