In the past, most companies tried to increase their profitability by cutting corners, meaning that they strived to optimise their operational efficiency and lower costs.
However, the increasing globalisation meant that when lowering costs, companies were engaged in the race to the bottom, which refers to the notion that a price war would eventually wipe out any profitability and lead to unhealthy competition.
Therefore, companies also realise that they cannot cut costs forever without reducing product quality, and staying in business. It is crucial to generate more value for customers.
The elusive concept of customer values
In the first place, it is important to understand the meaning of customer value. Interestingly, despite the prevalence of the concept, not all public research agreed on a universal definition of customer value, citing the fact that value is highly relative and varies with customers’ life perspectives, cultural beliefs, and priorities.
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Regardless, in general, customer value can be measured as the difference between the perceived benefits that customers derive from the consumption of the products or services and the price that customers had to pay to obtain the products or services. This definition highly underlined the importance of customers whose opinions contributed to the perceived value of the product or services.
With the evolvement of the product development process and customers’ preferences, it is argued that customers wish to fulfil more than one need when consuming a product/service, looking for more than just one value.
In fact, researchers claimed that customers want to satisfy five different objectives from their consumption, including functional values, social values, emotional values, epistemic values (the new knowledge and wisdom associated with product and service consumption), and conditional values (the difference in utility level between different product consumption).
Another framework to measure customer value consisted of three fundamental dimensions, including product quality (the perceived utility of the product), delivery methods, and the overall experience of the customer at all touchpoints of their consumption journey. Accordingly, while companies can control some aspects of their product’s value to customers, there are many things outside of their control, requiring businesses to look at customer value in its entirety and think of a holistic approach to improving the total experience of the customers.
The central role of customers in determining customer values
Regardless of the definition, central to the customer value concept is the role of the customer, who ultimately determines the value of the products. Therefore, it is vital to learn about the kinds of needs that customers seek to satisfy through product consumption.
There are various theories to uncover customers’ needs; nevertheless, the most established theory is probably Maslow’s Hierarchy of Needs. According to Maslow’s Hierarchy of Needs, there are five levels of needs that a person might have, and to move up the hierarchy, the lower levels of need must be satisfied first. Specifically, at the very bottom of the hierarchy is the physiological need which can be satisfied by the functional values of the products. The next level of need is safety, including financial safety, healthcare, etc.
Once this level of need is met, customers look to fulfil their social also needs, allowing them to connect with other people in society, gain a sense of belonging and form long-lasting relationships. These two levels of needs can be met with the product’s social and emotional values.
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Next, on the higher level, customers hope to have more self-esteem and actualise their full potential, which can correspond with the social, epistemic, and conditional values of the product and service.
Engaging open innovation and customer involvement
Considering the diverse, complex, and fast-changing natures of customers’ values and needs within the current economic and social context, it is crucial for companies to help customers obtain more value and achieve more goals from production consumption.
More significantly, businesses should not just focus on some individuals but strive to serve as many customers as possible. Therefore, they must identify and define some shared values that are common across their vast customer base. To accomplish this goal, businesses must move beyond individual needs to recognise social needs and integrate prevailing social shared values into their customer value creation to motivate social progress through meeting individual needs.
Consequently, one way to do so is to shift from an inside-out idea brainstorming and innovation process to outside-in value creation which invites external stakeholders and engages outside resources in the process. Indeed, open innovation has become the cornerstone of contemporary marketing practices, taking advantage of the massive pool of ideas and data from around the globe to select the most common causes and values for the company to satisfy.
In sum, by understanding the concept of customer values, businesses can better serve their customers, enhance the perception of their products’ worth, and retain their customer satisfaction and loyalty.
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