What is Customer Value?

Don't make the same mistake as everybody else

Jun 17, 2025

What is customer value?

Before you read the definition of customer value in the next section, have a go at answering this question for yourself first.

Have a little think, then write down your answer or read it out loud or quietly in your mind, whichever works best for you.

No cheating!

The definition of customer value

Customer value can be described as the perceived worth of your product/service to the customer, by considering the associated benefits it brings, less the costs that the customer incurs.

Customer value = Perceived worth/benefits - perceived costs/drawbacks

As a subjective concept, this means that two products with the same price and cost could have different value, in the eyes of the customer.

Note that customer value is not the same thing as a low-cost manufacturing and price optimisation strategy, where a company attempts to maximise revenue while remaining attractive to customers.

When assessing customer value, the customer will factor in benefits vs drawbacks associated with using the product or service, hence why the concept expands beyond the product/service itself.

In other words, customer value also considers intangible aspects such as customer service, user experience and brand association.

The customer’s overall perception becomes your reality.

The mistake that (nearly) everybody makes

People generally find it easy to understand what customer value is and agree that it’s really important.

Words of wisdom such as the quote below tend to resonate with business audiences:

“Customer will create most value for you at the point where he thinks you’re creating most value for him.” — Don Peppers

It seems like the perfect business strategy at this point. Focus on increasing customer value and business value will follow.

There is just one little problem in the way: Time.

The transmission mechanism between customer value and business value is not instantaneous. It takes time to play out — customer value management is a long-term game.

However, businesses usually want to see a clear and direct commercial impact and in practice this means a strong focus on short-term results.

Without the right guidance, it is not hard to imagine why customer initiatives can risk getting deprioritised over other revenue-generating activities.

Add to this that many ‘customer’ strategies have a measurement problem — customer success, customer experience, customer advocacy etc. People intuitively know these are the right things to do, although quantifying the impact and benefit is not as straightforward as counting the number of widgets sold in the next sales campaign.

Where all of this can lead to is down the opposite route of what was outlined above. Customer value leads to company value, but this doesn’t necessarily work the other way around.

Focussing on trying to make money over making meaning for the customer is the mistake that everybody else makes.

But not you. You’ve been reading Scaling Customer Value!

As long as you stay focussed, patient, determined and keep adding value for the customer and the money will follow.

How to increase customer value

As you know by now, there are two different dimensions to customer value: (perceived) worth/benefits and costs/drawbacks.

There are quite a few different factors moving elements to consider here, but in the spirit of keeping things simple:

How can we take the first few basic steps to increase Customer Value?

Let’s break this down with a couple of practical examples.

I would recommend focusing on and trying to improve just one thing at the time, while holding the other factors constant (unchanged).

Examples:

Actual cost → Lower the price (e.g. work towards reducing manufacturing costs through lower overheads, price of material, labour, process efficiencies etc).
Perceived cost → Eliminate / mitigate drawbacks (e.g. long waiting times, product and process pain-points as guided by customer feedback).
Actual benefits → Solve real customer needs, don’t just add more features (enhance your proposition/offer by adding incremental value, without upping the price).
Perceived benefits → Win the hearts and minds of customers by taking into consider intangible aspects, such as adding in a wow-factor to your servicing or customer experience. This can be anything from fast delivery times to a smooth customer journey, or offering a highly personalised and memorable service.

You should aspire to improve all of the above aspects to maximise customer value for your product/service.

Although in practice, it might be better to double-down on only one or two areas where you got most leverage (e.g. your competitive advantage) versus competitors.

The choice of customer value strategy is yours to make.

I will end with a suitable inspirational masterpiece which (with a bit of imagination) is obviously all about customer value.

All these words I don’t just say.

And nothing else matters.

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