What is customer value? Definition, formula & importance
Customer value is best defined as how much a product or service is worth to a customer. Here’s how companies can enhance their value to improve the customer experience and increase satisfaction.
Published September 24, 2020
Last updated July 13, 2022
What comes to mind when you hear the words “customer value”? You might think about money—giving customers a good price for a quality product—but customer value encompasses much more.
Today’s consumers don’t care only about price or quality. They also want the product or service they buy to solve a problem or need. With tons of shopping options at their fingertips, buyers are looking for companies that consistently deliver value.
Customers see value in a company that makes their lives easier and improves their overall sense of well-being. In their minds, the benefits of their purchase are worth the cost, and they’ll continue to reward the company with their business.
In the post-pandemic era, creating customer value is more important than ever. According to the Zendesk Customer Experience Trends Report, over 60 percent of customers will switch to a competitor after just one poor experience. Businesses need to ensure they’re doing everything they can to showcase their value throughout the customer journey so buyers keep coming back.
Don’t focus on monetary costs alone. The key is to deliver a high-value product or service and a memorable, positive brand experience.
- What is customer value?
- Why is customer value important?
- Measure customer value
- How to increase customer value
What is customer value?
Customer value is best defined as how much a product or service is worth to a customer. It’s a measure of all the costs and benefits associated with a product or service. Examples include price, quality, and what the product or service can do for that particular person. There are also monetary, time, energy, and emotional costs that consumers consider when evaluating the value of a purchase.
How is customer value created?
Customer value isn’t only about money. It’s typically created through the solution that a product or service provides, not only to the buyer but to their organization as well. Keep in mind that customer value is subjective. Price is universal—it will cost every customer the same amount to purchase your product or service. But the value will be different for every buyer because it involves so many variables, including customer experience.
For example, say you offer an ecommerce platform where businesses can post items for sale. You get two new customers—an online-based corporation and a mom-and-pop shop that, until now, has been brick and mortar. The cost is the same for both companies. But for the corporation, a new ecommerce site in and of itself may not drastically change their business. For the mom-and-pop store, however, going online could radically increase their sales. So, your company’s value will likely be much higher for them than for the corporation.
Similarly, if you’re selling software to multiple companies, your customer value will be higher for a business that relies on your product to run every department than for a business that only uses your product within one department.
Why is customer value important?
Delivering customer value is key to maintaining long-term relationships with existing customers and earning repeat business. It’s an important part of meeting customers’ needs and expectations and learning how they change over time. Knowing how customers feel about your product and the service experience you offer is key to building customer loyalty and increasing customer lifetime value.
Quality service can add customer value. According to Zendesk’s 2022 Customer Experience Trends Report:
- 93 percent of customers will spend more with companies that offer their preferred option to reach customer service.
- 90 percent of customers will spend more with companies that personalize the customer service they offer them.
- 64 percent of business leaders say that customer service has a positive impact on their company’s growth.
- 60 percent of business leaders say it improves customer retention
- 47 percent of business leaders report an increase in their ability to cross-sell due to good customer service.
How to measure customer value
Customer value optimization starts with measuring it.
- Ask customers a small set of questions
- Determine customer benefits and customer costs
- Determine if the benefits outweigh the costs
1. Ask customers a small set of questions
To track customer value, you need to communicate directly with your customers. Ask them how your business is providing value and how it can continue to do so. Many companies opt to gather customer feedback by sending out regular surveys via email or by calling customers directly.
First, come up with a small set of questions that will allow you to gauge the value you’re delivering. For example, you could ask customers how your product or service helped them achieve their goals or how your company could improve or provide more value.
2. Determine customer benefits and customer costs
Along with qualitative questions, you should also pose quantitative questions to evaluate the value of your products or services. To get a sense of perceived value, you could ask buyers to rate how satisfied they were with their purchase based on a scale from 1 to 5. Then, you can take the average numerical rating and determine whether or not your company is delivering high value.
Once you have your feedback, create a list of the ways your team delivers—and doesn’t deliver—customer value.
