What is Customer Value?

Customer value is a customer’s perception of the value of your product or service.

Customer Value

Diamonds are a girl’s best friend, but not all diamonds end up costing you the same amount—even for the same size of diamond. Take this 1-carat diamond ring from James Allen jewelry. Here, you could get a nice diamond ring for about $5,000.

But if you went to Tiffany’s (a very high class and famous jeweler), you couldn’t find a 1-carat diamond ring that costs less than $15,000. Both of these diamonds are 1-carat, so why are the prices so drastically different? 

The answer lies in the concept of customer value. Every company has to work with customer value to make sure their customers are satisfied with the product and prices and find the products to be worth the price. So what is customer value? We’ll walk you through this concept and how your company can utilize it to help your customers. 

Why Does Customer Value Matter?

Customer value is something that every company should be working with and trying to understand and improve. Why? Understanding your customer value and why your customers come to your products and services can help you both retain your current customers and attract new ones. 

To retain your customers, it’s important to understand what they value about your product or service right now. For example, if your customers value your low prices, you’ll know to keep your prices low to keep them coming back again and again. If you added expensive products, your customers might go somewhere else instead. You’ll be better able to keep these customers coming back if you know how they perceive your company and why they value your products and services. 

You’ll also be able to attract new customers. If you already know why customers choose your company, you’ll be better able to tailor your products and services to attract new audiences who would have similar ideas of customer value. For example, if your company offers extremely low prices—especially compared to nearby competitors—potential customers who value low prices and savings would be drawn to your company. 

Overall, understanding and attracting customers is why every company should be focusing on customer value and what their customers need. But to better ensure you’re meeting your existing customers’ needs and drawing the new ones in, you’ll need to know how to measure customer value. 

How Is Customer Value Measured?

Many aspects of your company affect your customer value. Your reliability, your brand recognition, what industry you operate in, your public image, your customers’ experience, and more. But at its core, customer value is really only looking at two concepts, which means there is actually a formula for measuring customer value: total customer cost subtracted from perceived customer benefits. We’ll walk you through what these two numbers mean. 

What Are Customer Benefits?

Customer benefits are anything a customer perceives they will receive or gain from using your product or service. These benefits can include more than just the actual product or service though, as some benefits come through things like association with a well-known brand or a company that has good values. Here are some of the facets of customer benefits: 

  • The quality of your product or service
  • The ability of the product or service to provide a better solution compared to competitors
  • Your brand’s reputation and perception by customers
  • The customer experience provided by your company
  • The quality of your customer service team
  • The social advantages of partnering with your business
  • Your company values and charity work
  • Your public image
  • Speed of service, including speed of delivery of a product

What Are Customer Costs?

The other half of the customer value formula are the customer costs. Customer costs are anything the customer loses from buying your product or service. These costs can be broken down into two categories: tangible and intangible costs. 

Tangible Costs

Tangible costs are any costs that can be measured. These costs include: 

  • The price of your product or service
  • The price of an installation or onboarding, if applicable
  • The financial and time costs of maintaining a product
  • The financial and time costs of renewing or repurchasing a product

Intangible Costs

Intangible costs are any costs that can’t be easily quantified or measured but still have a big impact on the customer value. These costs include: 

  • A bad customer experience or bad interactions with customer service employees
  • The time costs for what it takes to purchase
  • The social cost of choosing your company over competitors
  • Any kinds of costs associated with interacting with your company 

To have a positive customer value, your customer costs will need to be lower—and hopefully much lower—than your customer benefits. 

How Is Customer Value Increased? 

Since customer value matters and can be measured, how is customer value increased? Here are some ways to begin increasing your customer value for your products and services: 

  • Focus on more than just the price: Price can be an important factor, but a lower price tag isn’t the only thing that matters for customer value. Your customers also need non-monetary benefits from your company, so don’t forget to improve everything around the products and services as well. And at the end of the day, focusing on high quality products and services will go further. 
  • Examine your customer experience: One of the non-price aspects to focus on is the customer experience. Analyze your customer’s journey from coming across your website to purchasing. Where might they be getting lost? Where might they hit snags? By identifying and analyzing each step through the process, you can improve your customers’ experience and improve customer value. 
  • Remove any obstacles you can: As you examine your customer journey, you’ll want to remove anything that could be holding your customers back. If your payment system is slow, it might be time for an upgrade. Customers will make a lot of decisions about your company based on these obstacles. 
  • Collect customer data from loyal customers: Your loyal customers are the ones who put the highest value on your brand. Collect data from them to see what’s driving them back to your company time and again. 
  • Understand why your customers choose your company: With your data from customers, see if you can determine why your customers are choosing your company. Having a better understanding of the value people are already seeing in your company will help you focus your efforts on the right areas of your company and your products. 
  • Make customer experience a top priority: Once you have all of the information from your customers and have optimized the customer journey, keep focusing on making the customer experience as wonderful as possible. A focus on customer experience helps keep a focus on customer value. 


Recall the 1-carat diamond example. While both the James Allen and Tiffany’s diamond are 1-carat, customers view the Tiffany’s diamond as being extremely high quality and high end. There’s more to the diamond than just a 1-carat stone; there’s brand reputation, customer benefits, and other parts of the customer value formula to consider. After weighing the costs and benefits, many customers find Tiffany’s a bang for their buck—the price tag isn’t the only thing that customers value. There’s also the quality of Tiffany’s, the brand recognition, and the long-lasting product. 

To begin understanding your customer value, you’ll need tools to start identifying patterns and beginning to figure out exactly what customers value about your company. Try out the Experience Clouds tool to recognize trends in customer value and begin improving your customer value today.

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