3 Steps to Customer Value Analysis

Customer Value Analysis is a tool that you can use to check how parts of your product or service your customers or market value more. How is that possible?

If you are looking at your sales figures, you have probably asked yourself “What can I do to make these go up?“. There are indeed many things you can do like getting your product into more sales points or promoting harder and better or slashing the price. But what can you do on the actual product that can improve things?

A product or a service package in a wider sense consists of objectively measured features like size and subjective features like smell or helpfullness of customer service. So, if you are to make your product better, how would you start?

You can brainstorm all you want, but ultimately you want to focus and prioritize. Unless you want to base your decision on what to change and how much only on experience, you can give it some support with Customer Value Analysis.

The concept follows Porter’s investigation of ways for businesses to get an edge from competition. It is a modern tool as it is focusing on the customer and the market. It was introduced by Dr Bradley Gale in his book Managing Customer Value. It has been used in academic research and applied in real-world businesses.

What are the steps of customer value analysis?

1. Find which features matter to my market the most

The first step is to find out what your market thinks on what’s important for your products and your competitors’. Product characteristics, like size, fuel consumption, capacity, taste, design, smell and so on affect your sales. But, there are other things your customer evaluates. These can be time to deliver (ship, serve, create, perform), customer service, ability to create and maintain your relationship with the customer, website quality, offices’ looks, warranty and so on.

You can look at your company’s data and consider contacting your customers (and competitors’). Focus groups can work for this stage more than surveys.

2. Measure how my product is doing in those features

The second step is to measure the performance of your product and competitors’. The objectively measured features like download speed, picture quality and so on may be easier to measure. The subjective ones like user-friendliness need to be measured by asking for people’s opinions using surveys.

3. Get the value-for-money

The third step is the comparison of products’ performance Vs price of yourself and the competitors. The comparison will show if you are charging more or less for what you offer compared to the others including of course the customers’ opinions. This relationship of offers to price is also called value. The higher the offer relative to the price, the higher the value.

In this stage, you will need to put everything down as numbers and pay attention when translating numbers back to business action.


The final question you can answer is:

How much should I change my price and/or offered features to produce better value?

What is important to understand here is that the goal is to offer higher value. This is becauseΒ  the higher the value relative to competition, the higher the market share. Changing the price may not be enough to make your product more valuable. On the contrary, financing improvement of the important features may give you just that.

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