On the surface, customer value seems like a simple concept, but by no means is it simple. Customer value is a complex cocktail of rational, emotional and subjective benefits that customers perceive minus the price they pay.
Customer Value = Customer Benefit – Price Paid for Product
The price paid for a product or service is typically straightforward, with the exception of trying to figure out residual, maintenance and repair costs for some products and services.
Customer benefit is the tricky aspect of this equation. First, customer value must be compared to the value created by competitive products and services. customers don’t make purchase decisions in a vacuum; they typically compare the perceived value they will get from buying your product or service versus a competitive product or service. Second, customers can derive benefit from the entire customer value proposition & journey, including distribution and promotion.
Get going on improving your customer value equation with your free Customer Value PowerPoint Template, which includes:
1. SERVICE VALUE PROPOSITION BENCHMARKING
We’ve included a service value proposition benchmarking template. You should make sure the service value proposition dimensions are the important ones to your industry. For instance, in retail the 5 dimensions retailers compete on are Selection, Service, Convenience, Experience (Shopping), & Value. The quick way to fill in the data is to brainstorm with an internal team and use relative rankings versus competitors. The more accurate, but longer way to fill in the data is to execute a customer benchmarking survey or a customer journey/ethnography exercise.
2. PRODUCT VALUE PROPOSITION BENCHMARKING
We’ve included a product value proposition benchmarking template. You should make sure the product value proposition dimensions are the important ones to your industry. You should especially expand the core features dimensions, since those are often the most important with physical products. The quick way to fill in the data is to do some research and see if you can compare technical and/or feature specifications between products. You can also do analysis on product reviews to see what the most important dimensions are for customers. Then you can also brainstorm with an internal team and use relative rankings versus competitors. The more accurate, but longer way to fill in the data is to execute a customer benchmarking survey or conduct a customer journey/ethnography exercise.
3. CUSTOMER NEEDS TO SOLUTIONS EXERCISE
We’ve included a product and service template for this exercise to generate new ideas for existing products or services. The first thing you need to do is make sure the value proposition dimensions are aligned with your benchmarking or with the dimensions that are important to your industry. Then brainstorm the needs customers have across each dimension, with a focus on those needs that aren’t currently met by anyone, or gaps you may have against competitors. Then focus on potential solutions to those needs, especially solutions that would be hard to replicate by competitors. Then score your ideas by customer value improvement and ease and cost to implement. These scores can feed into the product / service / feature prioritization matrix.
4. FEATURE / PRODUCT / SERVICE PRIORITIZATION MATRIX EXERCISE
This is a great template to help generate ideas and prioritize them. The two axis of the matrix are “Improvement in Customer Value” and “Effort & Cost of Implementation”. Those ideas that are high customer value and low effort and cost to implement are the low hanging fruit you should focus on.