What is customer value?

Updated April 11, 2022

Customer value is the phenomenon that keeps companies from teetering over the brink of bankruptcy and instead, maintaining long-term relationships with existing customers and earning repeat business by providing an excellent customer experience.

Customer value comes down to identifying what matters most to customers and delivering it, but this is often easier said than done.

When business leaders fail to step up to the task of focusing on customer value, they find their organizations in a state of chaos, losing profits and market share at an accelerated rate as their clients find more favorable offerings.

Read on to learn more about customer lifetime value, its importance within any growing organization and how your company can enhance the perceived value it offers those it serves.

What is Customer Value

Customer value is best defined as a balance between the total customer benefits they derive from a service or product and the customer’s effort, or the total customer costs they face in using or obtaining the product or service in question. In other words, what how much does a customer value your product or service?

Customer value can be heightened when companies find ways to align their core competencies with their customer’s feedback and primary concerns.

How is Customer Value Created

When you create or enhance customer value, you're able to increase customer satisfaction and the omnichannel customer experience. There are multiple reasons to build customer value, but a few stand out as especially critical.

Retaining Customers

Customer loyalty is the result of excellence and attention to detail – neither of which are small feats for a company to incorporate into its daily operations. However, even small improvements in customer retention can have a major impact on profitability.

For more information on improving customer value can improve overall business performance, download our whitepaper, Driving Business Performance Improve Improvement with Conversation Analytics.

Customer Advocacy

Satisfying customers to the point that recommending your company over others comes naturally to them can bring about lasting changes in your market position. Customers who become advocates for your company and actively give customer feedback do the work of your marketing team free of charge. Their enthusiasm for your organization helps tremendously in attracting additional leads, which contributes to your business’s growth over the long term.

Improving Customer Value Within Your Organization

There are numerous avenues worth considering to improve the customer value your business has on offer. Here are a few clear options you can try.

Clarifying Customer Needs

The most obvious step in the process of enhancing customer value in any given organization is identifying the needs of its customers. However, there is another step before this one that makes this easier to accomplish – identifying the customers themselves.

Define Your Clientele

Your business’s target demographic is unique, as are their needs and interests which are both predictable and understandable. Identifying the types of people to which your company caters most is the first step toward satisfying their needs more effectively and increasing the number of loyal customers. This means identifying the demographics and/or firmographics of your customers to construct a clear persona your business consistently serves.

Choose Fundamental Improvements

Customers tend to look for a few simple things in products and services:

• Low price
• High quality
• Speed

Improving in any of the above areas can give your business an immediate edge in the market and an opportunity to exceed customer expectations. However, once you know what portion of the market your company serves, you can adjust the base needs of speed, cost-effectiveness, and quality to best fit their requirements and priorities.

Streamlining Business Processes

The internal processes that animate your organization have the potential to bleed into customer relations and market positioning.

Either over-engineering or under-engineering your business’s core operations can negatively impact its performance, with such central deficiencies being magnified as processes create snags and bottlenecks. Simplifying and enhancing the efficiency of everything from product development to logistics and payment processing can make a positive impression on customer perceptions and customer satisfaction.

The following areas are prime for business performance improvement in many developing organizations:

Improving Staff Training

Your employees form the front lines of your brand and its reputation, interacting directly with customers in addition to keeping the company moving behind the scenes. Recognizing the importance of each of your staff members and investing in their development ensures your clientele can see your business at its best through the commitment and professionalism of its people.

Proper training and encouragement make a difference in transforming good employees into a great workforce. If you have yet to investigate performance measurement options, be sure to do so in order to establish a baseline on the strengths and potential weaknesses of your marketing and customer success teams upon which you can create a plan for continuous improvement.

Incentivizing excellence through additional compensation and praise can prove effective as well. This, in addition to setting and adhering to strong company values, can help bring your workforce together and convey a sense of your organization’s trajectory to the market at large.

Investing in Technology

Technology upgrades make improving specific facets of your company’s operations a possibility. Everything from customer data management and managerial concerns to individual contributor duties stands to benefit from technological improvements.

Assess your business’s current way of getting things done with an eye to optimization and automation to see where technology could potentially lighten workloads.

How do your employees handle collaboration? How is information made accessible to those who need it at any given time? These and similar questions can yield actionable insight into the obstacles that technological investments could help your team overcome.

Building customer value involves all the above, plus the patience to consistently implement such operational changes.

Frequently Asked Questions

What are the four types of customer value?

Customer value is the combination of the benefits a product or service provides and the effort a customer exerted obtaining it. The four types of customer values are functional, monetary, social, and psychological.

Why is customer value important?

Creating customer value is critical because it supports retention and loyalty. When customers perceive a product or service as valuable, they’re likely to remain a customer and advocate on your behalf to prospective customers.

What is a customer value strategy?

A customer value strategy includes implementing tasks and processes based on what’s most important to your customers, while driving overall business performance improvement.