As markets grow increasingly competitive, companies are quick to cut costs or rely on brand reputation to keep customers coming back. But customers make purchase decisions based on value. They only rely on cost or brand in the absence of clearly communicated value. Customer Value Measurement (CVM) will tell you what kind of value you should be communicating to customers and prospects, and how it compares to competitors.
CVM replicates the purchase behavior in your market to measure your overall market value position, as well as head-to-head comparison against your major competitors. CVM reveals insights into how best to gain or protect market share, differentiate in a crowded marketplace and whether or not your company is leaving money on the table.
How CVM works
Customers determine Value based on the Benefits (e.g. what they receive) and Costs (e.g. what they risk or give up). Costs are not limited to price; for example, a cost could be the time needed to drive the extra distance to a restaurant versus choosing a closer one.
CVM identifies the Benefit and Cost attributes of the market, and how much weight they each carry in the purchase decision. Customers rate how their primary provider (either you or your competitor) performs on each of these attributes. The ratings are weighted, using the relative importance of attributes, to give a highly targeted analysis of your market strength, including improvement areas and potential advantages.
A real-life example
To better penetrate a niche market, a client wanted to know how to better compete against the market leader. The client was perceived as being more expensive despite offering comparable pricing. This led to sales reps’ demand to cut price.
The results of our CVM analysis showed that the client was stronger than the competition in two Benefit attributes: account management and customer service/support. Customer service, in particular, was found to be a large driver of customer loyalty and perceived value.
SMS concluded that the client was having difficulty with market penetration because the major competitor had trained the market to focus on costs, giving them an advantage by forcing the client to compete on price. By breaking out of this cost-centric model and focusing on benefits instead, the client would boost engagement, strengthen customer loyalty and increase retention. This would help them build value to overcome negative price perceptions and grow, all without sacrificing margins.
Leverage CVM data to find your advantage
A successful CVM analysis needs more than just data. Expertise and experience go a long way to ensuring you get the most out of this incredible methodology. Attributes need to be carefully chosen and defined to make sure results are clear and actionable, and advanced analytics are required to determine the latent drivers behind consumer behavior.
When working with a market research firm, expect to receive strategic business guidance. SMS is committed to further development of all aspects of this process, with special concentration on the consulting interventions that help organizations gain full value from their CVM investment.
Market research firm SMS Research Advisors are part of PadillaCRT. This article originally appeared in the SMS blog.