The word ‘value’ means different things depending on who is asked. To some people, value represents the benefit they gain from something. To others, value is regarded the same as the price of an object, product or service. The phrase ‘value for money’ closely relates to this school of thought, meaning that individuals are more likely to consider price as the differentiating factor.
The ability to clearly show the value of a product or service has never been more important for the modern-day business owner or entrepreneur. Businesses that can clearly define what their offering is actually worth to their customers are few and far between. Yet, being able to do so is critical in persuading customers to consider transacting with them.
As Massimo Acquaviva, 2R Capital Investment Management Limited co-founder and co-CEO will know, understanding what customers value is integral to being able to communicate it for positive results.
How is Value Created?
Value creation can be a function of the systems and processes that have been deployed to create a product. However, it can also be a result of mindset and culture, which are aspects that are much harder to change (and emulate). Therefore, mindset and culture are crucial for long-term success. Add in systems, and a business has the potential recipe to demonstrate great value.
Value changes along the customer journey. Indeed, how it is perceived when a customer intends to buy versus when the purchase has been made and the product or service is in use can be different. For a business owner, understanding this dynamic should lead to a determination to create customer value, which has been shown to increase loyalty, among other benefits.
Measuring Customer Value
Customer value measures the worth of a product or service and compares it to other possible alternatives. For a customer, this determines whether they feel they’ve received adequate value for what they paid for a product. If a customer feels that the cost outweighs the benefits, buyer’s remorse (or regret) sets in, especially if there is an alternative at a better price point.
For some, customer value is about money. However, customers give more than just money in a purchase decision; they’ll invest time, energy and possibly emotion to come to a decision. It’s also important to differentiate customers from consumers. The latter can be users of a product or service, but they are not necessarily the ones who purchased or made the decision to buy.