Competitive business world of today has created a need for defining more effective Marketing strategies. This raises the question that what should be the bases. Customer satisfaction has been the major pillar for that matter. Then customer loyalty was added. Now the upcoming concept is customer value. The concept of customer value was originally introduced in late 90’s but in recent years it has gained a lot of fame in marketing and business circles.
Companies have been identifying the tools to measure customer satisfaction. Customer loyalty has also been measured. Now it is the time to ‘Understand Customer Value’. While trying to understand that we must not confuse the customer value with customer satisfaction as both are two different concepts. Customer value refers to the customer’s perception of benefit of a product that how does he actually decide on the value of any product or service. Customer value not only includes the value of product or service for the customer but also the cost against which the customer is expected to gain that product/service value. The difference between these two constitutes the customer value.
While defining the marketing strategies now companies have to focus on increasing the customer value. There are primarily two directions for that matter. Either company can increase the benefit a product or service gives to the customer or it can reduce the cost that customer has to bear in order to gain that product value or benefit. We need to understand not only present but future needs of the customers. Customers evaluate the worth of a product or service for the benefits they get today and also the benefits they would get in future. Therefore, to enhance the customer value future expectations of customers should also be understood. Different customers with different backgrounds can perceive different benefits from the same product or service which results into the difference of customer value for them. We must define the marketing strategies while giving due consideration to these differences.
If we can measure the benefit a customer is expected to derive from our product or service then we can be in a position to enhance that benefit. Being ignorant of the actual benefit to the customer we can never gauge the customer value and if we can not gauge we can not improve. Therefore, it is imperative to understand the customer value. Apparently it seems to be a complicated concept but in fact, it is not. We just need to consider customer’s perspective. We can not focus on selling our idea only but we have to consider the worth a customer gains from our product or service. Customer value is determined while comparing any product or service with its alternatives. Comparing the benefits a customer perceives from a product or service and the cost he has to pay for that benefit. The customer also determines the worth of the perceived benefit against not only his today’s but also future wants.
We can gauge the value a customer actually derived from the product or service he purchased from us. If we can determine and understand the gained value then we can reinforce the value for such customer. This increased customer value will definitely help in customer retention. Furthermore, we can also attract new customers who are expecting the same level of customer value. Sometimes customer himself cannot understand the worth of a product or service for him. The customer knows his own requirements and needs but he is not in a position to understand the exact worth of that required product or service for him. Such customer derives the customer value primarily on the basis of price or the cost he has to pay. He compares the offered price with the price of alternatives available in the market. In such scenario, we need to compete on the price with our business rivals.
While marketing for our ERP (Enterprise Resource Planning) I interacted with different companies as our prospective clients. I experienced that while comparing our product to our competitors some prospective clients compared the benefits they would get and also the cost they have to pay. But some primarily compared the prices as they could not exactly perceive worth on the bases of claimed benefits. Therefore, we had to define different marketing strategies on the bases of difference in customer value.
We may conclude that ultimate goal of every business is to generate profits through customer satisfaction. But now is the time to change the basic way of approaching customers. In order to develop new customers and retain old customers, we must provide a high level of customer value. Ultimately the results are growing customer network and higher profits. Customers belong to different cultures, beliefs and income groups and their expectation can also be different. We need to consider all these factors while gauging the customer value and adopting measures to enhance the customer value which will eventually result in effective marketing strategies.