How to measure value realization

As a customer, how do you decide whether a business has earned your loyalty? Most likely, you’re recognizing the benefits you’re enjoying from a product you’ve purchased, and you feel that it’s delivering on its promised value. This process and its conclusion are called value realization.

As a vendor, value realization affects customer loyalty and retention, customer satisfaction, referrals and recommendations, and opportunities to upsell.

To positively and effectively influence all of these, you must be able to measure value realization.

Learn how to measure value realization

Learning how to measure value realization is different from tracking other metrics, such as customer lifetime value or customer acquisition cost, which are tied directly to a formula. 

With no set formula, it takes work to define and understand how to measure value realization. It’s important, however, because it enables you to:

• Learn the value of your product or service from the client’s perspective
• Improve your ability to plan for future upgrades and enhancements
• Refine customer acquisition and retention efforts

Measuring value realization comes down to capturing information at different stages, then using that data to qualify and quantify the value your customers get from your product.

The stages of value realization

The stages of value realization are definition, delivery, realization, validation, and optimization. Understanding each of these will help you build an overall strategy that will ultimately help solidify your customer base.

1. Definition

It’s important that you create a definition of value and communicate that to your customer. 

Value definition should happen at the point of sale, so the salesperson can set the right expectations. If you skip this step, your customer may create their own definition of value that does not align with the definition you want them to consider.

The value definition communicates to customers the benefits they’ll gain from purchasing and using your product. To make this definition meaningful, salespeople should understand each customer’s needs and contextualize the value of your product accordingly.

Instead of simply saying, for example, “Our software will reduce the amount of time you spend troubleshooting shipping issues each month,” be more specific. Concrete examples show your customer the exact value you offer and provide measurable baselines for service and outcomes.

You could say something like: “You’re spending $30K monthly and 200 hours of personnel time troubleshooting shipping issues. Our analysis shows that after implementing our product, your costs would be halved. Your time investment will be reduced by more than one-third.”

Setting value realization metrics

The value definition stage is where you should set your own metrics for value realization. These can vary from product to product or from customer to customer. In the above example, the value realization metrics could be:

• Reduction of troubleshooting costs by 50% or more
• Reduction of troubleshooting time by one-third or more

Now you have a way to quantify value for this customer, and they also have similar expectations.

2: Delivery

Value delivery is the stage where your customer implements and uses your product.

For the vendor, delivery includes providing support and education throughout the customer journey as they move through initial implementation, integrate your product with any legacy systems, and learn how to use it in a way that brings them the best results. Customer onboarding and ongoing customer education are keys to success.

3: Realization

This is the moment your customer realizes the value they’re getting and that their expectations have been met or exceeded. Your product has delivered the value promised, and your customer recognizes that they are enjoying the benefits.

4: Validation 

This is a stage of opportunity. Your customer has seen the product’s value. Now, they may want to increase that value. They may be open to upsells, cross-sells, or add-ons.

5: Optimization

In this stage, you optimize the value your customer has already recognized. You may be able to earn referrals or recommendations from your customers, build case studies for future marketing efforts, and gather other qualifying evidence of value, such as testimonials.

Capturing value realization

How do you capture the data you need to identify how customers are progressing through these stages and where they are in their journey? 

Implementing a value management process is the best way to define, measure, and leverage value. A value management process creates a methodology to engage customers throughout their purchasing and value realization journey. The process may include:

• Choosing a platform to track and understand the customer journey
• Identifying value metrics that you can customize for each prospect
• Working with customers to build a mutual understanding of product expectations
• Providing onboarding support and customer education
• Gathering customer feedback
• Using a Customer Success platform to input and analyze value data

An effective value management process helps ensure customer loyalty and gives you a wealth of information to use in future marketing campaigns and articulate value to customers.

Fight churn with value realization

Customer churn doesn’t always come down to customers experiencing failure or disappointment with your product or service. Sometimes, it’s due to poorly managed expectations.

If you know how to measure and influence value realization, you can capture and analyze the right information and fight churn in the process.

Value realization is just one important metric for chief customer officers to master. For more, check out our blog post, “Top 4 metrics chief customer officers (CCOs) must know.” Track these KPIs to improve renewal rates and gain valuable insights on customer engagement.