For all the focus on customer experience, very few organizations actually nail down what kind of value they create for their customers.
This is not an academic question - it's at the heart of the future of the business and why customers will continue to pay to use your products and services.
So, let's draw a line in the sand about customer value means, once and for all.
Customer experience is about more than feelings – For many, consumer experience is defined simply as “how your customers feel about their interactions with your company.” We think that is a shortsighted definition and misses opportunities to drive sustainable business growth and true competitive advantage.
Put simply, how customers feel about your products and services comes from the value they get by using them. It is understanding and building for that value that makes a product or service sticky, keeping customers even when new choices emerge.
Use doesn’t imply lasting value – Use of a product or service only reflects positive customer value when customers have a choice. Just because your customers use your product or service, it does not mean they find net value in doing so, even if it solves a real need. This is a dangerous place to be in as your market share could easily be disrupted if/when more choices are available. Look at how taxi industries in many cities and countries were decimated by the arrival of Uber and Lyft, for example.
If you can measure, and track how your customers define value, you can reliably create experiences that produce value for your customers.
So, how do we start to make sense of customer value? Customer value is not business value (more about that in a moment). Customer value is also not strictly about dollars and cents. As a place to start, we like to break down customer value into four primary categories:
- Economic: Focused on money or time – how does your product or service save/make money for your customers or save them time or let them use their time in new ways? At its simplest, when everything else is equal, cost and time savings will often drive choice, but stopping there misses the core of understanding customer value.
- Functional: Tactical & Task-focused – how does your product or service reduce effort, organize, simplify tasks and the achieving of specific goals for your customer? This is where product differentiation begins to drive competitive advantage. Understanding the key functions your product or service does (or can) play for your customers ensures you don’t miss critical points of value.
- Experiential: Emotional & Intangible – this can be as simple as making an enjoyable product or service, but it can also include things like adding stability or a sense of safety or even nostalgia. Hospitals and hotels are both places one might sleep, but consumers expect very different experiences. One may be about luxury, the other security, strength and restoration. Understanding the desired value can allow you to build a competitive advantage by speaking to the deeper emotional needs your customers want to solve for.
- Social: Visible & Symbolic – Does using your product or service connect your customer to a desired identity (i.e.: being someone who is environmentally conscious)? Can it create a sense of belonging, affinity, or exclusivity? While this is easy to see in aspirational ways, it’s also important to recognize the risk of creating negative value due to unwanted brand associations. Dr. Pepper infamously encountered this when launching their low calorie soda “Dr. Pepper 10” with the slogan “It's Not for Women”. The backlash was swift and any intended humor was lost, driving down brand perceptions by both women and men.
Any successful leader should be able to easily define their KPIs but fewer take a structured approach to understanding and creating lasting customer value. We’d like to challenge you to start defining Consumer Value Indicators (CVI’s) alongside your business KPIs.
Consumer Value Indicators – As the old saying goes: you make what you measure, so, if you measure customer value, you’re more likely to focus on it and as a result, your customers will be more likely to choose your products and services.
Customer value isn’t the same thing as business value – it can sometimes be easy to mix customer and business value and related metrics. Net Promoter Score (NPS) is a great example. At first blush, it may seem like it’s a measure of customer value – it is definitely connected to it – but ultimately, having your business or service recommended by your customers is not something your customers would say is valuable to them. Similarly, Customer Lifetime Value (CLV) is all about business value – imagine if you also sought out customers who you could best deliver value to – how would that change your long-term strategy and how would it impact customer loyalty and positive word of mouth for your brand?
Real Examples of Prioritizing Customer Value – you don’t have to look further than your customer contact center. First Contact Resolution and time to resolution together are fantastic measures of customer value – producing both economic (time) and experiential value through fast, low-frustration answers to questions or problems. As an added bonus, both have clear business value – who doesn’t want to save the time taken by contact center associates? As service begins to embrace AI tools, shifting first contact to AI agents, these two metrics will be key measures of success for your customers. This will still be true long-after you’ve eliminated the cost of having a live person being the front-line for customer service, so don’t forget about them!
To avoid these pitfalls, we recommend identifying business value and customer value side by side. Doing this makes it much easier to define things that are true examples of consumer value. Simply ask yourself – is this something I could imagine a real customer saying is important to them? That alone will sort out business KPIs from real CVIs.
Defining CVI’s for your customers doesn’t have to be hard – but it does mean getting into their shoes and seeing first hand what is important to them, not just what you think is important to them.
This is the sort of thing that qualitative research excels at. It can help you know what to measure because it can help you see through your customer’s eyes.
Building on the contact center example: imagine a new customer-service AI chatbot saves associate effort and salary costs but unless it solves problems as fast (or faster) than existing service options, it may not be providing new customer value.
It’s ok if something new doesn’t improve customer value but by explicitly accounting for customer value, you can ensure that you aren’t significantly subtracting value. Being available 24/7 could be incredibly valuable to customers – but only if the AI system actually makes it quick and easy to solve problems or to get to the people who can.
About Ted
Ted is a service design and strategy leader with experience in healthcare, technology, and higher education.
He has a career-long pattern of driving measurable impacts, establishing new teams and new ways of working, with a focus on driving lasting value through organizational evolution, creating new tools, and uncovering durable insights.
