Customer Value Analysis
Understand How And Why
Customers Buy
"It is unwise to pay too much, but it is unwise to pay too little" (John Rushkin)
Our customer value service is for companies who want to grow or improve margins by getting a better understanding of why prospective customers buy or don't buy so that they can get better volumes and/or prices.
It is also suitable for companies who are suffering from intense price competition who need to remove costs from their offering.
At the heart of our strategy and profit improvement consultancy lies the concept of perceived customer value management.
This recognises the simple principle that customers try to maximise the benefits they receive in return for the price they pay. They try to get the "best value for money" and this applies to anything from a sandwich for lunch to a new car or house.
This common sense principle has a series of advantages because it encourages us ask questions:
- How do the benefits we aim to provide compare with the price we charge and how do these compare separately and combined with competitors?
- What do customers value? Why do they choose to buy what they do? What re they trying to achieve with our product/service?
- Are all customers the same or are there different needs and values in different market segments?
- Can we find ways to improve the benefits (value) of what we sell?
- Does the customer understand and appreciate the value that we provide?
- Do we provide features that add costs but little value?
- Is the customer willing to pay more than our current price?
- How can we make the customer more willing to pay a higher price?
- How does our value compare to our competitors?
- Are there any gaps in the market where customers' requirements aren't being effectively met?
- Do we operate in a way that means that we can deliver value predictably? If not, what do we have to change.
All the time we keep coming back to how the factors within the business affect the building blocks of profitability:
- How do the answers help us increase the sales volumes that you sell?
- How do the answers help us increase the prices that your customers are prepared to pay?
- How do the answers help us to reduce your purchase costs and operating costs?
The extended quote from John Rushkin below explains why the lowest priced item is not the best value.
"It is unwise to pay too much, but it is unwise to pay too little.
When you pay too much, you lose a little money; that is all.
When you pay too little you sometimes lose everything.
Because the thing you bought was incapable of doing the thing you bought it to do.
The common law of business balance prohibits paying a little and getting a lot.
It cannot be done.
If you deal with the lowest bidder, it is well to add something for the risk you run and if you do that, you will have enough to pay for something better." (John Rushkin)
Now is the time for action
Give me Paul Simister a call on 0121 554 4057 if you would like to know more about customer value analysis.
It will add focus to your marketing and strategy setting process.
It is also being used more and more as a basis for setting sales strategies as it can demonstrate to customers just how much they can gain from buying a product.
Customer value books available from Amazon
Customer value is a relatively new focused marketing approach but if you'd like a chance to learn more about it I recommend the following books:
Bradley T. Gale - Managing Customer Value
Frederick F. Reichheld - The Loyalty Effect
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Last updated 2007-07-04
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