How to measure customer value?
A simple formula may help you
We all know that any business should create value for customers. Value is what a customer is willing to exchange for their money.
But how can we measure it?
If we successfully sell our products and see growing sales, this may serve as an indirect indicator that customers are satisfied. However, they may also consume our goods simply because there are no comparable alternatives – so far. Or, they may do it for other reasons, but it doesn’t mean they are happy with them.
Metrics like NPS, CSI, and others can help us gauge how well we meet customer needs. Yet they measure satisfaction, not customer value.
I use a simple formula for evaluating the value a product creates for customers. It wasn’t derived from scientific research. I came to it empirically, conducting dozens of strategic projects.
It looks like this:
CV = CN*NAC – CF – PPG
CV represents Customer Value, while CN stands for Customer Need.
Similarly, NAC refers to the Need Awareness Coefficient…