3. Determine if the benefits outweigh the costs
Finally, you can start to see whether the benefits (like convenience, quality, and brand reputation) outweigh the costs (such as price, time investment, and emotional stress). While it takes time and effort to measure your customer value, the insights you’ll gain will be invaluable.
Customer value formula
Use the formula below to measure customer value.
Total Customer Benefits — Total Customer Costs = Customer Value
You’ll need to subtract total customer costs from total customer benefits. There are two key types of customer benefits: product and/or service value and service experience value. Other types of customer benefits can include social value, personal value, and psychological value. Since benefits (and costs) tend to be qualitative, you’ll want to assign a metric to the different types of benefits and costs to see if certain benefits outweigh certain costs. For example, numerous studies have identified customer service as a benefit that outweighs price.
Benefits and costs can vary depending on the needs of a specific customer group. Customer personas, journey maps, and support data can help you segment your customer base.
9 tips for increasing customer value
Acting on feedback is just as important as getting it. Taking customer feedback seriously shows buyers that you care about them and are committed to providing a good experience, which can help increase satisfaction. So, use feedback to identify areas of improvement and formulate a plan for delivering more value. You may find that you need to:
- Personalize your support interactions
- Provide multichannel support options
- Create a robust onboarding program
- Prioritize customer success
- Address patterns in support issues
- Make sure customers know you’ve heard them
- Find opportunities to surprise and delight
- Acknowledge and reward customer loyalty
- Give your customers a sense of community
1. Personalize your support interactions
If your support agents recite the same script on every call, your customer won’t be impressed. Show every customer your value by tailoring the support experience to their unique needs. This not only makes customers feel more valued, but it also inspires greater brand loyalty.
To provide personalized experiences, you’ll need to ethically gather customer data and leverage it to cater to each buyer. You must ensure your support agents have quick and easy access to that information.
CRM software like Zendesk is critical for storing and accessing customer data. Thanks to customer context tools, agents have all the details they need right at their fingertips, enabling them to deliver more personalized service. Agents can view the history of each interaction a customer has had with the company—including past purchases and support requests—and can even see their recent web and shopping cart activity. It’s also seamless to transfer customers to another agent or to pick up the conversation on another channel.
With this level of transparency, nothing will slip through the cracks, and customers won’t ever have to repeat themselves. They’ll also feel as though your company truly understands them, which only adds to the customer value you offer.
2. Provide multichannel support options
Provide support on a variety of channels—such as email, phone, live chat, and messaging—so customers can reach you on the platforms they prefer. Find the channels your target audience uses regularly, then make sure you adopt them.
To deliver a more effortless customer experience, go a step further by connecting conversations across the various channels you offer. This is what it means to offer omnichannel support. With an omnichannel platform like Zendesk, interaction history and context travels with the customer from channel to channel, allowing agents to provide better, personalized support.
For example, a support agent talking to a customer on the phone will be able to see if that customer has already interacted with a representative from their team via Facebook and what they spoke about.
The ability to continue conversations across channels makes seamless, reliable customer interactions possible—a win-win for agents and buyers alike.
3. Create a robust onboarding program
Start customers off on the right foot by building a comprehensive onboarding guide for them. If possible, give each account a support agent who can show stakeholders how to implement your product. This agent can hold several onboarding meetings with your customer to make sure they’re comfortable with your product and using it optimally.
For products that require ongoing support, you’ll want to assign a customer success associate to each account. This person should have specialized knowledge about the product and should serve as a continuous source for strategic guidance. They’ll need to check in consistently, provide best practices, and develop a true partnership with their clients.
4. Prioritize customer success
While support teams are essential for resolving short-term customer issues and technical problems, customer success teams are equally important for ensuring buyers’ happiness. Rather than focusing on solving problems as they come up, customer success managers anticipate their clients’ needs and help them achieve their long-term goals using a company’s products or services.
Having staff dedicated to helping customers succeed makes it easier to provide personalized experiences, increase retention, and even find opportunities to cross-sell and upsell. But you’ll have to leverage customer data to stay informed about how their needs might change and how you’ll be able to meet those needs. That may mean using data analytics to spot trends and see where common problems arise, creating a robust knowledge base to address frequently asked questions, or investing in a CRM to track your evolving customer statistics over time.
