Customer Value Management: The Ultimate Guide for SaaS Companies
What’s customer value management? Why does it matter for product teams and what are its benefits? What are its stages?
These are some of the questions the article tackles. We also give you a bunch of tips on how to implement it in your SaaS.
Let’s dive in, shall we?
TL;DR
- Customer Value Management (CVM) is a business process that focuses on analyzing customer needs, building outstanding products that satisfy them, and enabling users to realize their value.
- By delivering valuable products that meet user expectations, SaaS organizations can better retain customers and increase their lifetime value.
- CVM helps companies identify not only user problems but also their willingness to pay for relevant solutions. This allows them to drive account expansion and product growth.
- Overall, customer value management can make your product more competitive.
- Marketing teams that understand what customers value can target them more accurately with marketing campaigns that truly resonate.
- Sales reps can use the knowledge to shift sales negotiations from price to value.
- Thanks to CVM, customer success teams can support customers effectively and help them achieve their business outcomes.
- CVM starts with value discovery. Its aim is to diagnose customer pain points and needs via market and customer research techniques like surveys or interviews.
- The next stage focuses on value delivery. That’s when the team develops the product and helps users to use it effectively, for example, through onboarding and in-app support.
- Value realization is about helping users experience the product value. Teams can foster it by analyzing customers’ progress along the user journey and removing unnecessary friction.
- Value validation is the 4th stage, and its goal is to analyze how well the product satisfies user needs. You can do it by tracking metrics like churn rate or NPS and through qualitative surveys.
- Finally, at the value optimization stage, you try to maximize the value for customers. This includes secondary onboarding to introduce new features, and drive upsells.
- Userpilot is a product adoption platform that can help your team implement every stage of the CVM process. Book the demo to see how!
What is customer value management?
Customer Value Management (CVM) is a powerful business tool that involves tracking and analyzing how customers perceive the product value. This helps SaaS companies understand how well the product satisfies user needs in comparison to its competitors.
It doesn’t stop here, though.
CVM isn’t only about measuring the current state but also constantly adding value to the product to better satisfy customer preferences and expectations and build long-term mutually beneficial business relationships.
Why is customer value management important?
In short, CVM allows companies to maximize their growth opportunities. This can happen in a few ways. Let’s have a look at a few of them.
Optimizes customer lifetime value and retention
Customer value management allows companies to stay tuned to the changing needs of customers. This means they can easily adapt to constantly deliver value, which translates into higher customer retention.
Better retention is directly linked with higher customer lifetime value. As the customers stay longer with the company, they also spend more money.
However, there’s more to it.
Drives account expansion and revenue growth
CVM allows companies to identify new account expansion opportunities and maximize them to drive revenue growth.
This is possible because they understand not only what customers need but also how much the product is worth to them in monetary terms.
This means they can adjust their pricing to maximize revenue. What’s more, it allows them to attract the most valuable customers by highlighting the relevant features in their marketing efforts.
Gives you a relative competitive advantage over others
Ultimately, CVM helps SaaS organizations to gain a competitive edge over other players in their industry.
That’s partly because they can better satisfy customer needs and partly because they can better prioritize their efforts to deliver value. This means increased efficiency and lower overheads.
How does good customer value management benefit different teams?
Good CVM greatly benefits teams from across SaaS organizations.
For product teams, it guides product development so that it meets the customers’ needs and helps them achieve their goals.
For the marketing team, CVM plays a crucial role in communicating the value of the products or services to the customers. It helps them craft a targeted marketing strategy that resonates with the customers’ perception of value.
Sales teams, on the other hand, leverage CVM to discover the value with customers. It allows them to shift the focus from price to value. This can lead to more effective sales conversations, improved close rates, and a shorter sales cycle.
Finally, customer success teams can use CVM to realize the value for clients. By helping customers achieve their desired outcomes, they can reduce churn and increase customer lifetime value, which is pivotal for growth in SaaS organizations.
How is customer value calculated?
To calculate the customer value, divide the perceived value of your product by the perceived value of a competitor’s solution.
If the ratio is above 1, you rock. If it’s not, you’ve got work to do.
The tricky question is how to estimate how much the product is worth to the users. One way to do this is by using a combination of techniques and methods to assess their willingness to pay.
What are the stages of customer value management?
The customer value management process consists of 5 main stages:
- Discovery
- Delivery
- Realization
- Validation
- Optimization
1. Value discovery
Value discovery is the process of assessing user pain points, needs, wants, and preferences. This is essential for SaaS teams to develop solutions that deliver value to the users.
The stage normally involves market and competitor research.
By looking at what your competitors offer to their customers, how successful they are, and how much customers are willing to spend on their products, you can gain a general understanding of the market trends.
To gain more in-depth insights, customer research is essential. That’s how you can really find out what users value about the existing solutions and what’s missing in their lives.
