How To Measure Customer Value

How To Measure Customer Value

If you are going to stay long in business and make more money, you should know how to measure customer value.

According to the Oxford English Dictionary, value is defined as the regard that something is held to deserve; the importance, worth, or usefulness of something.

Additionally, it can be described as the worth of something compared to other things for which it can be exchanged.

Value is an integral feature of every business.

This is so because it determines its or company’s ability to attain its aims and purpose.

Therefore, this blog post shares insight into how to measure customer value.

It also addresses the factors that makeup customer value and the importance of customer value.

The ways to achieve customer values, and most importantly, how to measure customer value will also be considered.

Read on!

How To Measure Customer Value; First, What is Customer Value?

Customer value which is referred to as customer perceived value, is the fulfillment or the sense of achievement a customer experiences.

It could also be what they expect to experience by consuming a product or using a service for their money’s worth.

Customer value could be described as the satisfaction and fulfillment that a customer feels about your products and services.

Furthermore, customer value is the additional benefits and advantages that a customer enjoys when using a particular product or service.

The meaning of value varies from business to business and from customers to customers.

While some might see value as the money paid for the goods and services, others see value as the product and the services that they have paid for.

In other words, it means that the product or the service is worth the money being paid for it.

Therefore, customer values are of different types depending on their perception.

Let’s consider what they are.

How To Measure Customer Value; Types of Customer Value

Functional Value

This type of value describes the ability of a product or service to provide solutions.

Also, it satisfies the needs and meets the expectations of its customers.

Monetary Value

Monetary value is the value given when the product and services equal the price paid to acquire them.

Social Value

This value is measured by the relationship in which a customer can create with other people or groups using a product or service.

Psychological Value

Psychological value is derived when a product or service satisfies its customer’s needs.

Emotional Value

As the name implies, emotional value describes a customer’s feelings and the affective response of a customer.

This is before and after experiencing the products and services provided by a business or company.

Now you know the different types of customer value.

Let’s examine what influences the measure of the value a customer gets from using a product/service.

Determinants of Customer Value or Factors that Constitute How to Measure Customer Value

Certain factors contribute to or constitute customer value.

Some of which includes;

Price or Cost

One of the factors that determine your customer value is the price of your goods and services compared to alternative or similar goods and services.

Quality of Goods and Services

The quality of your goods and services is also a determinant or factor that helps build up your customer value.

It is your products’ distinctive standard and attributes in measurement or comparison to other goods and services.

Quality of Customer Service

The quality of your customer service contributes to your customer value.

This constitutes the assistance or guidance that your business can provide to its customers before, during, and after purchase.

While good customer service positively impacts your customer value, poor customer service negatively impacts it.

Quality of Customer Service Support Team

In line with the quality of customer service, your business’s customer service support team also adds up to your customer value.

The capacity of your customer service support team to interact with your customers appropriately and effectively determines your customer experience, and your customer experience adds up to your customer value.


Branding is a marketing strategy that consists of your business’s or company’s name, designs, and symbols.

These help you to capture the attention of your customer and your products and services.

It also allows your customer to identify and differentiate it from similar brand products and services.

Point of Difference

The point of difference is how the goods and services of a business or company defer from that of an alternative company or a competitor.

It is also an integral and essential step taken by a company or business to ensure that its products and services stand out from the available variety of such goods and services.

Existing Business Relationship

This factor refers to the relationship between the customer and business due to the customer’s experience with the business.

Customer Experience

Additionally, customer experience is a factor that makes up your customer value.

It is the collective, behavioral responses of a customer before purchase, during purchase, after purchase, and during consumption.

Also, it is the total involvement and interaction your customer has had with your business throughout their customer journey.

Before we discover how to measure customer value, it’s essential to discuss its importance in business.

The Importance of Customer Value in Business

As we stated in the previous segments, customer value is a determinant of a company’s ability to satisfy its customers’ needs effectively.

Hence, it is essential.

Here are some detailed importance and advantages of customer value to the business:

Loyalty and Retention

The quality of your customer value helps your brand, business, or company achieve loyalty and retention.

Loyalty and retention were when your business had been able to get customers to make repeated purchases.

As well as building a relationship that allows customers to be loyal to your business.

Customer Trust and Confidence

Through customer value, companies and businesses can build trust and confidence with their customers.

When your business provides your customers with values that fulfill their needs and meets their expectations, customers will begin to trust your business as one that delivers value to its customers.

Increased Profit and Sales

Another importance of customer value is the increase in its sales and profit.

Customers who have a good perception of your products and services spend more money than other customers.

They also recommend your business to others, thereby increasing profit and sales.

Increase in Customer Base and Clientele

Additionally, customer value is important and integral to business because it helps to increase your customer base and clientele.

This is through the recommendations, referrals from your customers to potential customers, and the positive reviews written by satisfied customers about your business.

Now that you know why customer value is important in business let’s discover how to measure customer value.

How to Measure Customer Value

Customer value can be measured with the following metrics.

Customer Lifetime Value

You can measure customer value is by using the customer lifetime value (CLV) or lifetime value (LV).

This is the total number of purchases a customer made from your business in their lifetime due to their relationship with the business.