5. Address patterns in support issues
Don’t wait for customers to complain—try to prevent setbacks as early as possible to keep your customers happy.
Success managers should share any customer problems they regularly see or hear about with the rest of the support team, so the group can brainstorm potential solutions. You should also consider collecting customer feedback and data on a more regular basis to gain increased visibility into any recurring issues and take steps to address them.
For example, if you notice that 30 percent of your customers run into the same issue with your product, you might proactively send them an email to explain how to fix the problem so they don’t have to call support.
You can also offer self-service options—such as FAQ pages, help centers, or AI-powered chatbots—which make it easy for customers to solve their own issues. Research shows that 70 percent of customers actually prefer to help themselves these days. From a business perspective, customer self-service allows you to dramatically cut down on costs, increase live agent efficiency, and improve the overall experience for customers.
6. Make sure customers know you’ve heard them
You may already send out surveys and act on customer feedback to make improvements. But take it a step further by following up with customers who shared input to let them know how you incorporated their feedback. (You can do this via email or text message.) Customers will be happy to hear that you took their ideas and suggestions to heart and used them to make positive changes. It also shows that you champion your customers at every step of their journey—adding to your value.
To track all that valuable feedback and customer information, use a CRM like Zendesk. The data is housed in a central location, making it easy for employees across the organization to view it. Analytic tools also help your whole team see what’s working and what’s not so they can make informed decisions on how to better serve customers.
7. Find opportunities to surprise and delight
In 2021, customer retention is all about exceeding expectations and building lasting relationships with your buyers. So, consistently show them your brand’s value with a stellar support experience.
Establish a strong, long-term connection with customers by regularly finding ways to wow them. For example, empower your support team to go above and beyond for each customer by giving them the freedom to offer a certain number of discounts each month or to surprise a customer with a free gift. You should also make sure you’re providing quick and easy resolutions, self-service support, various channels for customer service, and personalized experiences. All are crucial; components of a customer retention strategy.
Retention is critical for any company’s long-term success and bottom line. In fact, research by Bain & Company found that increasing customer retention rates by just 5 percent can boost profits by up to 95 percent. Focusing on your current customers is more cost-effective than directing most of your efforts on gaining new ones, too—acquiring a new customer is five to 25 times more expensive than retaining an existing one.
8. Acknowledge and reward customer loyalty
Customers love to feel seen and appreciated. Recognize your most loyal buyers by offering them a discount or promotion at the end of a support experience. Or, consider launching a loyalty rewards program to show customer appreciation.
A customer loyalty program is where buyers receive discounts or freebies after reaching specific benchmarks, like having been a customer for one year or having spent a certain amount of money. Take Sephora, for example. Customers who are part of the company’s Beauty Insider rewards program receive points for every dollar they spend. They can then use those points to choose gifts.
Loyal customers are rewarded simply for continuing their buying habits, further deepening their ties to the business and giving them added value they can’t find at competitors. When creating a loyalty program, choose rewards that are enticing to your particular audience. Listen to your customers and let them be your guide.
9. Give your customers a sense of community
Everyone enjoys feeling like they’re part of a community. Foster this type of connection with your brand by building a customer community forum where buyers can go for product support, Q&As, and feedback. This forum can live on your website or social media page; it can also feed into your larger, cross-channel support strategy as a self-service option for customers.
Online forums help create a sense of community by connecting users to others with similar needs and interests. This often translates to customers feeling more supported by the brand, which increases your value. Additionally, if you give forum users the space to share their knowledge or expertise, they’ll presumably be a longtime brand advocate.
If you want to start building a thriving online community around your product or service, we recommend using community forum software. The right solution takes the pressure off your agents while promoting customer engagement.
Creating customer value for long-term success
People often measure a business’ success by its sales. But to gauge a company’s long-term success, you also have to consider another factor: the way customers feel after they make a purchase.
To grow your company, customers should consistently feel your product or service was worth its price. Prioritize quality and offer competitive rates, and of course, deliver an above-and-beyond support experience. Customers will see your value and likely stick with your brand for years to come.