A Complete Guide to Customer Value

What is Customer Value

You can build a successful eCommerce business by creating value for your customers throughout the shopping journey, not just by offering the best price. 

Customer value provides an organization’s foundation for growth, as it affects nearly every metric that matters to an online store. It increases customer retention and loyalty (satisfied customers tend to stick around longer), which creates a strong competitive advantage. Finally, it helps boost revenue, because happier customers are more likely to become repeat buyers and spread the word about your business.

In short, delivering customer value is essential. But where do you start? 

Use this guide to learn the definition of customer value, why it’s critical to your business, and how to increase the perception of customer value to ramp up sales. 

What is customer value?

Customer value is the net benefit a customer receives from a product or online store compared to alternatives. It’s been a well-researched topic in marketing for the past two decades and plays a crucial role in predicting customer choice. If a retailer can deliver value to a consumer, they are well on their way to creating a fundamental competitive advantage. 

While there are many different interpretations of “customer value,” here are the two overriding definitions:

  • Product value: a shopper’s satisfaction with a product in relation to what they paid for it
  • Shopping value: a customer’s perception of an online store’s shopping experience and the user journey of finding, purchasing, and receiving their desired product 

Many retailers focus first on product value and try to appeal to customers by offering the best product for the lowest cost. Yet rock-bottom pricing is not the only way to increase customer value, and it puts you in the unenviable position of ensuring ever smaller margins. 

Though price does play a huge part in the perception of value, consumers also derive it from the online shopping experience. According to data in the paper “Variable Relationships in Online Retailing: Cultivating Consumer Satisfaction and Loyalty,” this can include entertainment, convenience, interactivity, and visual appeal. 

Moreover, while the temptation of a low-priced product is a considerable draw, consumers also appreciate a personalized experience as a part of an enjoyable online shopping environment. This is a significant opportunity for retailers to create a unique customer experience strategy valued by their target audience.

Customer value goes far beyond offering a lower price than the competition. It’s an umbrella concept that applies to both the shopping experience and perceived product value. Once a retailer knows what their customers value, they’ll gain a competitive advantage in the marketplace over their less knowledgeable competitors. 

The importance of understanding customer value

As an eCommerce marketer, you strive to create customer value-related strategies to cultivate long-term success. Understanding customer value is essential to predict customer behavior that will lead to such success, yet in online retail, gaining insight into this value may seem daunting.

In his classic Marakon Commentary, Ken Favaro, Chief Strategy Officer of BERA Brand Management, explains why customer value creation is such an important strategy:

Understanding where, how and why value is created within your company and your markets is the best, most objective way to identify which of your activities and assets are distinctive enough to provide a platform for sustainable and profitable growth.

Being aware of your customers’ wants and needs can lead to successful marketing because you can: 

  • Determine which customers in which to invest (and which ones to deprioritize)
  • Create a more targeted value proposition to attract more profitable customers
  • Enhance existing services to deliver an improved, more personalized shopping experience
  • Bolster product benefits by understanding how and why people use your products
  • Better understand your customers’ behavior, which will enable you to help them make better buying decisions
  • Find out what products high-value customers want
  • Learn which products have the greatest profitability

One landmark example of an enhanced customer value is Amazon’s 1-Click checkout, patented in September 1999. This feature allows shoppers to purchase an item with a single click. 

Amazon 1-click example
Image courtesy of Tech in Asia

At the time, the online checkout experience was tedious. Customers had to submit long, cumbersome payment and shipping information every time they bought something, even if they had previously provided their information.

Amazon knew their customers valued an expedient, hassle-free shopping experience, and that a lengthy checkout procedure resulted in increased cart abandonments and missed opportunities. 

Armed with this knowledge of their customers’ habits, Amazon created the 1-Click patent, which helped generate traction for the company when it was first starting out. Their improved checkout experience promoted a greater affinity between Amazon and its customers and increased the perceived value of the shopping experience. Then, as their customer base grew, the company began to collect and use shopper data to create even more value for shoppers and to drive new customer acquisition, producing a virtuous cycle. 

To build more meaningful relationships with customers, you have to engage with them and understand how and why they purchase items, both of which we’ll cover later in this article. 

How to measure customer value

An important part of a successful customer experience strategy is ensuring the tactics and channels you choose achieve your business goals. To do that, you need to know how to measure customer value.

While there are many models used to measure a customer’s value to a company, the simplest one for most eCommerce stores is Customer Lifetime Value (CLV).

“Customer Lifetime Value can be defined in many ways depending upon the business model used or the level of accuracy used in the calculations. 

Generally, customer value is defined as the customers’ dollar value based on present total spent and future projected cash flow for the customer. When used in this manner, the lifetime value metric is generally used as a tool for business predictive analytics and projections.”

— Rorie Devine, CEO, and Founder of GRO.TEAM

The formula for Customer Lifetime Value can be defined as:

Average order value X number of times the customer buys each year X average length of the customer relationship in years

For example, a well-established interior designer who regularly buys picture frames from your shop may be worth:  

$120 per frame X 20 frames per year X 7 years = $120x20x7 = $16,800

Whereas a new homeowner in their 30’s might be worth:

$35 per frame X 3 frames per year X 15 years = 35x3x15 = $1,575

In which segment would you invest more time and energy? The interior designers, clearly (unless you have a penchant for leaving money on the table!) 

