Understanding what your customers really value can help you to market your products and services more effectively.
Customer value is the perception of what a product or service is worth to the customer. Customers don’t buy features – they buy benefits. Your customers will buy your product or service because of the benefits that they get. If you take the time to understand what your customers value and what they are willing to pay for, you will be able to market your business more effectively. You may also be able to win new customers from your competitors.
Most businesses make the mistake of thinking about value purely in terms of money. They create special offers to promote their products and services, but all they are doing is cutting their profit margin in a race to the bottom. Sure, there is a place in most markets for a lowest priced competitor but this doesn’t work for everyone. Take the airline industry – there isn’t room for more than a handful of low-cost airlines and that is why many of them are in financial difficulty – their costs have gone up, but there is downward pressure on pricing.
Value is about much more than just money. Put yourself in your customer’s shoes – your customers think of value in terms of goals, benefits, and results. They are seeking an outcome and this is what drives their purchasing decision. For example, an accountant might save a customer £6,000 on their tax bill and charges the customer £2,000 for doing the tax work. The monetary value to the customer is therefore £4,000. But what if this is only the beginning? What if the customer wants to grow their business over the next 5 years. The accountant could add value by providing advisory services to the customer over the next 5 years, to help them to achieve that goal. The customer would be willing to pay for that additional service because it helps them to achieve their goal.
The overall perception of value is, from a customer’s perspective, also influenced by experience. If the accountant in our example is difficult to deal with and the customer has to regularly drive to their offices to sign paperwork, have face to face meetings, etc. the customer will not think that the service is great and may question whether it is worth the money. Conversely, if the accountant offers meetings over Skype, at a time convenient for the customer and provides documents by email with e-signature capability, the customer may value the convenience and efficient service to the extent that they may even be willing to pay more for that service.
Amazon.com is a great example. The high street is struggling yet the world’s largest online retailer continues to grow. Why? Because its customers value the convenience, the vast range of product choices on offer and the ease of purchasing. Amazon has aligned its business model with the values of its customers and that is why it continues to succeed.