Successful businesses always keep customers at the front and center of their strategic marketing activities. Keeping customers at the centre of a company’s strategic marketing activities assists these companies drive customer satisfaction, loyalty and perceived value.
Customer perceived value, according to Lovelock, is the difference between the prospective customer’s evaluation of all benefits and all the costs of an offering and the perceived alternatives.
Business is the activity of creating value. That is what businesses get paid to do. Customers do not necessarily want products and services as much as they want what those products and services will do for them. Anecdotally, it would seem sometimes that public and private institution leaders and their followers lose sight of this crucial aspect of doing business. Every employee of private and public sector institution must learn to become a value creator. Those businesses that understand and deliver superior value will have strong bottom lines and those who do not will always remain mediocre performers, at best.
I will first explain what customer value is before we deal with some specific issues that will help businesses create customer value.
Customer value defined
Individuals make buying decisions every day. For example; a banker buys porridge product from “Koko King” on her way to work or prepares her own beverage in the morning before leaving home or settles for “Yomi” yoghurt; these decisions all have to be made taking cognisance of perceived benefits and costs of each of these decisions. Is the new iPhone 6 worth its cost or should the aforementioned banker continue to use her current smartphone which does almost all she wants from voice or data perspective? These are all buying decisions that must be made by the banker.
In every buying decision, a consumer asks the same question: “Is what I am going to receive worth what I have to give up in order to have it?” The gain the consumer receives for the benefit is weighed against the cost the consumer must pay to acquire the benefit. The value the individual consumer places on a product or service becomes the customer value for that offering. It can be expressed in a simple mathematical term as;
Customer value = perceived benefits – perceived costs.
The customer value is weighed against the customer values assigned for similar products and services that would provide a similar benefit. Consumers will typically purchase the item with the highest customer value among all offerings in the marketplace. When the banker contemplates where to have lunch, will she consider the Best Western to have a higher customer value in comparison with Papaye or Asanka Locals?
Every consumer has a unique set of needs and resources, so no two consumers will place the same customer value on the same product or service. The highest quality product or service does not always provide the highest customer value, since the benefit of each item is measured against the cost, i.e. the sacrifices one would have to make to acquire the benefit. Some consumers are willing to pay a high price for a quality product or a high level of service, but others will make the decision that the same benefits are not worth the price.
On your next vacation for example, would you rather stay at a Beach Hotel or the Regular Inn? The Beach Hotel will provide a prospective customer with a bigger room, fancier lobby, incredible ocean view, prompt room service and perhaps a spa service. With the Regular Inn, however, a hotel guest might benefit from lesser amenities and stay at the outskirts of a city, but that customer may choose to spend the savings from reduced hotel rates on a clothes shopping spree.
Customer value must, therefore, be seen from the perspective of the customer and only the customer can accurately determine the value a product or service offers.
The truth is that value is the way in which an individual actor‘s actions take on meaning, for the actor him/herself, by being incorporated into a larger social whole.
To the customer, value is the way he/she represents the importance of his/her own action to him/herself. By representing this importance, the customer has a guide to his/her action.
It is quite common to hear corporate leaders proclaim how critical it is for the institutions they lead to create value for their customers; however, customers tend to see little action in this regard. At best, what customers often experience is salespeople and client service personnel “talking brochures”; simply reciting their products’ or service’s specifications and features. Interestingly, customers do not buy facts, specifications or features – they buy favourable experiences and solutions to their problems that create value for them.
The underlying goal of every business process must be to create value for customers by understanding the problems (or challenges or opportunities) confronting them. Customer “problems” manifest themselves in many different ways. In essence, a problem is simply nothing more than the difference between what a customer is experiencing or achieving now (their existing situation) and what they need or want (that is what they would like to achieve).
The gap between the two is the problem, and becomes an opportunity to create value; the scale and nature of the gap will usually determine how much urgency the customer feels to act on it.
The challenge for every business, therefore, is to understand the customer’s need gap and develop solutions through products and services that will help the customer solve problems and satisfy their needs. Businesses must create value with their propositions in the eyes of the customer; in order to offer the customer the opportunity to see it as distinct from any other on the market.
This has the effect of repositioning your competition, so that price becomes a less dominating factor in the purchasing decision. It is fair to argue, price will always be an issue, but if the customer perceives unique value, price becomes secondary.
Let me share three fundamental points that might assist companies begin a fruitful journey of customer value creation.
Know thy customer
The first commandment for every business executive is to know their customers. There are many strategies, tactics and techniques for creating value for customers, but what is often ignored is the groundwork required to effectively implement any of these. Business leaders must realise the need to get inside the head of the customer and develop a good understanding of what they value.
To get inside the customer’s head, companies must build strong customer relationships to enable them get a much better sense of the customers’ current situation and where they want to be – information that can used to position the company’s value proposition to address customers’ needs. Building a relationship with the customer allows companies to learn how to communicate with the customer at all times. Building strong relationships and understanding what customers value lays the foundation for how to go about building customer value.
Communicate relevant
value to the customer
As institutions solidify relationships with customers, companies must build an understanding of their current situation, assess their business problems and the solutions they need; the institutions must then position their value propositions as the solution to the identified customer problems by doing the following:
• making a promise about how the institution’s products or services will help the customer
• stating a fact that backs up the promise
• stating the commercial advantage or benefit to the buyer – this is a critical step because if institutions do not explicitly state a benefit, the customer will assume one... one that may be incorrect. To enhance the institution’s position, they will need to direct the customers’ thinking so that they can 'picture' how the solution relates to solving their problem and satisfying their needs
• stating the personal value – the psychological benefit it brings to the person the institution is dealing with.
Pay close and constant
attention to customer value
Building customer value presents companies with a great chance to capture a customer and grow long term business relationships. To the extent that the value creation process can be same but different for each customer, close and constant attention must be paid to a host of variables, including: strength of relationships with the customer, the customer’s tolerance for change, the customer’s current situation and asking the right questions. GB
Robert E. Hinson is an Associate Professor in the Department of Marketing and Customer Management at the University of Ghana Business School and writes for the Centre for Sustainability and Enterprise Development (CSED) at the same School. CSED is a training, research and advocacy center specialising in marketing; communications, sustainability and social responsibility. Robert holds doctorate degrees in Marketing and International Business Economics and can be reached at
