DEFINING CUSTOMER VALUE

The first thing we need to know before search for best practice examples about customer value is to fully understand its meaning and which are the main elements embedded in this concept.

As stated by the SEO agency Builtvisible the market has radically changed. We were used to have a few brands in a seller’s market, where the focus was on decreasing costs and increasing volume becoming more efficient. The communicative process was not as important as it is today.

Now everything has changed, we have an overwhelming abundance of offer, and the market is known by having a fierce competition. Customers have high expectations and little loyalty if they are not met. We are living in a buyers’ market. In this scenario companies have to communicate value in order to attract consumers. That is why we need to understand what value is and what is not.

CONCEPT: CUSTOMER VALUE 

According to a dictionary definition, customer value is the difference between what a customer pays for a product or service and the value they get from it

Following a post from Harvard Business Review, customer value is the worth in monetary terms of the technical, economic, service and social benefits a customer receives in exchange for the price it pays for a market offering.

I personally, find this definition quite limited since it is just taking into account money and benefits... I believe there is more costs of acquiring a product/service beyond money.

Supporting my point of view, Chron defines customer value as the satisfaction a consumer feels after making a purchase for goods or services relative to what she must give up to receive them. A consumer doesn't consider value just in terms of money spent, but can also consider the time it takes to obtain a purchased product and interactions with customer service personnel. In summary, "customer value" focuses on a buyer's evaluation at the time of a certain purchase. The higher the value the higher the probability of having loyal customers.

WiseGeek warn us that the term "customer value" is frequently confused with the value of customer to businesses. I will try to differentiate them so that I will not use them indistinctly in future posts.

CUSTOMER VALUE VS CUSTOMER LIFETIME VALUE

When looking for information about customer value, I found out that it is common to use customer value (CV) and customer lifetime value (CLV) indistinctly, but I realized that both concepts are extremely different and shouldn't be confused. 

As stated by Techtarget, Customer Lifetime Value is a metric that represents the total net profit a company makes from any given customer. CLV is a projection to estimate a customer's monetary worth to a business after factoring in the value of the relationship with a customer over time. CLV is an important metric for determining how much money a company wants to spend on acquiring new customers and how much repeat business a company can expect from certain consumers.

Customer lifetime value is a tool for companies to use but customer value is a perception that will vary depending on what the offering is.

Having understood both concepts and knowing the main differences between them, I am ready to dig into customer value and learn more about it.