Whatever product a marketer has to offer in the market, one thing is sure, it’s going to get competition. It depends on the product type and marketplace what degree of competition it’ll get. In highly competitive marketplace, managing the non-price purchase and satisfaction drivers that matter most to customers can positively impact market share. Customers make purchase decisions based on how valuable they perceive the quality of available products or services as they relate to price. Those organization’s that are perceived to offer low value are highly unlikely to attract new customers and retain their existing customers. In a highly competitive market, an organization’s competitive position is determined by the perceived value of its products and services, relative to the competition. Customer value analysis is a powerful analytical technique that help marketing managers to measure and grow relative market share.
What is Value Analysis
Value analysis is a process to identify and eliminate product or service features that add no true value to the customer or the product bur incur cost to the process of manufacturing or provision of service. Value analysis process is used to offer a higher performing product or service to the customer at a minimal cost. The competitive pressures are forcing manufacturing and marketing organizations to re-examine their product ranges to offer higher level of customization without incurring high cost penalties.
Value Analysis can be defined as “a process of systematic review that is applied to existing product designs in order to compare the function of the product required by a customer to meet their requirements at the lowest cost consistent with the specified performance and reliability needed.”
Value analysis is a systematic, formal, and organized process of analysis and evaluation. Value analysis concerns the function of a product to meet the demands or application needed by a customer. In value analysis the review process include an understanding of the purpose to which the product is used. The formal management process must meet these functional specification and performance criteria consistently in order to give value to the customer. In order to yield a benefit to the company, the formal review process must result in a process of design improvements that serve to lower the production costs of that product whilst maintaining this level of value through function.
Customer Value Analysis
Customer Value Analysis is a powerful tool used to better define an organization’s products or services because it provides a better understanding of what customer value most. It allows an organization to view its performance relative to the competition. Customer Value Analysis leads to development of high quality products, new product line extensions, and an optimal marketing strategy. Customer Value Analysis is critical to understand the needs of the market, and to track organization’s and competitor’s performance on those needs.
In other words, Customer Value Analysis helps businesses understand the perceived value customers get from using their product or service. There are many benefits of conducting customer value analysis. It can help businesses to improve their products and services, better understand their customers, and make more informed decisions about pricing and marketing.
Importance of Customer Value Analysis
Customer value analysis can help your business in several ways, including:
- Improving customer retention – Customer value analysis can help you identify which of your customers are the most valuable and, therefore, worth retaining. This is important because it costs far more to acquire a new customer than to retain an existing one.
- Increasing customer lifetime value – Customer value analysis can also help you increase the lifetime value of your customers. This is because it can help you identify ways to increase the value that each customer brings to your business. For example, you may be able to upsell or cross-sell additional products or services to your most valuable customers.
- Identifying new revenue opportunities – Customer data can also be used to identify new revenue opportunities. For example, if you know that a certain type of customer is particularly valuable, you may be able to target similar customers with your marketing efforts. This could lead to an increase in sales and revenue.
- Improving customer satisfaction – Another way that customer value analysis can benefit your business is by helping you improve customer satisfaction. Understanding what customers value most can help you ensure that your products or services align with their needs and expectations. As a result, customers will be more satisfied with what you have to offer, leading to improved retention rates.
How to Conduct Customer Value Analysis
Assuming you know the importance of customer value analysis and have identified your target market, it’s time to start conducting customer value analysis. But how exactly do you go about doing this? There are five key steps you need to take:
- Identifying the main attributes that customers value – This may be identified by asking a group of representative customers of the target segment(s). You may ask them what they look for in a product and how they select a particular seller. You should record their responses to help you identify your company’s position in the minds of your target buyers.
- Assessing the quantitative importance of the different attributes – To assess the importance of different attributes that customers consider important, you may request them to rank the attributes in order of ascending value. By averaging their rating, you can decide which attribute is most important, which comes next to it, and so on.
- Assessing the company’s and competitors’ performances on the different customer values against their rated importance – On the third stage, you may ask your respondent customers to compare your company’s performance with that of your competitors with respect to each of the attributes they consider important.
- Examining how customers in a specific segment rate the company’s performance against a specific major competitor on an attribute-by-attribute basis – Here respondent customers are requested to compare the company’s performance with that of the major competitors against each of the attributes of customers value. It helps the company identify its position with respect to its major competitor. This helps the company to decide whether it should raise its price, reduce it, or keep the price unchanged.
- Monitoring customer values over time – Customers’ values always do not remain the same. They may change with the elapse of time, and consequently, a company should, after certain intervals, measure customer values for revising its strategies if required.