When a customer sees real value from your product, they are more likely to stick with you. Value realization is critical to customer retention. Learning how to measure, quantify, and articulate the value customers receive from your product can help you maintain sales numbers and retain more customers.
Value realization refers to how well your product delivers on its value promise along with the benefits it provides to a customer. At the beginning of your relationship with a new purchaser, there is an expectation of how your product will solve that person's pain points and benefit them.
Value realization occurs when your customer sees these values and benefits. When a customer feels that their expectations are met by your product, they are more likely to be satisfied and stay with your company. They are also more receptive to upselling and cross-selling.
Knowing how you are benefitting your customers and other key stakeholders helps you strengthen your company at all levels. Your sales and marketing teams can create campaigns and sales pitches around key benefits. Your product team will have a better idea of how customers are getting the most value from a product as well as what they can improve. The customer success team can work more closely with customers to provide more effective solutions.
When you have quantifiable metrics that show how you have contributed to your customers’ successes, you can better communicate these potential outcomes to prospective customers. Here are some metrics you can use in your value realization strategy.
A customer’s lifetime value is the total value they provide to your company throughout the course of their business relationship with you. Since most SaaS businesses operate with a subscription model, multiply the monthly subscription with the duration of the average customer in months. For example, if your business charges $15 for a monthly music subscription and the average customer stays with you for 5 years, their lifetime value would be $15 x 60 months or $900.
If you’re operating a non-subscription business, calculate LTV by multiplying the average total order by the average number of purchases per year. Then, multiply the result by the customer’s average duration of doing business with your company.
Establishing success metrics with new customers will help you measure ROI for your customers. This ROI should be specifically tied to the problem the customer has come for you to solve.
In some cases, these ROI metrics may be tracked within your software. If you have access to your customers’ data, measure their ROI from when they started using your product. Knowing this information for multiple customers will help you better communicate how your company benefits customers.
In other cases, you may need to work with your customers to track ROI together. This is a great way to use quarterly business reviews (QBRs) to have an open dialogue on how your product is driving tangible results for the customer. When possible, get real numbers so you have metrics to communicate to new customers.
For example, if you’re selling a marketing platform, you can check on the customer’s cost of acquisition or how conversion has changed since implementing your platform. And if your product focuses on customer success, you want to take a look at your customer retention rates.
This metric refers to the length of time between when your customer signs a contract and when they go live with your product. In general, customers will likely realize value when this measurement is shorter. If it takes too long to go live, they might be tempted to switch to a company with a faster deployment schedule.
Even if your TTL is short, it might take customers a while after implementation to start seeing real value. This time period is known as the time to value. As with the TTL metric, you want your TTV to be shorter. Knowing how long it takes your average customer to see a tangible benefit from your product helps you identify potential barriers to usage and lets you refine your product.
Knowing what to measure is only part of the process. You also need to understand your customers’ needs and how they intend to use your product. Use customer goals and objectives from your initial sales meeting to determine how well your product is performing. Have your sales team help define your initial goals and then partner with your customer success team to work with each customer to realize these goals more quickly.
Ask your customers to define the metrics they want to measure to determine how your product is benefiting them. Have them share in detail what successful implementation would look like. Ask them to explain which parts of your product are most important and beneficial to them.
Knowing this information upfront will help you better assess how the implementation process is going and provide you with a more accurate idea of the TTV.
Value realization goes beyond other metrics like adoption rate. When you know the quantifiable value your product provides to a customer, you can use this information to attract similar customers. You can also use it to provide better service to your existing customers. Once they know that you offer a proven solution to their problems, they may be more likely to approach you for solutions to other issues.
Satisfied customers are often your biggest advocates. Almost half of businesses rely on word-of-mouth to drive business. When you have proven that you can deliver on your value promise, your customers are more likely to be satisfied.
Having a better understanding of value realization lets you focus your marketing on actual benefits. Your understanding of your product might differ from that which creates value for your customers. It lets you see firsthand how your product provides value, and you have access to actual metrics.
Tailor your marketing strategy around these metrics. Use your value realization statistics to develop case studies and create content-promoting customer successes. You can better target potential customers who are in need of similar business solutions. You can also identify other parts of your product to feature in your advertising.
Use value realization data to analyze your products in terms of what is working well and what can be improved. You can work with feedback from your customer success team to share with your product team about how to improve your product. Knowing which parts of your product aren’t as valuable to customers can help you retool them so they provide better solutions to your customers.
Collecting data related to customer goals and successes can spur new ideas for business development. You might think of ways in which your current products can be used to solve different issues. Or you might consider developing complementary product offerings that deepen the value you provide for customers.
If you’re ready to start measuring customer value realization, Quala offers a platform that you can use to generate these insights. Quala measures how customers use your software; tracks their monetary value to your business; and layers on insights from customer conversations and observations from frontline teams, such as Customer Success. These insights give you a better idea of how you can improve value realization for individual customers, as well as for your whole book of business.
Contact us today for a demo and start measuring your customers’ value realization.