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What is Customer Value and How Can You Create It? 

Gautam Mahajan | Jan 14, 2016 31,960 views 6 Comments

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Value has many different meanings. To some Value means price (what is the value of this car?) to others it means benefit (the value I got from this car). It also means the worth of something. That is why you hear some people saying “value for money” (meaning they are price sensitive); and others who prefer “money for value” (meaning they are willing to pay for what they consider as benefits, as from a brand or a better product, or more convenience etc.)

The dictionary meaning includes: The regard that something is held to deserve; the importance, worth, or usefulness of something. Synonyms are: merit, worth, usefulness, use, utility, practicality, advantage, desirability, benefit, gain, profit, good, service, help, helpfulness, assistance, effectiveness, efficacy, avail, importance, significance, point, sense.

No wonder, the reader is confused about the value word that s/he uses so often. When used in the vernacular it does not matter, but when used as a technical term, like Customer Value, the meaning of Value must be precise, so that everyone understands what it means, as shown below:

Customer Value is 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 or he got benefits and services over what s/he paid.

In a simplistic equation form, Customer Value is Benefits-Cost (CV=B-C).

What the Customer pays is not only price (cash, cheque, interest, payment during use such as fuel and servicing for a car) but also non-price terms such as time, effort, energy, and inconvenience).



The benefits include the advantages or quality of the product, service, image and brand of the company or the brand of the product, values, experience, success one gets in using the product and so on.

Values are distinct from Value (the plural of value as defined above is Value). Values are what someone or a firm stands for: Honesty, morals, ethics, sustainability, integrity, trust.

Consumers are distinct from Customers. Consumers use the product or the service, but in all cases do not buy the product/service. The value the consumer perceives influences the buying evaluation and perception of the decision maker or the Customer. The Customer is someone who buys or makes the decision to buy. A Non-Customer is someone who could buy from us, but is buying from someone else.

How is Value Created and What Does It Do?

Value is created just as much by a focus on processes and systems as much as it is by mind-set and culture. Mind-set and culture are much more difficult to change, and also difficult to emulate. It is easier to copy products and systems than to change mind-sets and culture. Therefore, for long term success, mind-set and culture are important and lasting. These, along with systems create great experience and value.

Value changes during the use of a product or during the Customer Journey. Value is perceived during the purchase intent, the shopping, the actual purchase or buying, the installation or start-up, the use and even the re-sale. We sometimes call this the waterfall of needs. Needs change during the Customer Journey.

Creating Customer Value increases customer satisfaction and the customer experience. (The reverse is also true. A good customer experience will create value for a Customer). Creating Customer Value (better benefits versus price) increases loyalty, market share, price, reduces errors and increases efficiency. Higher market share and better efficiency leads to higher profits.

How to Create Real Value

You first have to understand the Customer Value concept, what a Customer perceives as value, and how a customer’s value needs change over time, and how to get Customer feedback. You must realise that people buy a product or service that creates the most value over competing options.

To create real value, you must recognize what a Customer perceives as value. You must understand how the Customer views your competition’s product. What is important to the Customer in his buying decision? Is price more important or are benefits? Are you good at delivering what the Customer believes is important? Are you able to deliver more than your competition on these factors?

I understand these are general terms, but they will help you to create value as you understand your Customer’s need and perceptions. Let us take some examples on how to create Customer Value:

1. Giving a price that makes the Customer believe he is getting more than he pays for the benefits he gets versus competitive offers

2. Reducing the price, or keeping the same price and giving something extra over competition (this could be service, better attention, an add on to the product)

3. Making it convenient for the Customer to buy, and how he wants to buy and pay.

4. For B2B getting a proper price justification, not just a price.

5. For dealers, the feeling the company will grow and offer new products for the dealers to sell. These are things that the dealer may not have an experience of, but dos Value

6. The image of the company, including the brand and the trust in the company or when the Customer appreciates the Values of the company including sustainability. These create Value for the Customer

7. Giving the Customer a product that works as it is meant to (as perceived by the Customer) and easy for him/her to understand and use (so that no unnecessary time or energy has to be expended)

8. Making the Customer feel valued. For example:

  • Smiling at and being attentive to a Customer creates value for him. Ignoring him/her destroys value for the Customer
  • Making it easy for the Customer to contact the company, and an assurance that an answer will be given when and how promised (how many times do you have to wait to talk to someone and how often does s/he promises to call back and how often do you get a call)
  • Not making you repeat questions or answers, and keep relating the problem
  • Receiving a call from a service person confirming his/her visit (the Customer is not kept wondering whether the service visit will take place)
  • Not answering queries destroys Value

All readers have real life examples of Value creators and Value destroyers and can add many more examples. Do add yours. Answer the following:

  • What could I do to create Value for my Customer?
  • What can destroy Value for my Customer?
  • Does experience create Value?
  • List things that you do not experience that can create Value for you.

You can contact the author at [email protected] for answers or view the website http://www.customervaluefoundation.com

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6 Responses to What is Customer Value and How Can You Create It?

  1. Michael Lowenstein January 14, 2016 at 2:36 pm (1320 comments) #

    Another intangible value definition and perception element is emotional investment, the product of which can be positive, negative, or neutral. Emotion (and memory) are also the subtext of tangible value elements.

  2. Gautam Mahajan January 15, 2016 at 12:53 am (176 comments) #

    Michael, I agree with you. Maybe I should chart an attribute tree and put the emotional and psychological factors. What do you think?

  3. Sam Klaidman January 18, 2016 at 6:26 am (61 comments) #

    I think that would be valuable to many people.

    As a reminder to the readers – CVCI (customervaluecreation.org) was established to give individuals a place to go to read more like this article, start and join discussions, read and write book reviews, and rate a variety of different content. Hope you visit and join.

  4. Gautam Mahajan January 18, 2016 at 11:59 pm (176 comments) #

    I think readers should join CVCI to get more on this

  5. Ann Sole September 11, 2017 at 1:04 am (2 comments) #

    To my mind, when customer buys a product, he doesn`t really buy the product itself, he buys the resolution of a problem that this product can help with. For instance, if a guy buys a drill, he doesn`t really need a drill, he needs a hole in the wall, and drill will help him to solve this problem. Basically, we buy the products that will help us to solve our problems) We`re buying food bcs we`re hungry, that`s the problem. The food is the resolution)To me, customer value is how many problems can I solve with this product? If those shoes fit me, it`s good, but if they`re fashionable – it`s a bonus, if they`re comfortable – it`s a bonus, if they`re water resistant – it`s a bonus and so on! That is Customer Value.

  6. Gautam Mahajan September 12, 2017 at 12:22 am (176 comments) #

    Ann, you are absolutely right, a smile, a special gesture or freebie at a hotel, are all adding to customer value. Companies can notch up more customer value as they satisfy customers’ needs.
    Thanks for a great comment.

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