You need to know what your customers value


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Mark Hocknell - How customers define value

It is commonly understood that most sales people cannot articulate value for their customers. This leads them to talk more about the features of the offerings. It is the same with most businesses, there is way too much focus on the detail of the offering or how it is done.

Customers define value very differently than this and we need to understand how it is that they define value.

I use the term Two-Way Value Exchange to describe what happens when you have a group of customers that absolutely get the value that your business delivers. These customers are often the profitable promoters for the business – the ones with the greatest level of spend, retention and advocacy. However, many businesses do not understand the value these customers are getting.

I learned this many years ago whilst working in financial services and it has remained true ever since.
If a business knows the value that it’s profitable promoters get, then it can deliver that value on purpose. And align its resources and efforts to maximise the exchange of two-way value.

For example in construction supplies, a business that is committed to being the supply partner of first choice for their customers finds that their account managers are spending most of their time with customers that valued price, over service or partnership. These customers with a price-bias represented about 15-20% of total available customers. The customer’s behaviour of demanding deals and discounts-for-volume led to much activity, but very little margin in the deals and very little positive word of mouth, let alone not working towards the company goal. So the business put in place protocols that ensured the price-bias customers were dealt with more on a transactional basis, so that more time and effort could be allocated to the customers that valued a partnership relationship with their supplier.

You see it is what customers value, that drives their purchasing behaviour. Knowing this allows a business to develop their customer portfolio with higher percentages of profitable promoters.

I often see value described like this: An accountant saves the customer $5000 in tax and only charges $2000, therefore the value for the customer is $3000…or the RRP on this product is $45, but you pay $27 therefore you save $18…

These equations of value are too generic and simplistic, value is not just about dollars. Customers buy based on emotions, the rational communication of value is not the full story.

When we come to think of the sources of value for our customers we tend to think of the product itself, or the service delivered, perhaps in some cases it is the physical resource, like a shop, or restaurant. Then we quickly move into ideas of service excellence (think high-end department stores) and consistency with attention to detail (like McDonald’s).

However, customers define value in very different terms.

Customers tend to think of value in terms of goals or results. That is the outcome they are seeking. Customers seeking to buy a new home are often told by the finance people all about the details of the loan and mortgage. Do the finance people talk about their ability to collaborate with solicitors and settle on their home for these customers…? These customers don’t really want a mortgage, they want to get into their new home with the least hassle possible, and that is rarely communicated.
Similarly, when someone goes to sell a house, the real estate agent will often talk more about the marketing package – that includes signage, internet listing, sole agency agreement etc. This customer does not want a marketing package with a lock-in agreement, they want their house sold at a fair price, that is the goal or result they seek.

In addition to customers defining value in terms of the goal or result they seek, the overall perception of value is also dominated by the end-to-end experience the customers have during the delivery of the goals or results. So using the earlier ‘buy a new home’ example, if the finance company made the process of getting the finance and buying the home a complete hassle, then – even though the customer achieved their goal – they will be unlikely to promote the finance business, probably they will be a detractor and provide negative word-of-mouth freely.

Additionally, customers can define value from the feeling and benefits they get from belonging to a community. The managers of musicians have know this for quite a while and the investment fans make into merchandise is quite extraordinary. However, it is in this way the fans display their affiliation with their favourite artists that brings about the sense of community they value from wearing logos and brand names on their clothes, coffee cups and even guitars. Harley Davidson Motor Cycles have survived the dearth of American manufacturers to become leading global brand of motorcycles, primarily based on developing their community of Hogs (Harley Owners Group), people that love to wear the brand, logo, advocate and attend events.

Customer define the value they get based on the results or goals their realise. Then add to this the experience they have in realising these goals, and if you can, create some sense of value in a community. They do not define value in terms of features and advantages of products or services.

Mark Hocknell
Mark is a Customer Centric Business specialist with experience spanning three decades, from line management to consulting and academia. Based in south east Queensland, Australia, Mark led one of the first, large scale CRM deployments for one of Australia's leading financial institutions. For the last fifteen years Mark has consulted to leading organisations in Australia, as well as small-to-medium sized businesses. He is the author of Profit by Design: how to build a customer portfolio full of profitable promoters.


  1. Mark:
    I see no mention here about the problem that the customer is facing. Aren’t we providing a solution to this problem and isn’t that the way the customer is getting value. How can we describe or relate to value without understanding the nature of the customer problem?

  2. Hi Jim – great point.
    I feel that we tend to focus too much on what we “think” the the customer problem is…this leads us to talk too much about the features of solutions.

    So if we see that the customer is trying to achieve a goal – there could then be many problems to solve on the way through. And what they experience on that journey.
    We need to keep how the customer if feeling about overall value in mind, so that we can be meaningful and considered in our conversations and engagement with them. Not too much on what WE do or how WE do it…

  3. Agreed Michael – the better we can articulate value for our customers, the higher the level of engagement and advocacy. And in turn, a customer portfolio full of profitable promoters..!


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