Is customer value a two-way stream? If so, how do we understand the importance of customer value beyond a formula?
Did you know that there are over 4000 mousetrap patents just in the USA, and this is not counting the designs that were not patented?
A quote wildly attributed to Ralph Waldo Emerson says, “Build a better mousetrap, and the world will beat a path to your door.”
The logic is simple. There would be as many mouse traps in the world as there are mice. Even if every mouse trap executed the same task, the misery of having a nosy rodent drives people to find the next best mouse trap.
In a discreet corner of Emerson’s journal, a scribbled note expanding beyond mouse traps said that ‘the world would beat a path to the door of anyone who sold better corn, wood, boards, pigs, chairs, knives, crucibles, or church organs.’
A ‘better’ or a ‘great product’ is tricky because even household brands have had massive misses; take the example of New Coke or Newton, Apple’s first PDA.
In a mission to understand the secret sauce of a great product, we asked the underlying question of how people perceive the value of the product. Rather than targeting a product-market fit, we narrowed it down to a product-human fit.
Our hypothesis was product value is dictated by what the customer perceives about the product in unison with what the product perceives of its customer. It is a two-way stream, and when the expectations meet mid-way, it can lead to product adoption.
We asked Colin Crowley, a customer experience innovator and CX advisor at Freshworks to decode the importance of customer value and how it makes or breaks the product.
The insights from the conversation were so deep that we had to break down our understanding of customer value into three parts.
Part 1: What is customer value, and how do we measure it?
Part 2: How does a startup or a scaling company build customer value and ride the Trojan horse to success?
Part 3: The overlooked link between product experience and customer value.
But before we move to our takeaways from the conversation,
Customer value is self-explanatory. It measures the product or service’s value through the eyes of the customer and is a correlation between their effort and the price they pay compared to their opportunity costs.
Simply put, it is the perceived worth of the product to the customer compared to the alternatives.
Customer value is an important metric to consider as it is directly related to the satisfaction of your customer. It isn't always a byproduct of your product’s sophistication, and that gives one more reason to look at customer value beyond a formula.
We asked Colin Crowley what customer value is and how to perceive it if we want to be in the same boat as the customer. Here are the top points.
Being a customer of software and a CX leader at many organizations, Colin has seen two sides of the spectrum. He strongly believes that customer value is far from being restricted within a formula.
“Formulas have their place - and sometimes you can try to metricize and formulize things at least, so you get something that's more trackable. But customer value is really beyond the formula and involves key intangibles. Acknowledging those and finding a way to incorporate them into your value calculator is crucial.”
When thinking about customer value, it is often broken down as the customer’s expectations in the light of a single product but is also about the total products in the company’s ecosystem.
Colin elaborates on this view based on his experience with leaders and investors who generally place a huge value on companies that have a wide suite of products. They might opt for only one product today, but it leaves the room open for them to potentially bring other products from the company into their larger ecosystem.
Many times companies overlook the benefit an ecosystem of products offers to its customers in terms of less siloing of data, less administrative inefficiencies, and so forth. Colin says,
“Sometimes people think of customer value product-by-product, but it's important to understand that any product is also part of the ecosystem in which other products operate and that that ecosystem can increase the value of a given product or make a consumer be more forgiving about current product deficiencies."
Playvox is a company that has deliberately developed a wide suite of product offerings that are complementary to each other across quality assurance, customer surveys, workforce management, and beyond.
Freshworks, where Colin works, similarly offers products for customer support, IT ticket management, business services, sales and post-sales marketing engagement, and even a new free surveying tool. The ideology is that there are so many different things in the product ecosystem that adds value to customers so they can experience different products and have a single source solution for many things.
A realization that hit Colin at Freshworks was about how with their suite of products, they spent too much time talking about what they had today rather than what they were going to do tomorrow.
Colin says customer value, in fact, is only 50% about what is there today, and the rest is reliant on the product capability of tomorrow.
“If you want to have a relationship with a company and you intend to grow with that company and grow with their product and grow with their service, you want to know where they're heading and why they're heading there and how they plan to get there. Speaking to the innovation at the heart of your business is just as important as what the products are doing today.”
Including your customer in your broad vision and being able to articulate it is important. But most importantly, being able to show things that exemplify it as well is also really important.
The most undervalued asset while calculating customer value is human relationships. Many times companies are very product-focused, and as part of the Voice of the Customer initiative at Freshworks, Colin ensures that the messaging of the company goes beyond what the product delivers but also about the human relationships it helps build.
Customer value is directly tied to the customer's feelings about their relationship with the product. The people behind the product build this relationship. Freshworks captures the essence of human relationships at the very first. Colin says,
“I see all these different things we're doing to invest in the human relationship through offering special onboarding, superior customer service, closer relationships with Customer Success Managers, and even industry experts like myself who offer complimentary best practice advice. We're also doing all this stuff in our online community, and we have all these interesting programs in customer success to reach out to customers. These things are part of the value proposition of a company, alongside the products.”
The one thing about customer value that seems self-explanatory but also gets overlooked is that customer value can be very dependent on different customers. Colin says, “it's important to understand the different types of customers you have and to segment your customers naturally based on how they segment themselves.”
It’s never one-size-fits-all, and there may be certain things that are general across your organization in terms of the service and products you offer, but it's also important to understand that there are different nuances across different customers and to make sure that you're also looking at customer value through the eyes of different types of customers.
“It's very organization-dependent in terms of what those different types of customers are. It could be based on business size, or it could be based on their level of prior investment or maturity or loyalty, perhaps.”
Understanding customer value depends on the organization and puts the onus on you as a company to do due diligence and understand the value you bring to different customer types.
Colin asks every company, irrespective of their size, to ask themselves, “Where should we segment our customers in terms of where we see differences in customer needs and how customers may perceive value and make sure that you're being very mindful of that when you're developing your products.”
The most important time an organization needs to look into customer value is from step 0 when they are building their product. But an early-stage or a rapidly growing startup might have many moving parts. In that case, how does one account for customer value when the customer and the product evolve in ways unseen?
What does Colin think about a shapeshifting ocean of startup dilemmas?
Watch out for Part 2 for more information. Psss, here's a sneak peak