CLV = (average value of a sale) × (Number of repeated transactions) × (Average retention times in a month or year)


Businesses can also measure customer value by reviewing customer loyalty.

A careful examination and survey of their purchase patterns, i.e., how many customers are loyal to your brand, will help you.

This will be in measuring the type of experiences that your customer gets when they patronize your business.


Businesses can also measure customer value from the feedback it gets from its customers.

Just as customers vary from one another, their perceptions and experience vary.

Create a platform where every customer can share their experiences and perception to enable you to measure and review your customer satisfaction.

Communication is how customer value can be built and measured.

Purchase Frequency

While exploring how your business can effectively measure its customer value, you should consider trying out the purchase frequency method.

It is the amount or number of times in which customers make purchases over a stipulated period.

Additionally, it is also the number of times an average customer purchases from a specific business over time.

The calculation for purchase frequency is;

PF = Number of orders/purchases ÷ Number of Unique customers. Or PF = Total number of orders in a year ÷ Total number of customers. 

Average Purchase Value

Average purchase value is also another means of measuring customer value.

It calculates the average value of each purchase that a customer makes compared to the average number of units per purchase. 

Purchase Amount

Purchase amount measures customer value by giving you an insight into how much a customer has spent on your business.

Customers will naturally spend more on your business if they derive immense value from your products and services.

The Number of Referrals Generated

Referrals refer to the number of people that have come to patronize your business over some time due to a piece of information or directions given to them by your customers.

These people could be a part of your customer’s networks, consisting of their friends, colleagues, families, former classmates, acquaintances, etc.

Now you know how to measure customer value.

The next question becomes, how do you improve it?

How to Improve Customer Value

Let’s say you’ve used any of the above metrics to measure customer value in your business, and the results you got are not impressive; here are some ways to improve it.

Examine your Customer Value

The first step to take to improve your customer value is to examine your current customer value.

Consider all that your business currently does to provide value to its customers.

Next, identify which of these values are working out effectively for your customers.

It will help you identify areas you need to improve on, your products, services, customer relationships, branding, etc.

It would also help you identify what’s not working so you can replace or discard it.

Choose Value over Price

One of the first ways to improve on your customer value is to focus more on providing your customer with a value other than increasing the price of your products and services.

Ensure that your already existing goods and services give your customers satisfaction and the experience they desire.

This you can do by looking and devising new ways and methods to create additional value.

It should be a value that places you above alternative brands and competitors while maintaining the same price.

Additionally, choosing value over price means creating an opportunity for your customers to enjoy more for a standard and reasonable price.

This, in turn, encourages them to pay more and increase their patronage.

Seek to Understand Your Customers’ Perception

Customer varies, and their perception of values vary as well.

So, to effectively improve your customer value, you should seek to understand the perception of your different customers.

Ask them about their experiences in a bid to figure out what each customer regards as value.

This helps you understand the changes in your customer’s perception of value over time due to certain internal and external factors.

Know your Target Market and Audience

Understanding your customer’s perception of value helps you understand your target audience and market better.

This helps you divide and segment your customers based on their characteristics and perception of your products, services, and business.

This could be dividing your customers into the categories of influencers, consumers, personas, and families.

Focus on your Loyal Customers

Focus on your loyal customer and most profitable customer.

This will help you figure out what adds value to them and how to improve on them.

Create Quality Goods and Services

By creating quality goods and services, you make sure that your goods and services are of a high standard.

Also, ensure that goods and services are easy to use and serve a functional purpose for your customers.

Make Communication Easy

Another way in which you can improve your customer value is by making communication easy for your customers.

It could be done by creating different platforms and communications methods such as customer care phone lines, emails, webchats, and social media platforms like Facebook, Twitter, LinkedIn, etc.

Value your Customers

To create and improve customer value, you must ensure that you, first, value your customers.

Valuing your customers means being polite and respectful to your customers.

Responding to their requests and problems promptly is also essential.

Additionally, render the best of assistance and guidance to your customers.

Listen to your Customers

By listening to your customers, you allow them to share, and you learn about their perception of your products and your services.

It helps you understand what value means to them and how you can improve your products and services to add more value.

Make Irresistible Offers

Improving customer values could also be by appreciating customers through making irresistible offers to your customers.

This enables you to make use of your products and services for free or at a cheaper rate.

These offers could be in terms of discount offers, special offers, free trials, subscription services, partnership offers. 

Communicate your Values to your Customers

Furthermore, you can improve your customer value by communicating your value to your customers using different platforms. 

By communicating value to your customers, you inform them about all the benefits and advantages of using your products and services.

Conclusion on How to Measure Customer Value

Customer value is not what the business thinks the value is; it is based on customers’ perceptions and views.

This means that what a business considers as providing value to its customers may not be seen as a value to the customer in question.

This is because of the variation in personalities, needs, desires, experiences, and expectations.

Hence, as a business, an organization, and a company, you should focus on finding out what value means to your customers.

Also, use various means and resources to ensure that they get the value they are looking out for. 

Overall, a business that cannot effectively provide value for its customers will not achieve customer satisfaction, retention, loyalty, and business growth.