Customer Value Is Crucial. Learn Why!

Customer value

Customer value is crucial in your business. Find out why?

These days, brands must try ever harder to create and communicate value in everything we do. Customers have an overwhelming abundance of choice. They have high expectations and little loyalty to spare if brands fail to meet them. It is very much a buyer’s market.

These days, brands must try ever harder to create and communicate value in everything we do. Customers have an overwhelming abundance of choice. They have high expectations and little loyalty to spare if brands fail to meet them. It is very much a buyer’s market.

Customer-centric organisations are 60% more profitable than non-customer focused organisations (Deloitte and Touch). Forrester Research declares from 2017 onward, that businesses will become increasingly more customer value obsessed.

According to a recent Gartner survey, 74% of marketers focus too much on their product features and technology. But if product features aren’t that critical when your buyer is deciding, what is?

To communicate value to our customers, we must understand what customer value really is, and more importantly, what it is not.

Four Components of Marketing

Marketing is defined as the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.

If you read the definition closely, you see that there are four activities, or components, of marketing:

  • Creating customer value: the process of collaborating with suppliers and customers to create offerings that have value
  • Communicating customer value: broadly, describing those offerings, as well as learning from customers
  • Delivering customer value: getting those offerings to the consumer in a way that optimises value
  • Exchanging customer value: trading value for those offerings

What is Customer Value?

Customer Value is at the centre of everything the company does. So, what does value mean?

Marketing is composed of four activities centred on customer value: creating, communicating, delivering, and exchanging value. When we use the term value, we mean the benefits buyers receive that meet their needs. In other words, value is what the customer gets by buying and consuming a company’s offering.

So, although the company creates the offering, the customer determines the value. Furthermore, our goal as marketers is to create a profitable exchange for consumers.

By profitable, we mean that the consumer’s personal value equation is positive. The personal value equation is value = benefits received [price + irritation] Irritation is the time and effort the consumer puts into the shopping process. The equation is a personal one because how each consumer judges the benefits of a product will vary, as will the time and effort he or she puts into the buying process. Value, then, varies for each consumer.

Let us Look at an Example

One way to think of value is to think of a meal in a restaurant. If you and three friends go to a restaurant and order the same dish, each of you will like it depending on your own personal tastes.

Yet the dish was the same, priced the same, and served the same way. Because your tastes varied, the benefits you received varied. Therefore, the value varied for each of you. That is why we call it a personal value equation.

Creating Customer Value

Marketing creates those goods and services that the company offers at a price to its customers or clients. That entire value bundle consisting of the tangible good, the intangible service, and the price is the company’s offering.

Another example

Marketing people do not create the value offering alone. For example, when creating the iPhone, engineers were also involved in its design. Apple’s financial personnel had to review the costs of producing the offering and supply input on how to price it.

Operations group from Apple, needed to evaluate the manufacturing requirements the iPhone would need. The company’s logistics managers had to evaluate the cost and timing of getting the value offering to retailers and consumers.

Apple’s dealers also likely supplied input about the iPhone’s service policies and warranty structure. Marketing, however, has the biggest responsibility because it is marketing’s responsibility to ensure that the new phone delivers value.

Communicating Customer Value

Communicating is a broad term in marketing that means describing the offering and its value to your potential and current customers, as well as learning from customers what it is, they want and like. So let us look at the various types of communication in communicating the value.


Sometimes communicating means educating potential customers about the value of an offering, and sometimes it means simply making customers aware of where they can find a product or service.

Customer Feedback

Communicating also means that customers get a chance to tell the company what they think. Today companies are finding that to be successful, they need a more interactive dialog with their customers. Companies might post questions, send samples, or engage in other activities designed to ask for feedback from customers.

Companies use many forms of communication, including advertising on the Web or television, on billboards or in magazines, through product placements in movies, and through salespeople.

Other forms of communication include attempting to have news media cover the company’s actions (part of public relations [PR]), participating in special events.

Delivering Customer Value

Marketing cannot just promise value, it also must deliver value. Delivering an offering that has value is much more than simply getting the product into the hands of the user. It is also making sure that the user understands how to get the most value out of the product.

Delivering value form part of the company’s supply chain. The supply chain includes several organisations and functions that mine, make, assemble, or deliver materials and products from a manufacturer to consumers. The actual group of organisations can vary from industry to industry, and include wholesalers, transportation companies, and retailers. Logistics, or the actual transportation and storage of materials and products, is the primary part of supply management.

Exchanging Customer Value

In addition to creating a value offering, communicating its benefits to consumers, and delivering the offering, there is the actual transaction, or exchange, that must occur.

In most instances, we consider the exchange to be cash for products and services.

Other exchanges, such as information about your preferences gathered through surveys, might not involve cash. When consumers buy, consume (use), and dispose of products and services, exchange occurs, including during the consumption phase.

Apple has a Web page where consumers can fill out a form, print it, and ship it along with their old cell phones and MP3 players to Apple. Apple then pulls out the materials that are recyclable and properly disposes of those that are not. By lessening the hassle associated with disposing of products, Office Depot and Apple add value to their product offerings.

Related Article: Setting value, not price. McKinsey

So, finally what is Customer Value?

Customer value is the satisfaction the customer experiences (or expects to experience) by taking a given action compared to the cost of that action.

The given action is traditionally a purchase, but could be a sign-up, a vote or a visit, while the cost refers to anything a customer must forfeit in order to receive the desired benefit, such as money, data, time, knowledge.

Your internal chain of sourcing, operations, processes, sales, marketing, and customer service all contribute to the creation of value. So, do your support operations such as HR and accounting. All these components affect your customers directly or indirectly in some way, informing their perception of you.

And this leads to the fundamental point: The results of your efforts to create value are measured in the customers perception of that value.

People do not buy things because you like them. They buy them because they like them or need them.

More importantly, in this world of choice: Customers compare their perceived value of similar products when making a decision.

Whether you are deciding on a restaurant to visit, your next car, or which digital marketing agency you want to use, there are choices available and many factors play a part in forming that decision.

Customer value is all about subjective perceptions, which can only be influenced, not controlled. This gives accountants nightmares.


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