How to Deliver Customer Value
April 28, 2011 Leave a comment
What is customer value and how do we maximise it?
Customer value is not prescriptive or standard but is the value that is derived from a product or service, as perceived by the customer. This may well be different for different customer groups and it can be defined with the following ‘equation’;
Customer Value = The Benefit – The Effort – The Risk – (The Price)
Benefit – The benefit that provides the perfect solution to a problem or need
Effort – Using insight to understand and adapt to what makes customers lives more convenient
Risk – Any perceived downside to purchasing i.e. quality, peer group opinions, time, availability
Price – This is in brackets because it should be accompanied with a word of caution. Countless surveys have been conducted, all of which consistently throw up the following information regarding price;
In Developed Markets, 90% of people prefer to buy on non-price based motivations
In Un-Developed Markets 60% of people prefer to buy on non-price based motivations
It is very easy to lower prices but extremely difficult to raise them, so price should only be used very tactically.
So to maximise Customer Value, we need to increase the Benefit and reduce the Effort, Risk (and Price), all of which is achieved through the three core marketing strategies of Branding, Segmentation and Differentiation.