What is Customer Value? - Marketing & Definition

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  • 0:03 Customer Value Defined
  • 1:49 How is Customer Value…
  • 3:11 Why is Customer Value…
  • 4:06 Lesson Summary
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Lesson Transcript
Instructor: John McLaughlin
In this lesson, we will learn the meaning of customer value and discover how consumers use customer value to make buying decisions. We'll also learn why companies must establish and maintain a high customer value for their products and services.

Customer Value Defined

You make buying decisions every day. Should you buy the Skinny Caramel Macchiato at Starbucks or the house blend coffee at the fast food drive through? Is the new iPhone game app worth 99 cents, or can you find a free game app that is basically the same thing?

In every buying decision, a consumer asks the same question: 'is what I am going to receive worth what I have to give up in order to get it?' The gain the consumer receives for the benefit is weighed against the cost the consumer must pay to acquire the benefit. The value the individual consumer places on a product or service becomes the customer value for that offering.

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This customer value is weighed against the customer values assigned for similar products and services that would provide a similar benefit. Consumers will typically purchase the item with the highest customer value among all offerings in the marketplace. When you are deciding where to go for lunch, for example, do you consider Subway to have a higher customer value than Burger King?

Every consumer has a unique set of needs and resources, so no two consumers will place the same customer value on the same product or service. The highest-quality product or service does not always provide the highest customer value, since the benefit of each item is measured against the cost. Some consumers are willing to pay a high price for a quality product or a high level of service, but others will make the decision that the same benefits are not worth the price.

On your next vacation, would you rather stay at the Marriott or the Quality Inn? The Marriott will provide you with a nicer room, a fancier lobby, and room service, but you might rather spend the money you save by staying at the Quality Inn on souvenirs.

How Is Customer Value Delivered to the Customer?

There are three ways a company can establish customer value to its customer base:

1. Provide the consumer with the best cost.

Companies can choose to focus their efforts on providing a reliable product at a reasonable price. The low price helps to increase the value of their offering to the consumers even if it is weighted against a low benefit. For example, you might place a high customer value in a meal at McDonald's restaurant because you know you will receive a consistent, satisfactory meal at a low price.

2. Provide the consumer with the best product.

Companies that offer top-quality products increase the customer value of their offerings to their consumers by providing a high benefit, which exceeds the high cost. Lexus, for example, makes a luxury car that many consumers consider to be top quality. Lexus, along with other luxury car manufacturers, is able to charge a premium price for their cars, since they consistently produce cars of this high quality in the minds of their consumers.

3. Provide the consumer with the best service.

Companies that provide a high level of service to their consumers increase their customer value of their services by providing a high benefit, which exceeds the cost for many consumers. Consumers who buy from these companies are willing to pay more to be treated with exceptional service. The retailer Nordstrom, for example, has legendary customer service that is unmatched in the retail industry.

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