I once asked an entrepreneur a very simple question. How do you know that your customers are receiving value? He looked at me confused and said, “If they weren’t receiving value, then they wouldn’t be customers.”
While this answer may sound reasonable, it’s not. When I spoke with his customers to learn about their experience, I heard a consistent and scary message, “The product does the job, but I don’t think this is our long-term solution.” Does this sound like a customer who is receiving value?
This man had a strong value proposition and an incredibly valuable product, he just wasn’t demonstrating and communicating that value back to the customer. This is not an isolated incident, and it’s one of the biggest mistakes I see companies make. If you can’t measure and articulate your value proposition, neither can your customer. It puts you at risk of a competitor swooping in, who can communicate value to your customers.
Our goal for this post is to help you improve the way you measure and demonstrate value proposition.
What is a Value Proposition?
Value proposition is a short description that tells a customer why they should buy your product or service. This is your promise to your customers. For resources to help you craft a strong value proposition, check out this ROND newsletter. Your value is when you deliver on your value proposition.
What are the Different Types of Value You Can Provide to Customers?
Before you can measure your value, you first need to have a clear understanding of what value your customers are looking for. Customers expect two main types of value, business value and emotional value. Business value is tangible. It is easier to identify. Solutions with business value improve efficiency, increase revenue, reduce risk, increase convenience, add functionality and improve quality. Emotional value is a bit more nuanced. Emotional value provides your customers with a sense of something, whether that’s health, ethics, beauty, newness, social status, etc. Ben Casnocha, further breaks value into four categories, which you can find here.
How do you Measure Value?
Measuring value isn’t hard, but it does take a proactive effort. Each company has a unique offering, so I’m not going to get into the weeds on reporting. (I don’t know what kind of systems you are using). Instead, I’ll provide you with best practices to get your company started on measuring customer value:
Rule 1: Instill customer value creation as a core mission of your organization.
Customers are relationships, not checks. Every interaction with a customer is an opportunity to provide and measure your value. Your customer service, sales, implementation and support teams should all have processes to solicit feedback from customers and communicate value back.
Rule 2: Track everything.
We live in a world where it’s feasible to track online and offline interactions. You should track every element of your customer’s journey in detail.
Rule 3: Plan for ROI
What is your ultimate ROI goal? Measure the relevant metrics you plan to impact before your solution is implemented with the intent of benchmarking the same metrics at different intervals throughout the customer lifecycle.
Rule 4: Never settle for intangible value.
Intangible value can be an incredibly powerful thing. I once had an entrepreneur tell me, “If you take my product away, there will be riots.” And he was right. But how did I confirm he was right? I looked at his user engagement metrics and talked to his customers. There is always a way to provide supporting data for intangible value.
How do You Communicate Throughout the Value Spectrum?
It’s important to demonstrate value to customers at each phase of their customer journey. So what are the different phases you should be communicating value across?
Phase 1: Hypothetical
Customers sign up for a new products or services for the promise of future value. Before a customer has even interacted with your product or service, they have certain expectations. What value can you provide them to start your relationship off on the right foot? Would they find value in resources to explain onboarding? Can you give them examples of how other customers have utilized your offering? Do they need materials to increase buy-in among their colleagues?
Phase 2: Early-Wins
Customers are impatient and fickle. Prove your value early and often. Making your customers lives easier. Help them look like a hero. You don’t need hard proof; it’s too early for that. Anecdotal feedback and stats that show that you are on the right track can make a big impact.
Phase 3: Proof Points
This is the phase where you start to put your money where your mouth is. At some point, you will have enough data points on a customer to show them that it’s working. You may not be able to show definitive ROI, but you should be able to provide them with evidence that they can look at and say, “Wow, I already see results!”
Phase 4: Proven ROI
Proven ROI is the holy grail of value. It’s hard proof that you lived up to or exceeded your value proposition. Proving ROI often takes creativity, particularly for folks who offer services, where the value propositions aren’t tangible increases in revenue or decreases in costs. If you are struggling to identify a proven ROI, try this exercise: First, fill in the blanks below.
- Because of my product/service, my customer ______.
- Without my product/service, my customer would have ______.
- Before my product/service, my customer ______.
- My product/service enabled my customer to ______.
Next, tie in the proof points. How do you know that you enabled this? How can you measure the result you created? How do you know you were responsible vs. the other initiatives the customer was doing? Get creative. I once met an entrepreneur who sent a member of her team to weigh the paper recycling bins each week to prove that they reduced paper output. Obviously, this isn’t scalable, but it is creative.
Phase 5: Repeatable ROI
Being able to replicate value across all your customers is the key to building a successful business. You should constantly look to refine and hone the way you demonstrate and measure value to customers. Each time you sell a new product to an existing customer, you should repeat this whole cycle over again.
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