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What Is Customer Value? Why Should You Care?

Customer value is defined as the perception of what a product or service is worth to a customer when compared to other alternatives. Worth represents the additional benefits the customer feels he/she received over what they paid.

Simply put, Customer Value = Benefits – Cost

Benefits are mostly non-priced aspects of a product or service and can be tied to a particular Brand (Mercedes vs Ford), experience, convenience, services, etc.

Values are what someone or something, such as a brand name, represents. Does the brand stand for honesty, quality, high integrity, excellent service, trust, etc?

Some businesses will run marketing campaigns and focus solely on just making sales.After the sales are made, their customer just sits in the database as they move on to the next sale and forget about the previous one.

This is not a good approach.

Each customer has a lifetime value or CLV. Once you begin shifting your focus on figuring out the lifetime value of your customers, you will know exactly which efforts you need to focus on in order to bring you the best results. Once you can identify those actions, you can set them to continually nurture your past clients using autoresponder systems.

Let’s use Mercedes as an example. They developed a Mercedes-Benz S-class, which was far more luxurious than other vehicles within their fleet.

When a customer comes in and purchases an S-class and drives off to continue to live their life, Mercedes doesn’t forget about them.

Mercedes introduces a newer S-class model every few years and they do a wonderful job of continuously marketing to their existing S-class buyers.

Calculating Value

Let’s assume the S-class vehicle always costs $100,000. Mercedes will then analyze their database of S-class buyers and will see that each customer buys an average of 3 S-class models for $100,000 every few years. They can then conclude that each customer has a lifetime value of $300,000.

When the newer car is released, many of their current S-class buyers are the first to upgrade and buy the new model.

When Mercedes runs marketing campaigns, they will now know exactly how much they can spend to acquire a customer and still be profitable. In this case, they can spend $1,000 or more to acquire one customer.

Make A Plan

You should be asking yourself how often you market to your existing customers and should begin figuring out what your customer lifetime value is for your business.

This metric is vital, you should know how much each customer is worth to your business after 30 days, 60 days, 90 days, 180 days, 360 days and so on depending on your business.

If you have the same processes and marketing material going out to all of your customers, then you can easily figure out this information with the right analytics.

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What Does Mean for Your Campaigns?

Your top priority should be to always provide value over price.

If you are spending $100 and it was costing you $1 to acquire a lead, that is 100 new leads for your new business. If you are selling a $100 dollar product and one of your prospects buys, you will break even.

On the backend, you should have a collection of different products you can sell to the new customer who just made the purchase.

If you have a wider range of products to sell through your funnel you can afford to spend more money upfront to acquire a new customer.

Creating Value

Value is a big part of any purchase decision and comes to the forefront long before the shopping cart. It continues through the purchase process and long after the purchase during the use of the product or time of service. 

Creating value right out of the gate is imperative. The more value you can convey the greater sense of trust you can build between you and your next customer.

That also speaks directly to content creators, bloggers and the like. When putting together a blog, I take whatever time is necessary to acquire more information through research.

My goal with every blog I publish is to provide the reader with far more value than they anticipated. The positive comments I receive are a testimony to that. 

Here are some questions that will help you understand how to create more perceived value to your customers. 

  • What is my competition offering that I’m not?
  • In what ways does my competition build trust?
  • What can I offer that will sweeten the deal and win the sale?
  • How can I lower the risk factor a potential customer may be feeling? (i.e. a guarantee)

Building customer value boosts customer satisfaction and customer experience. The added benefits include increased loyalty, boosts your online reputation, visitors are more likely to subscribe to your email list.  If the perceived value holds true, a first-time customer can easily convert into a repeat customer. 

Different Strokes For Different Folks

Everyone has their own unique definition of value, what’s important to them.  You should not expect to be all things to all people. Rather a better approach is to identify your target audience and focus on what you believe they value most.

Each person’s perceived value will be different and depends on what their goal or objective is at that point in time.  For instance, a single woman’s perceived value of a mini-van purchase will be very different than a soccer mom of three.  Why? Because at that point in time, their needs are very different. So it’s fair to say that needs can and do influence perceived value.

Another example is a person looking for a new home. Great schools and a yard with a fence will have greater perceived value to a young family and/or pet owner than it would to a single person with no pets.

It’s Not About The Price

Trying to compete on price alone is short-signed and will not win the day for you. Many people are often willing to pay more for something that they perceive has greatest value. 

Think about your competition with similar products and customers.  Your value proposition is where you differentiate yourself and win over the customer.

Here are some ways marketers create a greater sense of value:

  • Giving something extra over the competition for the same or reduced price.
  • Offering a limited time discount and/or free shipping.
  • Making it easy to purchase and use.
  • Buy one, get one free (or half price). 
  • Offering a free membership or gift with purchase.

Great follow-up and customer service will always increase value and solidify in the buyer’s mind they made a good decision. 

When crafting a sales page for a particular product or promotion, make sure you address the following:

  • Clearly identify customers fears and then address them.
  • Tell them exactly what it’s included.
  • List the benefits of the product and what the customer will have achieved by using it.

Your biggest challenge is communicating to the buyer what makes you different and continually work towards building trust through value. Communicate your value at a fair price (something in the middle) is typically the best approach.

Leave A Comment

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2 Replies to “What Is Customer Value? Why Should You Care?”

  1. Thank you for this very informative post! I was looking for some more information on incentives to offer my readers/customers. What are some examples of free gifts you would offer for signing up on an email list or making a purchase? I am trying to develop something that keeps customers returning to my site. Would a free e-book work? Or would you suggest going to buy some cheap knickknacks and actually sending products out to people who sign up for a membership or for your email list? Thanks for your help!

    1. Hi Ashley,
      E-books are good, instructional videos, or a PDF are some examples. My suggestion would be to see what your competition is offering as a reward for providing them with your email. I wouldn’t suggest that you pay for anything though. Create your own lead magnet is always a good idea provided it lives up to expectations. This is a once in a lifetime opportunity to demonstrate to each subscriber that you are trustworthy, so don’t let them down. Better to over deliver.

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