Customer benefits and their costs

A customer buys a package of benefits when they buy your product or service

- Some of these benefits are more important than others to your customer – some they may not want or value at all, some are critical and some they may not even realise they get. This will be different for each customer

- Some of these benefits cost you more than others to provide – some cost you a lot and some are free – or may even reduce your costs

- If you understand the relative value and cost then this allows you to make adjustments to your product, pricing and proposition so that you optimise revenue and margin

o This is the basis of the low-cost airline model. The benefits that were removed were valued less by passengers than the price reduction made possible by re-designing the airline process

How can I use this in my small business?

- Make sure that you understand all the benefits included in your product or service and that they are highlighted in your proposition

- If appropriate, develop different services to incorporate different packages of benefits (gold, silver and bronze for instance)

- In individual cases, understanding relative costs and benefits will help you negotiate with the customer

o You can make sure that they are comparing like with like in terms of the complete benefits package by you and your competition

o You can discuss which benefits they are prepared to forgo if they are asking for a price reduction

o You can offer additional benefits that cost you little or nothing but which the customer values in order to close a deal


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