Understanding what Customers Value


Understanding what Customers Value Customer Value
Table of Contents

What is Customer Value?

Customer value refers to your customers’ perceptions of the worth of your offerings. Understanding customer value involves measuring the worth of your offerings in contrast to the worth of your competitor’s offerings. 

In business markets, we can define customer value as the monetary worth of a company’s offerings in regard to the economic and social benefits received by the company in exchange for the price paid for the offering. 

Within this article, we dive deep into customer value to develop an understanding of customer value models and how they can be built. 

Exploratory Research Guide

Conducting exploratory research seems tricky but an effective guide can help.

How to Define Customer Value

We can use the following formula to reflect the definition of value:


Where Values and Pricesdenote the value of the supplier’s market offering and the price of the supplier’s market offering while Valuea and Priceadenote the value of the next best alternative and the price of the next best alternative.

Customer Value Models

The most common and accurate method used to build customer value models is through the use of field value assessments. Field value assessments require suppliers to gather as much firsthand data as they can from their customers. An issue with field value assessments is that it is often too tedious, and sometimes simply not feasible, to carry out such direct research. In cases like this, firms will use other alternatives to build customer value models including tools such as conjoint analysis and focus groups.

Steps to Build a Customer Value Model

Organizations can use the following steps to build a customer value model: 

  • Gather Extensive Data using a Dedicated Value Research Team

The first customer value model you put together will be the hardest one to build. You must put together an extensive amount of data of your customers to gain a thorough understanding of a market offering in a particular customer setting. This can be done by creating a value research team that comprises employees with expertise in field engineering, marketing, product, and sales. 

  • Select the Right Market Segment

The next step is to select the right market segment to target. Select a market segment in which the supplier has a close and collaborative relationship with the customer as this will enable them to carry out direct research and acquire the required information for the building of the initial value model. 

  • Have a Clear Objective in Mind

Before approaching the customer to gather data, the team must have clear objectives in place and also have the incentive(s) prepared to be offered in exchange for the data. 

  • Create a List of Value Elements

Value elements are the factors that influence the cost and benefit of the offerings. These factors can be economic, social, service, or technical in nature and will have different degrees of tangibility. The list must be comprehensive and should include as many elements as possible as this will allow the value research team to more effectively identify the disparities in the performance of the offering relative to the next best alternative. 

  • Gather Data

The next step is to gather information regarding the worth (in monetary terms) of each element in the listed value elements. Often, the data required will need to be gathered from a range of different databases or systems in multiple functional areas of an organization. 

  • Validate the Value Model

Once the data has been gathered and the initial value model is ready, the supplier must validate it by performing assessments with other customers within the market segment. This will refine the value estimates and provide a more accurate representation of customers’ perspectives.

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FAQs on Customer Value Models

Customer value can be defined as a customer’s perception of the worth of your company’s offerings.

Customer value can be measured using customer value models using tools such as field value assessments, focus groups, and conjoint analysis. 

A customer value model can be built using the following steps:

  1. Create a dedicated value research team
  2. Select the right market segment from which data will be gathered
  3. Have a clear objective in mind
  4. Create a comprehensive list of value elements
  5. Gather data on each value element
  6. Validate the customer value model by conducting additional assessments

A value element is a factor that influences the cost and benefit of an offering. This factor can be economic, social, service, or technical in nature.

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