“Every company's greatest assets are its customers because, without customers, there is no company.”
— American Business Author, Michael LeBoeuf
According to the study, businesses have a 60 to 70% chance of selling to an existing customer while the probability of selling to a new prospect is only 5% to 20%. This highlights the immense value of retaining existing customers and delivering a high-quality customer experience.
According to a study by Bain & Company, increasing customer retention rates by just 5% can boost profits by up to 95%.
When you think of "what is customer value," it's natural to consider factors like cost-effectiveness — offering customers quality at a fair price. However, customer value extends beyond monetary considerations.
Modern consumers seek solutions that meet their specific needs and desires. With numerous choices available, they incline towards brands known for consistently delivering value.
Consider this: 91% of customers who had a negative experience with a company will not return. This statistic highlights the emotional aspect of customer value.
Customers value companies that simplify their lives and improve their overall satisfaction. They believe the benefits outweigh the costs, building loyalty and repeat business.
Given this, it's clear that understanding and optimizing customer value is essential for retaining customers and fostering loyalty. But what is customer value? Let's give you a sneak peek.
What is Customer Value?
Customer value defines how valuable a product or service is perceived by a customer, considering all related costs and advantages.
This includes elements like price, quality, and the specific advantages the product or service provides to the individual.
Consumers also consider the following when evaluating the overall value of their purchase.
- Time spent
- Energy
- Emotional sentiments
Now that you know what customer value is, let's explore how it is created.
How is Customer Value Created?
Customer value comes from how well a product or service solves problems for the buyer and the company. It's important to remember that customer value can vary from person to person.
While everyone pays the same price, what they get from it can be different because of aspects like user experience.
Nudge’s onboarding feature can deliver an easy and personalized experience on your app or website. Make sign-up easy and guide new users to their "aha moment" quickly, using native onboarding tours, walkthroughs, and checklists. Use AI-driven algorithms to recommend products, services, and content that align with individual customer preferences.
For example, consider an online store where two new customers sign up: one from a giant online company and the other from a small local store just starting to sell online.
Even though they pay the same fee, the online company might not see a slight change because it's already set up online. But for the small store, going online could boost its sales. So, the small store finds more value in the service than the big company.
It's the same idea with software. If you sell software to many companies, it's more valuable to a business that uses it in all their departments than to one that only uses it in one area.
Similarly, understanding how extensively your product or service is utilized across a customer's operations can significantly impact their overall value to your business.
What is the Value of a Customer?
Each customer represents a transaction and a potential for long-term revenue, brand advocacy, and strategic growth. This realization can inspire businesses to tailor their strategies to cultivate loyalty, maximize retention, and drive sustainable success by quantifying customers' lifetime value and impact.
According to a study:
- 93% of customers are willing to spend more with companies that provide their preferred customer service.
- 90% of customers are likely to spend more with companies that personalize their customer service interactions.
- According to 64% of business leaders, effective customer service positively influences company growth.
- 60% of business leaders believe that good customer service enhances customer retention.
Read: Why Customer Retention Rate is Important?
Delivering customer value is the key to maintaining long-term Value. Companies must know how users feel about your product and your service experience. This is important in building customer loyalty and increasing customer lifetime value.
How to Measure Customer Value?
Measuring customer value is important for businesses to enhance customer satisfaction and loyalty. It involves assessing customers' benefits from a product or service relative to the costs they incur.
By understanding customer value, companies can tailor their strategies to meet customer needs more effectively, driving long-term success.
You can assess how customers perceive value and help businesses make informed decisions to improve their offerings with:
- Feedback from customers through a brief questionnaire.
- Assess customers’ benefits and customer costs.
- Evaluate whether the benefits justify the incurred expenses.
Nudge’s Surveys feature can help you build customer value. Surveys allow you to collect user feedback, providing valuable insights to your marketing team.
Engaging directly with your customers is essential for effectively tracking customer value. By asking them how your business currently adds value and how it can improve, you can ensure that they feel connected and involved in the process. Many companies use in-app surveys to gather this feedback, empowering customers to shape their experiences.
In-app feedback is provided while the user is actively engaged with the app. This means their responses are fresh and relevant. It reflects their real-time experience, unlike emails or calls, which rely on the user recalling their experience later.
Users find it more convenient to give feedback directly within the app they are using. It eliminates the need to switch to another platform. It makes it quick and easy to share their thoughts without interrupting their workflow.
Begin by crafting a concise set of questions that help assess your business's value. For instance, inquire about how your product or service has contributed to achieving their goals or where improvements could enhance overall value.
Businesses can include specific quantitative questions to evaluate the perceived value of their offerings. Whether it’s about a new feature launch or a discoverability issue, detailed questions guide respondents to provide relevant insights.
For instance, instead of asking, "What do you think of our new feature?" you could ask, "How easy was it to use the new feature on a scale of 1-5?" This gives you focused feedback on usability.
"Did you have trouble finding the new feature?" pinpoints users' issues. This helps in identifying and resolving problems quickly.
You can request customers to rate their satisfaction on a scale from 1 to 5, then calculate the average rating to gauge your performance. After collecting feedback, compile a list detailing where your team excels in delivering customer value and areas needing improvement.
