Value is the name of the game in any market, but how do you define it? You might say, “That’s simple! A customer that values a good smelling home places value in a candle.” While that’s true, it’s only a small fraction of the equation.
Put yourself in the shoes of that customer for a moment. If 20 companies are trying to sell you candles, what makes one more valuable than the next? This concept is one that puzzles even the best businesses and marketers. Here’s how you can better understand customer value and build success in your market.
In the business world, value equals worth. Heading back to the candle example, how much worth does a potential buyer place in any given candle? Whatever product or service you’re selling, you have to decide why making a purchase is worthwhile to the consumer.
While a candle will certainly make the buyer’s home smell better, there are other values at play that can derive a higher worth. Each of these values is what the customer gets in exchange for the price they pay. In this example, those would include:
- How long the candle burns
- What scents are available to choose from
- Chemical-free/organic ingredients
- The size or shape of the candle
- Color and the decorative nature of the container
All of these add value to the product, and that value does not change for the consumer. What does change is the price. Raising or lowering the cost only changes the buyer’s incentive to take you up on your market offering. So, the challenge is to ensure the cost to the consumer does not exceed the product’s value.
Customer Value Models
Since each potential customer places a different level of value on any given item, including candles, it can be difficult to tell where that value lies. The best approach is a field value assessment, but that’s rarely a possibility. Luckily, there are plenty of other tools at your disposal.
You could utilize direct and indirect survey questions, gaining valuable insight into where customers place worth. There’s also conjoint analysis and focus groups to better understand the perception of your product’s functionality and performance.
While all of the above can help you determine worth and adjust price accordingly, you also live in the modern age. The internet is ripe with customer value management tools that can help you make better use of your surveys and assessments while organizing the information you need in an easier-to-understand way.
These tools can also provide better insights, allowing you to leverage that information throughout your organization as you empower everyone from product managers to your sales teams and value engineers. Several also offer case study builders, which are an excellent way to boost value and therefore increase shelf price.
The Bottom Line
Value is relative, but it exists in the minds of every consumer within your market. By understanding and building worth within your product, as well as creating customer value models, you can determine the best price-to-value ratio. While it is a complex science, there are tools to help you pave a clear path to victory.