You can use CLV to calculate the profitability of a particular relationship and decide how to increase the value you deliver to that group. If your CLV moves up and to the right, this indicates you’re providing more value for customers. If it continually declines, you may want to revisit your customer experience strategy. 

How to increase customer value

Ah, the $64,000 question: how do you create more customer value? Here are seven of the best ways to develop and implement strategies that will increase your store’s customer value. 

  1. Expedite the shopping experience
  2. Create an interactive experience in your store
  3. Provide visibility into order status
  4. Reward loyalty
  5. Collect customer feedback and highlight reviews
  6. Send personalized offers
  7. Make products easy to find

1. Expedite the shopping experience

With online stores open 24/7, shoppers have more flexibility to shop anywhere, anytime. Accommodating a customer’s schedule is critical for retailers; saving time is a leading motivator for online shoppers. 

To increase customer value, you should be prepared to provide information about products to assist in purchase consideration and facilitate a sale. You can achieve this with a Customer Chat window on your website.

Customer Chat enables you to automatically field questions at any time or connect shoppers to a customer service agent if they want to talk to a human. Having this option available helps customers cut down on search and deliberation time.

Blossom Flower Delivery, an online flower delivery service, offers a customer chat on their homepage.

Customer Chat Example for Online Store

The chat window notes that the company “typically replies instantly” to queries, so if shoppers have a question about a product or service, they can rest easy knowing that they’ll receive an answer quickly, regardless of the time of day. Offering a responsive chat service demonstrates your customer devotion—shoppers won’t hesitate to exit your site and move straight to that of a competitor if they don’t feel appreciated.

Customer Chat helps you guide customers towards a purchase and minimizes the effort they need to expend to find what they need. 

2. Create an interactive experience in your store

Multiple studies indicate that online shoppers visit websites for amusement, not just for information or with a purchase intent. One way to capitalize on this habit and increase customer value is to create a fun, interactive experience on your site.

Quizzes, giveaways, welcome series, etc. can act as lead generation tactics while providing an  enjoyable encounter for shoppers on your site. They’re a great way to improve the customer experience, while also helping to surface products for various customer segments.

hideAWAY Handmade, an Australian online purveyor of signature handcrafted artisan soaps and body products, welcomes shoppers with a “fragrance quiz” to showcase the right products for them.

hideAWAY Handmade Quiz

Once a shopper completes the quiz, they learn which fragrance would best suit them and receive a 15% coupon just for answering all the questions. 

hideAWAY handmade chat example

hideAWAY Handmade used ManyChat’s Coupon Campaigns for Shopify to send coupons to shoppers via Messenger. They rewarded shoppers who participated in the weekly giveaway, provided feedback, took a quiz, and who were first-time buyers and cart abandoners. 

Quizzes are a great way to indulge people’s natural interest in themselves. They also help you learn more about a customer’s preferences and personality, which will help you make personalized product recommendations and increase customer value.

3. Provide visibility into order status

If you want to increase customer value and post-purchase satisfaction, focus on customer service after they buy. According to research by Convey, nearly 40% of customers consider the post-purchase experience to be the most memorable part of the brand experience; 75% of them feel that clear communication is essential to delivering a good experience. 

One way to increase customer value is by sending order updates directly to a shopper’s smartphone. This is a critical opportunity to build trust, considering 51% of shoppers want real-time visibility into their order status. 

Fulfillment messages are also known to reduce buyer’s remorse and can help forge a more meaningful relationship between you and your customers.

You can send automated personalized confirmation messages when a shopper places an order and after the order has been fulfilled. With ManyChat, you can automatically send these messages from a single platform via Messenger, SMS, or email. Here is an example of a typical SMS fulfillment message:

Order confirmation

If a customer has a question about their order status, you can route them to a Live Chat agent who can answer any questions. 

Remember to set expectations about delivery dates (ideally, under-promising and over-delivering). It’s better to predict a July 1st delivery yet have it in their hands by June 21st than the opposite! 

Read more: Selling on Shopify: How to Engage Shopify Customers on Mobile

4. Reward loyalty

Customer loyalty programs are an excellent way for brands to connect with existing customers, better understand their audience, and drive repeat purchases. 

Create a customer loyalty program to delight frequent shoppers and big spenders by granting them exclusive offers, promotions, early access, and relevant content. It’s a smart way to increase customer lifetime value and to keep people coming back to your store, time and again. 

Loyalty programs incentivize customers to spend more money with you in return for points, cashback, discounts, special offers, etc. Blume, a direct-to-consumer retailer that sells self-care products for women, has a terrific loyalty rewards program. 

Blume Website homepage

They make it easy for shoppers to earn “Blume Bucks” by performing tasks other than just buying products. You can earn BBs by telling friends about Blume, sharing your birthday with the company, or following the brand on social media. Customers can also ascend to different membership levels to earn various perks and prizes, and finally reach Blumetopia.