What techniques can you use for customer research?
Trigger surveys to research customers at scale
Surveys are a cost- and time-effective method to collect information about customers’ perceptions of value.
They are easy to create, and you can use them to collect both quantitative and qualitative data.
For example, you could ask them to evaluate how useful they find the existing product on a scale from 1 to 10, and then follow up with an open-ended question about their reasons.
In-app surveys tend to have higher response rates but work only if you already have a product in place. If not, you can use customer research tools like Qualaroo.
Interview customer segments to gain in-depth insights
Customer interviews are more challenging to set up and manage but can offer even more detailed qualitative insights. That’s because interviewers can follow up on ideas in a way that’s not possible through surveys.
How do you recruit your interviewees?
You can select them from your existing user population and reach out via in-app messages or email. If that’s not an option, you can find the right participants in databases offered by products like Hotjar.
2. Value delivery
Value delivery is about satisfying the customer needs that you identified in the previous stage.
This involves product development and its implementation.
They set your users up for success, but you also need to make sure that they know how to realize the product value once they start using the product.
Involve customers in the product development process
Involving customers at every stage of the product development process is essential to ensure that it addresses their needs.
This may entail using them for prototype testing to validate product design and feature ideas.
As you get closer to the launch, beta testing and usability testing can help you gather valuable feedback on how to improve the product so that it’s a strong offering when it enters the market.
Create a frictionless onboarding to reduce TTV
The goal of user onboarding is to teach users how to use the product to achieve their goals.
As such, it is essential for users to realize the product value as quickly as possible.
Good onboarding should start with a welcome survey which enables you to segment the users based on their use cases.
This is followed by a series of in-app experiences that introduce the key features that users need. This could be in the form of checklists, interactive walkthroughs, and contextual in-app messages.
Provide excellent customer service to support users
No matter how good your onboarding is, your users will still come across difficulties. That’s why you need a good customer support system in place.
Many users prefer to solve their problems independently, without any contact with customer support. To accommodate this preference, provide them with a resource center and a chatbot for self-service help.
However, there will always be a certain percentage of users who prefer the traditional high-touch support by agents, so make sure not to alienate this group.
3. Value realization
If you’ve done your work well at the previous stages, value delivery will lead seamlessly into value realization.
Value realization is when users start engaging with the product, completing their tasks, and experiencing the product’s value.
Your job here is to ensure that users progress through the journey.
With modern analytics tools, you can track this consistently and identify friction points where they slow down or drop off.
For example, funnel analysis can help you track how users advance from one key event to another, while path analysis gives you granular insights into the exact actions that users take between them.
4. Value validation
Value validation focuses on ensuring that there’s no value gap.
Basically, you want to make sure that the actual customer outcomes match what they had expected when they signed up for the product.
How can you do this?
In-app surveys are an easy way to determine if the product delivers on its value proposition. You could use them to target the whole user population or specific cohorts, like the users who signed up after a new feature was launched.
In addition to qualitative feedback, there are a number of metrics that can help you assess how well the product meets user expectations. These include:
- Churn rate – if the product underdelivers, users leave.
- NPS – a measure of how likely users are to recommend the product.
- PMF score – tells you how much your users would miss the product or feature if it suddenly wasn’t available.
- CSAT – a measure of customer satisfaction which is an indication of customer perceived value.
- Referrals – the more users recommend your product, the higher its perceived value.
Other sources of customer feedback include online reviews and social media mentions.
5. Value optimization
The value optimization stage aims at maximizing the value for customers. It iterates on the insights from the value validation stages to enable users to achieve their desired business outcomes.
Introduce customers to relevant features contextually
Users’ ability to adopt features is limited when they first join the product, so the primary onboarding should focus on basic functionality.
However, as they get more confident, it’s time to introduce more advanced functionality that will help them realize the full potential of the product. That’s secondary onboarding.
What’s the most effective way to help users discover new features?
Triggering contextual in-app messages is one. As they appear at the exact moment when the user needs the feature, users are more likely to engage with them.
Introducing new features may increase the relative perceived quality of the product, which is closely related to perceived value.
Trigger upsell messages for customers to experience greater value
In-app messages are also great for driving upsells, which is another way to optimize product value for customers.
How does this work?
High plans tend to offer better functionality that can potentially make the product even more valuable for the users.
Don’t be too pushy in your upsell tactics. Offer your users a limited-time free trial of the premium features so that they can experience them first-hand. And even if they decide not to upgrade, it can still increase their satisfaction with the plan they’re currently on.
Conclusion
Customer value management allows SaaS businesses to create products that satisfy genuine users’ needs better than competitors.
It also enables them to reach them more effectively with well-targeted marketing campaigns and attract more customers. This translates into better financial performance.
If you want to see how Userpilot can help your teams at all the stages of the CVM process, book the demo!
