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Strategy

Why What You Say and Do Affects the Bottom Line

Each individual customer defines your company’s value based on their own expectations - and it’s your job to meet these unique expectations at all times. But what are the factors that play into a customer’s decision and how do these factors affect said customer’s propensity to engage further with the company?

Matt Duczeminski
November 17 2017

I’m just going to come out and say it:

If you’re not providing your customers the value they expect, you stand very little chance of getting them to stick around.

The key part of that last sentence: “value they expect.” Each individual customer defines your company’s value based on their own expectations – and it’s your job to meet these unique expectations at all times.

We’ll discuss the factors that play into a customer’s decision of whether or not they’ve gotten value out of an engagement with a specific company, and how these factors affect said customer’s propensity to engage further with the company in the future.

But before we dive in, let’s go a little deeper into the nuances of what customer value actually is.

What is Customer Value, and What Does It Encompass?

In determining a company’s customer value, it’s important to analyze and assess three pieces of information:

  • The attributes of the product or service that the customer perceives as valuable.
  • The level of customer satisfaction derived not just from using the product or service, but also from attaining their goal through the use of the product/service.
  • What the customer exchanged in return for access to the product or service. This not only refers to money spent on the product or service, but also on the time and energy it took to successfully utilize it.

While the above explanation may make it seem as if customer value is something that can be mathematically computed, in reality, customer value is defined by each individual customer. This is because each customer’s needs, expectations, and experiences are, in one way or another, completely unique.

For this reason, customer value is defined by the culmination and comparison of three separate concepts within the mind of the customer:

  • Desired Value: What the customer wants to get from the use of a product or service
  • Perceived Value Before Use: The value the customer believes a specific product or service will provide
  • Perceived Value After Use: The value the customer believes they received from a product or service

Overall customer value is defined by comparing an individual’s expectations for a product with the experience of actually using it. In order for the customer to report a valuable experience, their perceive value before the purchase, must match (or exceed) the value after use.

Obviously, if a customer’s perceived value of a company’s product or service is lower than their initial desired value, they probably won’t end up doing business with that company anytime soon. On the other hand, if the company in question lives up to the customer’s expectations, there’s a good chance that individual will end up becoming a loyal follower.

Now, as we alluded to earlier, a lot more goes into meeting customers’ expectations than simply providing a helpful product or service. In the next section, we’ll break down the many factors that affect customer value and explain what each has to do with customer retention.

Factors Affecting Customer Value, and Their Relation to Customer Retention

When today’s modern consumer shops around for a solution to a current problem, they look at much more than the product or service.

Now more than ever, the experience plays an increasingly important role in their purchasing decision.

Product/Service Quality and Effectiveness

The quality of a product or service isn’t the only thing customers consider when determining the company’s value, but that certainly doesn’t mean it’s something to be ignored.

Case in point:

A 2013 survey conducted by the University of Gävle found that the quality of the product or service is the determining factor of whether or not a customer will continue doing business with a company in the future.

Of course, this makes perfect sense. If a company’s products have successfully helped a customer overcome a certain pain point or reach a specific goal, the customer will almost certainly think of that company the next time they’re in need of similar services.

Now, this isn’t to say the other items we’ll discuss in a moment aren’t important as well. Our point is that providing top-notch products or services is a prerequisite for a valuable customer experience. The reason CX is a differentiator throughout most industries is because top-performing companies have perfected their base offering, and are now looking for innovative ways to provide value.

But, again: if you’re just getting your business off the ground, it’s essential that you focus on perfecting your product or service before moving on to the other items on this list.

Customer Support and Service

We’ve talked about this before:

As a company, making a sale does not equate to success. Your success is defined by your ability to help your customers attain their version of success with as little effort as possible on their end.

According to data collected by Matthew Dixon, Nick Toman, and Rick DeLisi for their book The Effortless Experience, the effort when using a product or service factors heavily in consumers’ propensity to engage with a company in the future.

“94% of customers who had low-effort experiences reported that they would repurchase from the company, while only 4% of customers experiencing high-effort interactions reported an intent to repurchase”.

Now, there will almost certainly come times where customers will encounter problems or glitches, in turn causing them to exert more effort to accomplish their goals.

The onus is on your company to make things right.

Of course, if you’re unable to do so, you’ll almost certainly lose the customer. According to RightNow Technologies, nearly 90% of dissatisfied customers not only stop doing business with a company that was unable to help them – they’ll actively engage with a competitor of said company.

To increase your perceived value, you need to do everything you can to help them solve their problems with as little friction as possible. Or at least be prepared to mitigate the issues they face quickly and efficiently.

Brand Image and Message

So far, we’ve discussed the more tangible aspects of the customer experience.

The image and message of a company’s brand plays a major role in the overall customer experience – which, in turn, affects the company’s perceive customer value.

When discussing branding, there are a few things at play:

  • The way in which a brand presents itself
  • The mission and message behind the services the brand provides
  • The authenticity of the brand (in terms of true alignment with its stated mission and message)

As is the case with overall customer value, the customer’s perception of a brand is defined by comparing their expectations to reality. Of course, the more closely the two align, the more valuable the brand appears.

In a 2016 report from the International Journal of Business and Management Invention titled “The Impact of Brand Image on the Customer Retention,” researchers found that brand awareness and brand experience “play a significant role in selection of brand.” To add to this, BOP Design found that 64% of consumers cite shared values as a main reason for forging and maintaining a relationship with a specific brand.

Companies that make their mission and brand message clear are much more likely to attract and retain customers than companies that lack a “personal touch” or central mission statement.

Integrity and transparency also plays a key role in the way in which customers perceive a company. As reported by Label Insight, 40% of consumers say they would switch brands if a competitor offered “full product transparency.” What’s more: 73% said they would pay extra to ensure such transparency from their brand of choice.

Increasing your brand’s transparency and integrity increases your company’s value in the eyes of nearly three of every four of your customers.

Pricing and Cost

Up until now, we’ve merely touched on the monetary aspect of customer value.

We explained that the amount of money, time, and effort a customer gives up in exchange for a product plays a major role in determining the value of the product.

The thing is, decreasing the cost of your products in order to increase customer value simply isn’t sustainable.

Sure, your customers will be happy to take advantage of a quality product at a low price – but your company is going to end up hemorrhaging money. Not only that, but setting your prices too low can actually harm your brand, as it can make your products appear cheap in the eyes of the consumer.

Supporting this statement, a 2004 study by Solvey Brussels School discovered that most consumers don’t seek out cheaply-priced products or services – they seek reasonably-priced ones. Echoing this sentiment, Vinita Kaura found that consumers report a positive perception of companies that offer their products at (what customers see as) reasonable and fair prices. As discussed in the previous section, this increased perception relates directly to an increase in customer retention.

Remember that when a customer considers purchasing a product, they’re not just considering whether the product itself is worth the cost; they’re deciding if the overall value they’ll get out of using the product is worth it. It’s on you to ensure the value meets or exceeds the cost they put into the purchase.

Bringing it All Together

As we’ve said, your company’s customer value is subjective to the individual consumer engaging with your brand.

As each of your customers comes to you with unique needs and expectations, maximizing customer value at all times may seem like a daunting task. Focus on providing top-quality service to your ideal customers – the ones who are most likely to stick around and provide maximum lifetime value to your company.

And when the name of the game is customer retention, quality most definitely trumps quantity.

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Matt Duczeminski

Matt is a professional writer specializing in helping entrepreneurs improve relationships with their customers. He lives in Philadelphia with his wife, Sarah, and he'd probably get a lot more work done if his cat would stop bothering him.

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