Unlocking the potential of your customer base is fundamental for sustainable business growth. Businesses are increasingly rejecting volume-based strategies, instead focusing on value-based strategies to identify and cater to higher value customers.
This is where customer value management (CVM) comes in. At its core, CVM shifts the focus from the number of customers to understanding and maximising the value each individual customer brings. By putting customers at the centre of your business strategy, you can drive growth, nurture brand loyalty, and ultimately increase your bottom line.
This article will look at what customer value management is, and what strategies and best practices can be used to help you make the most of it.
If you're interested in taking a closer look at how technology can streamline CVM processes, consider exploring our value based management platform.
What is customer value management?
Customer value management (CVM) is a business strategy that centres around maximising the value delivered to individual customers over their entire lifecycle with a company. This approach is used to represent the value journey a customer goes on and develops best practices for creating value at each step of the customer journey.
This encompasses all stages of interaction with prospects, starting from their very first contact or purchase, right through to their most recent interaction. By assessing the value throughout this journey, you can measure how much value they bring to your bottom line, and the value you bring to them.
Take a look at our value based management platform which helps businesses focus on creating customer value, not just volume. We use a data-driven approach to analyse the value of your customers to provide you with detailed data to help you understand the long-term impact each one will have on your business.
Why is customer value management important?
Customer value is a crucial concept for a business to get their head around. Whenever a customer purchases a product or service, they want to feel like they are getting the right value for the price they’ve paid.
If they later decide they don’t think it’s worth that amount, this is known as buyer’s remorse. They’ll be unlikely to buy from you again and may look at what your competitors have to offer instead. It can only take one bad experience for a customer to avoid your brand for the rest of their lives.
Every business should be thinking about customer value management. Here are 7 reasons why CLV is important:
1. Customer retention
If your customers are satisfied, they’re far more likely to stay loyal to your brand. This reduces customer churn and increases customer retention rates. It is usually more cost-effective to retain existing customers than trying to acquire new ones.
2. Customer lifetime value
Customers that engage with a brand over an extended period usually have a higher customer lifetime value (CLV) as they’ll spend more money over time.
3. Positive word-of-mouth
Happy customers will be more likely to tell others about a good experience they’ve had with a brand. They’ll be even more likely to tell people about a bad one, too, so it’s important to deliver a positive buying experience!
4. Reputation and brand image
Brands with a positive reputation are more likely to succeed compared to those with a negative or neutral one. If a customer trusts your brand, they’re more likely to choose it over your competitors.
5. Reduced customer service costs
If your customers are satisfied, the chances of them contacting you to complain are far lower. This will lower your customer service costs that would be related to resolving any issues from complaints.
6. Boosted employee morale
Employees will feel more motivated and engaged when they see customers are satisfied and that their work is having a positive impact. Also emphasising customer value encourages everyone within your business to understand the importance of delivering value and contributing to the overall customer experience.
7. Risk mitigation
Happy customers are less likely to place negative feedback about your brand. This also reduces the chances of any legal action being taken against your brand which can be time consuming and costly.
Best practices for effective customer value management
Customer value management can help you understand and maximise customer value throughout the entire customer journey. Here are some practices to help you get the most out of the process:
Focus on value over volume
Having more customers doesn’t always mean you’ll maintain a sustainable profit. Find your most valuable customers and maximise your profitability. For example, 1 in 5 newly acquired telecom customers are value-destroyers, making it paramount that Telecom providers prioritise value over volume. Working out a customer’s long term value can help you make sound business and strategic decisions that can improve your return on investment.
Develop value propositions
Craft relatable and compelling value propositions that clearly communicate the benefits of your products or services and how they also address any specific customer pain points. Consider USPs that help customers solve problems that your competitors can’t.
Map the customer journey
Map out the customer journey from the initial contact all the way through to the end of the sale and beyond. Identify the main touchpoints and moments of truth where customer value can be enhanced. You should try to ensure a seamless and consistent experience throughout the journey.
Listen to your customers
Develop a deeper understanding of your customers by gathering data and insights through surveys and feedback. This can all be used to create detailed customer profiles to segment your audience based on their preferences, behaviour and needs.
Personalise interactions
Tailor your interactions with customers based on their preferences and previous interactions. This can involve personalised recommendations, targeted marketing campaigns and customised offers.
Cross-channel integration
Ensure that your CVM efforts are integrated across all customer touchpoints, including marketing, sales, customer support, and post-purchase interactions. Consistency and continuity in value delivery are crucial.
Empower employees
Empower your employees to deliver exceptional customer experiences. Provide training and support to front-line staff to enable them to understand and meet customer needs effectively.
Review and improve
You should regularly review and analyse your CVM strategies and performance to identify areas for improvement. If you spot any areas that can be enhanced, look at implementing the necessary changes.
Examples of customer value management
We’ve worked with many clients to help them understand their customers better and maximise their value. Here are some case studies of clients which demonstrate the effectiveness of customer value management:
Our market leading value based management platform can help you identify your most valuable customers. It provides you with the information to make key strategic decisions that will maximise your profits. Contact us today to see how we can help you identify your most valuable customers.