Blum reward loyalty example

Another model to consider is a paid membership, like that of Grove Collaborative. This direct-to-consumer retailer delivers eco-friendly home essentials and offers paying members the following perks:

  • Free shipping on all items
  • Free gifts
  • Early access to seasonal products
  • Exclusive discounts
  • New product sneak peeks
  • A dedicated customer support representative
  • Personalized product recommendations
  • Frequent rewards
Grove collective paid membership rewards

Although people have to pay to join, the value they derive from a membership is worth the cost. The paid membership strategy has helped Grove Collaborative build an engaged community of customers (referred to by the brand as “Very Impactful People”), who help spread the word about the business and remain loyal to the brand. Considering 92% of shoppers are more likely to believe suggestions from friends and family over advertising, such a devoted community is a true asset. 

Now it’s your turn! Brainstorm ways you can cultivate meaningful relationships with customers and reward them for their loyalty. Even if you don’t yet have a specific buyer persona or a considerable cache of customer data to mine, you can still learn more about their wants and needs by encouraging them to join your loyalty program. 

5. Collect customer feedback and highlight reviews

Exceeding expectations and continuously improving customer experience is a key driver to increase customer value. Yet, to gather the information that will enable you to achieve this, you need a way to acquire constant feedback from your customers. Seeing as only 33% of businesses are actively seeking and collecting reviews, this is a tactic that will set you apart from your competition.

Using ManyChat, you can collect customer feedback and turn positive responses into revenue; customer reviews are the most influential content that affect purchasing decisions. 

According to Spiegel Research Center, nearly 95% of shoppers read online reviews before making a purchase, and displaying reviews can increase conversion rates by 270%. Econsultancy also found that reviews produce an 18% uplift in sales.

Customer reviews on Amazon

Overwhelmingly positive customer reviews serve as social proof to drive customers to further explore your product, whereas bad reviews can send people running to a competitor’s site.

When you use ManyChat to secure customer feedback about your products or services, you can arrange for a different process following either a positive or negative review.

For example, if someone leaves an effusive review in your bot, you can ask them to leave a public review on sites like Amazon, Yelp, TripAdvisor, G2, or wherever people can discover your products. If their feedback is less than stellar, you can automatically route the dissatisfied customer to your support team to clear up any issues and hopefully win them back.

Customer feedback can help showcase your brand, as well as improve your products and better understand what people expect from them. If you want to build a Messenger-based review system, read “How to Get More Reviews with your ManyChat Bot.”

6. Send personalized offers

There is no better way to provide an incredible customer experience and increase customer value than through personalization. In fact, in a recent survey of 200 marketing leaders by Forbes Insights and Arm Treasure Data, 37% of executives point to increased sales and customer lifetime value directly resulting from offering relevant product recommendations. 

It’s a sensible conclusion. Each customer segment is different, with distinct desires and needs so it’s not ideal to show the same products or information to every customer. Segmentation and personalization enable you to create targeted marketing campaigns that engage each buyer at the right time. 

In ManyChat, you can use Tags, Customer Fields, and System Fields to collect information about customers, as well as filter through contacts based on their behaviors, demographics, and location. 

creating customer segments

Once you segment customers with similar characteristics into groups, you can send them exclusive deals based on their behavior patterns.

Say you want to send a text message to women who have recently interacted with your Facebook page about a new sale. You only want to send it to those who have given your brand a positive review and opted-in to receive notifications on their phone. Sounds complicated, but it’s easy with ManyChat. 

Or say you’re launching a new product category. You can amass an audience of shoppers and visitors with similar interests who might be a good fit for the new category and send personalized deals to them when it launches. 

In both these scenarios you can broadcast a text or Facebook Sponsored Message to a high-value group with specific messaging using ManyChat, and increase the likelihood that they’ll take action and buy something. 

7. Make it easy to find products 

If you want to create more value for your online store, make shopping easy and convenient for potential customers. Regardless of their unique situation (some customers may be shopping for a partner, looking for a specific product feature that satisfies a need, or any number of other scenarios), their goal is the same: find a product quickly while minimizing friction. 

They may also be hoping to get a great discount by purchasing online so they save time and money, instead of going to a brick-and-mortar store. 

One way to help customers find products efficiently is by presenting them inside Messenger. If you’re running click-to-Messenger ads you can take advantage of shoppers’ desire to buy on impulse, which 64% of US Americans reportedly do at least once a month. 

Watch the following video to learn how to build a Messenger-based product guide:

*Note: Even though this video was made for Father’s Day, you can still use the same build for a product guide. 

You can provide information about products to assist with purchase consideration, and even let people pay inside Messenger with a Stripe or PayPal integration, which further expedites the checkout process and helps customers complete their tasks faster. 

Delivering customer value in your online store

At the end of the day, creating the different types of customer value for your business is essential to sustainable growth.

If you give your customers an experience that’s memorable, convenient, and enables them to meet their goals, you’ll be well on your way to attracting and retaining loyal customers. These are the people who will become advocates for your brand and repeat buyers—the best customers to have! 

Want to increase customer value in your online store? Get ManyChat today. It’s free to get started.

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