Quantifying Customer Value

Agile suggests that teams should continuously deliver value to their customers and stakeholders. But to do that teams need to know what value is for their customers, and how to quantify it.

Many teams do not have a shared view of what their customers value. There are often different ideas or opinions on customer expectations and on what customer value is. I also often see teams that have insufficient detailed insight into the customer value of their product. They don’t know how customers use their products, and how they deliver value to them.

What is customer value

My suggestion is to put yourself into the shoes of your customers if you want to find out what is value for them. Think about how they use your product, and what they gain from using it. Find out how it helps them to get their jobs done or how it makes their lives easier or more fun, or how it saves them time. Ask them if you don’t know, get involved with them, and build a relationship with your customers.

Some examples of customer value are:

  • New functionality that customers can use to earn money
  • Updates to the user interface of a product that make it easier to use it
  • Improved quality of the product, for instance faster response time, higher availability, or increased stability
  • Product services that customers enjoy using

Once you have developed a first idea of customer value you can quantify it. Start by connecting customer values that you have identified to specific parts of the software products that you are delivering. This helps you to visualize the links between the software that you deliver and how they are valued by your customers. Try to be as specific as possible, e.g. by tagging features and describing how customers use them and gain value from them.

How to quantify customer value

Value should be quantified whenever possible (which is practically always). Quantifying increases understanding the value, if you know how to measure it then you know much better what the customer needs. It also increases the chance of delivering value: “what gets measured gets done.”

When talking about quantifying value most people think of money to measure it. However there are many different ways to quantify value, money is only one of them.

Other ways to quantify value are:

  • Time / cost of delay
  • Number of active users / end customers
  • Customer satisfaction scores
  • Number of unsolved / solved defects
  • Number of features delivered
  • Etc

Preferably value is estimated in the planning game. It can be checked during the product review, and measured after delivery.

I learned a lot on quantification from Tom Gilb. Over the years he shared many examples of how you can quantify things and how it helps to increase understanding. His book Competitive Engineering is a great resource if you want to learn about quantifying customer value.

Ask customers for feedback

Value is in the eye of the beholder. Ultimately the customers and stakeholders are the ones who decide if what the team delivers is really valuable. If you are ever unsure about how much value you are delivering (which is bound to happen occasionally), check with your customers and ask them for feedback!

How do you quantify customer value?

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Ben Linders

I help organizations with effective software development and management practices. Active member of several networks on Agile, Lean and Quality, and a frequent speaker and writer.

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