Question: What is a good way to improve my business? Answer: Improve the value you bring to customers.
Understanding and quantifying the benefits your products or services bring to customers is essential for business success. It’s not just a curiosity but a strategic necessity in today’s competitive landscape. Assessing and improving the value you provide helps attract and keep customers while giving you a competitive advantage. In this exploration, we’ll discuss how to measure and enhance customer value, emphasizing its pivotal role in your business’s growth and sustainability.
How to Measure Customer Value
Understanding how to measure value within the context of the lean philosophy involves the following:
Defining Customer Value Metrics: Exploring the key metrics and indicators that quantify customer value in a lean framework.
The Lean Customer Value Canvas: Creating a customer value canvas, helping organizations visualize and assess the value they provide.
Continuous Improvement through Data Analysis: How lean-oriented companies leverage data analytics to continually measure and enhance customer value.
Customer Feedback Loops: Implementing feedback loops to ensure ongoing alignment with customer needs and expectations in a lean environment.
Does the Customer Really Want to Pay?
One key criterion to evaluate the level of value added, is to look at whether the customer is willing to pay for your service or product. In essence, value added refers to the enhancements, benefits, or improvements that a product or service brings to the customer’s experience beyond its basic features. However, the value added must align with the customer’s needs and preferences to justify their willingness to pay.
Customers make purchasing decisions based on their perceived benefits and the relative cost of a product or service. If the value added resonates with the customer’s desires and solves a specific problem they have, they are more likely to see the offering as worthwhile and be willing to pay for it. This underlines the importance of understanding the target audience and tailoring value-added features to their preferences.
Conducting market research and gathering customer feedback are essential steps in determining whether the customer wants to pay for a specific value-added component. By soliciting opinions, analyzing consumer behavior, and studying market trends, businesses can identify areas where customers are willing to invest extra resources in exchange for enhanced features or benefits. This process helps companies avoid investing in value-added elements that do not align with customer demands.
How do we know if we are adding value?
Key Question: Are we getting closer to something the customer wants to pay for?
To answer the above question, we look at the application of CTQ. CTQ trees are the main measurable characteristics of a product or process, of which the performance levels must be met in order to keep the customer happy. Improvement or design efforts are matched with customer requirements.
Adding value for the customer involves enhancing the customer experience and satisfaction by offering more than just the basic features of a product or service. The concept of adding value encompasses various aspects, including the form, fit, and function of a product or service.
The form refers to the visual and sensory attributes of the offering, while fit pertains to how well the offering aligns with the customer’s needs and preferences. Lastly, function relates to the practical utility and capabilities of the product or service. By focusing on improving these elements, businesses can significantly influence the level of value added and create a competitive advantage in the market.
To conclusively answer the question of “How do we know if we are “adding value”? Usually the answer is in a question form: Are we modifying the form, fit, or function of the item/service? If the answer is “no”, you might be generating waste! Be sure to patch up your memory of the 8 wastes of Lean – and how to avoid them to bring more value to the customer.
The Price of goods – the cost of doing business = Profit
Adding more value for customers not only enhances their experience but also positively impacts your bottom line. It leads to increased customer loyalty, higher pricing flexibility, reduced costs, and greater opportunities for revenue growth, all of which contribute to higher profits. If you’d like to Increase profit, grow your business and focus on the cost area. You need to provide customers with higher quality from lower costs.
From Waste to Worth: Applying Lean to Add More Value
Lean measuring software can be the linchpin in the transition from waste to worth. It enables companies to precisely quantify their value-adding activities and, more importantly, identify areas where value might be slipping through the cracks. Through data-driven analysis and performance monitoring, businesses can gain deep insights into customer preferences, pain points, and evolving expectations. This invaluable information not only helps tailor products and services to meet customer demands but also highlights opportunities for innovation and differentiation in the market.
Moreover, Lean measuring software like KPI Fire facilitates the implementation of Lean principles by providing visibility into processes, promoting accountability, and tracking progress toward value-centric goals. Ultimately, it empowers organizations to pivot swiftly in response to changing customer needs, ensuring they stay on the path of adding more worth while eliminating wasteful practices that hinder growth and competitiveness.
In Better, Simpler Strategy, Harvard Business School professor Felix Oberholzer-Gee shows how companies achieve more by doing less. KPI Fire is proud to endorse this book to our constituents who are looking to bring more value to customers and achieve better operational results.