Also Read: Customer Feedback Methods
Do the Benefits Justify the Incurred Costs?
Finally, evaluate whether the customer benefits, such as quality and brand reputation, outweigh the costs, like pricing, time commitment, and emotional investment. The insights gained from customer value are invaluable for refining your business strategy.
What is the Customer Value Formula?
The customer value equation is a formula for determining a customer's value. It calculates customer value by dividing the perceived benefits of a product or service by its cost.
The equation for finding what is customer value is:
Perceived Value = Perceived Benefits / Cost
To determine the net customer value, subtract total customer costs from total customer benefits.
Customer benefits can be categorized into two main types:
- the value derived from the product or service
- the value derived from the overall experience
Nudge’s in-app experiences boost customer retention, ensuring long-term success, sustainable business model, and Customer Value.
Given that benefits and costs are often qualitative, it's beneficial to assign metrics to different types of benefits and costs to evaluate whether specific benefits outweigh corresponding costs.
How Can You Increase Customer Value in Marketing?
Increasing customer value is a cornerstone of effective marketing strategies for long-term business growth. By enhancing the benefits customers derive from their interactions with the brand, businesses can boost revenue and build loyalty and advocacy.
Companies can elevate customer value through targeted efforts in product innovation, personalized experiences, and proactive user engagement, ensuring sustained success in competitive markets.
Nudge offers in-app survey features with which you can drive user behavior. Gain actionable insights into user preferences and experiences.
Read: 12 Practical Ways to Increase User Engagement (With Expert Quotes)
Let's explore actionable strategies to maximize customer value and drive meaningful business outcomes through marketing initiatives.
1. Personalize Your Support Interactions to Enhance What is Customer Value
Customizing your customer's support experience shows your value. This approach enhances customer satisfaction and creates brand loyalty. Gathering customer data ethically and effectively for each individual is important to delivering personalized experiences.
With Nudge Surveys features, you can gain deep insights into customer experiences across multiple touchpoints. Track interactions, preferences, and purchasing patterns to discover what drives customer value.
Ensure your support team has efficient access to this information. Use tools like surveys, web analytics, social media, and email marketing to collect and analyze data on customer preferences, behaviors, needs, and feedback.
2. Create a Strong Onboarding Program to Increase Customer Value
Businesses can help customers get started smoothly by creating a detailed onboarding guide. You can conduct multiple onboarding sessions to ensure customers feel confident using your product effectively. You should maintain regular communication, share best practices, and foster a collaborative relationship with clients.
With Nudge onboarding and Activation features make sign up easy and guide users to their “aha moment” quickly. It helps you improve user engagement and facilitates user stickiness, maximizing revenue.
Read on: What is User Onboarding?
3. Address Patterns in Support Issues
Don't wait for customers to complain—aim to prevent issues early to maintain customer satisfaction. The marketing team should share common customer issues with the support team to brainstorm solutions. They should also regularly gather customer feedback and data to identify recurring problems and take action.
For instance, if many customers encounter the same problem, consider sending proactive emails with solutions to avoid support calls.
Implement self-service options like FAQs, help centers, or AI chatbots, as many customers prefer resolving issues independently. This approach reduces costs, enhances efficiency, and improves customer experience.
4. Ensure Customers Know You’ve Heard Them: Enhancing Customer Value Definition
You should gather feedback through surveys and take action to improve. Effectively using customer feedback is essential in demonstrating your commitment to customer value. It shows that you consider their input and are dedicated to enhancing their experience.
To go further, follow up with customers who provide input to inform them how their feedback was implemented,in in -app surveys. Customers appreciate knowing their ideas were valued and led to positive changes, demonstrating your commitment to supporting them throughout their journey.
Read: How to Make Surveys Online in 6 Simple Steps.
5. Rewarding Customer Loyalty
Customers appreciate feeling recognized and valued. Show appreciation to your loyal buyers by offering discounts or promotions after a support interaction. Alternatively, consider launching a loyalty rewards program.
A loyalty program rewards customers based on specific milestones, such as longevity or spending thresholds. For instance, you can reward members with earned points for purchases, which they can redeem for gifts.
Nudge’s Gamification & Rewards feature offers incentives like scratch cards, coupons, and coins, to drive repeat purchases and retention.
These programs strengthen customer loyalty by incentivizing continued patronage and providing unique value. When designing your program, select rewards that resonate with your audience's preferences to tailor the offering effectively.
Studies indicate that while most businesses make sales to between 5 and 20 percent of new customers, they close deals with 60 to 70 percent of existing customers. Focusing on existing customers is more cost-effective than acquiring new ones, as developing a new customer can be significantly more expensive.
Conclusion
“Customers who love you will market for you more powerfully than you can market yourself”.
– Author Jeanne Bliss
Sales figures are crucial in assessing a business's success, but long-term success hinges on customer satisfaction, which reflects customer value. To ensure sustained growth, it's imperative that customers consistently perceive your product or service as valuable for the price paid.
This involves prioritizing quality, competitive pricing, and an intuitive user experience. By consistently demonstrating value, you build lasting customer loyalty and retention, setting the stage for enduring success and growth in the marketplace.
Value your customer’s value? Book a demo with us right away.
Read Next: How to Calculate Customer Lifetime Value?