For about the last 25 years I have been fascinated by the concept of customer value – what you get for your money when you buy.
When we buy, we instinctively get a feel if what is offered represents good value for money based on what we want and our experience of buying and using similar items.
Buying involves choices.
Do we buy this one, that one or not buy either?
OK sometime we buy both but more often, buying one means not buying something else.
To help decide we look to the value that we as customers will get from using and/or owning the item.
I’m typing this on a PC, I get my value from using it.
If I had a low mileage Lamborghini Miura in the garage (and sadly I don’t), I may not be prepared to drive it because it would cause the car to lose value as a classic car investment. Instead, I’d get my value from knowing that I own one of the most iconic cars every made and also from walking into the garage to admire its stunning beauty.
Photo courtesy of motoryen.
What Is Customer Value?
Customer value is the key concept in developing differentiation strategies for your business.
Robert Woodruff has recognised that customer value comes through three levels:
- Attributes and product features
- Consequences of owning or using the product
- Goals and values behind the motivation to buy
A Customer Value Example – Buying A Classic Supercar
So if I was to go out and buy a Lamborghini Miura, then I may set myself a few product attributes to help make the choice.
- The colour – I have to admit that the gold Miura in the photo does look snazzy but I have a 1/18 model of a blue one that looks terrific too.
- Mileage – I could set a maximum mileage limit of 10,000.
- Condition – recently restored with original parts, immaculate.
Those would help drive the consequences – to feel good, to take pleasure from looking at it and treat it as an asset which will appreciate in value.
But it doesn’t explain why I want the Miura and not a Ferrari or Aston Martin. They are fine cars and could achieve similar consequences.
We need to go higher to find out why only a Miura will do.
And that relates back to falling in love when I saw one as a nine-year-old and being in a tizzy for days.
Sadly I’m rather too pragmatic with money to go out and buy a Miura, even if I could afford one.
When I go out looking for a new car, my first question is “do I fit in it?”
I’m a big chap and struggle for headroom, legroom and in some cars, width as well. I probably couldn’t fit into the Miura so it’s just as well that driving it isn’t one of my aims.
If I don’t fit – a qualifying attribute – the car fails and is dismissed from my consideration.
Once I’ve got myself a short list, I start looking at other factors like design (a subjective attribute linked to how I feel owning it, driving it and imagine what others think when they see me with it.)
Then I’m interested in practical issues like cost of ownership (depreciation, miles per gallon, service costs) and how inconvenient it is to have it serviced and maintained.
Customer value is a combined assessment made up of positives (the car makes me feel great) and negative (costs and service issues).
It’s also relative.
Customer Value Is Relative
Customer value is most easily assessed in comparison to a similar product.
The food in this restaurant is good but it’s even better at this second restaurant.
I like this wine very much because of its fruity flavours but I’m not so keen on this one.
My accountant does my tax returns on time but I think this one could give me better business advice.
Customer value is also relative to the price we pay.
This wine is great value for money at £5 per bottle. It doesn’t taste quite as good as this one for £25 but it’s much better value for money.
Other Customer Value Articles
Two diagram approaches to customer value are very useful for helping the management of a business understand customer value concepts and how their strategic position compares to competitors.
The Strategy Clock is a very useful way to think about possible strategy moves and changes in positioning.