A Customer Value Map Clarifies Your Position

by Paul Simister on March 22, 2011

There are many ways to differentiate a business and one of the easiest to understand is to find a new position on the customer value map.

What Is A Customer Value Map?

It’s a graphical representation of your market with price on one axis and customer value (what the customer gets for his or her money) on the other.

Customer value has many different components but at this stage, assume that value has a strong relationship with price along the lines of the old cliché “you get what you pay for.”

An Example of A Customer Value Map

Here’s an example from the car industry.

To keep things simple, I’ve listed four brands.

Hyundai at the low price, low value end, then Ford, then BMW and at the top, in the high price, high value end Rolls Royce.

BMWs cost more in general than Fords but, because people buy them, they must offer more customer value (certainly more prestige but also a better driving experience, more performance and more luxury) but they still do the same basic job – of moving you and perhaps other people from A to B.

People are prepared to pay more to get more but economics come into it as well.

Few can afford to indulge themselves with a Rolls Royce and even those who can, I suspect that many can’t justify paying out £250.000 for a car when they can get a nice BMW for a quarter of the price.

But some might want more than BMW can offer without being ready to splash out on the Roller.

On my graph, there’s  big space between BMW and Rolls Royce and that gap represents an opportunity.

In reality it’s where the big Mercedes saloons lie but imagine they didn’t exist.

You could create a luxury saloon designed to fit the gap and expect to attract some people who buy BMWs but really want more than BMW can offer and some of those Rolls Royce buyers who don’t really want to spend so much money but insist on having more than a BMW.

Drawing A Customer Value Map

Drawing the customer value map gives you a clear view of where competitors are lining up and where there may be space to position your product – this is differentiation by price and customer value.

Take another look at the customer value map and you’ll see a few more gaps.

In particular, at the extremes.

What’s lower price than a Hyundai?

Not much and that’s the opportunity for a basic car from India, China or Africa.

What about more expensive than a Rolls Royce?

This is a chance to go really over the top.

After all the Bugatti Veyron, although a completely different type of car, has shown that the extremely rich will pay over £1 million for a car.

To me it’s crazy but I’m not in the target market.

Customer Value For Money

The price is often easy to find out for competitors so you can get a price ranking which you can assume matches the value provided if each product is successful and holding its own in the market place.

However firms can be above or below the fair value line on the customer value map.

If a product provides more value for money than competitors, it is likely to gain market share.

If it provides less value for money than competitors, then it is likely to lose market share.

Customer value depends on the individual customer’s priorities, needs and wants although customers can usually be grouped together into similar thinking segments. You can find out more about this by reading my article on Customer Value Attribute Maps (the famous book on strategic innovations,  Blue Ocean Strategy calls these charts the Strategy Canvas).

Moving From Cars To Your Business

It’s easy to see the customer value map in action in an established market like cars but you can apply the same logic to your business.

Pick a market and map your business and your competitors. You may want to map an average price point or the range so you can see cross-overs.

In some markets, you’ll see everyone very closely packed together in what you can think of as the mass market.

These represent an opportunity to go above or below on the map, with:

  • a high value, high price offering or
    .
  • a low value, low price offering.

The idea is to give customers choice so that they don’t have to make a random selection from products or services they struggle to differentiate.

The different moves you can make on the customer value map are explained more in my article on Bowman’s Strategy Clock.

The Right Move On A Customer Value Map

The right move depends on:

  1. What customers want – there’s no substitute for research and finding out if customers want to pay more and get more or pay less and get less.
    .
  2. Your capabilities to deliver on your marketing promises. You can sell cheap if your costs are high and you can’t sell high if you can’t justify the price in a way customers will believe.

An Example Of Changing Customer Value Position For A Restaurant

Let’s imagine you want to start a restaurant and you look around at your local competition.

You see that there’s a lot of cheap and cheerful places that are popular an sell meals at £10 to £20 per head. You also find a very exclusive restaurant that charges £100 a head.

There’s a big gap in the middle – nowhere that’s special without being outrageously expensive.

Customer research shows that demographics are good – the area has plenty of people with a wide variety of incomes and your research shows you that there is an unfilled demand for a  mid-priced restaurant.

You can design your business to fit the gap on the customer value map – good food which regularly changes, a nice atmosphere and friendly, attentive service. You’re not having to cut corners to compete at the low priced end and you don’t have to indulge in extravagances to compete at the very top.

An important part of differentiating your business is seeing the opportunity to be different.

The customer value map and the idea of differentiating by price and designing what you give to match to match the price expectations, is a powerful way to think about your business.

Have You Used Customer Value Maps?

Did you find the customer value mapping process helpful?

Did it show you how crowded the middle market was and point to opportunities at either extreme?

Paul Simister is a business coach who helps small business owners to profit from differentiating their businesses, being distinctive in the eyes of their customers and standing out in a crowded marketplace.

You too can move past your profit tipping point by answering the seven big questions of business success.

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