Value Gap

What is a Value Gap?

A value gap is the difference between the value a user perceives in your SaaS product (before purchasing) and the value they experience using your product (after purchasing, or during a free trial). 

Value gaps can be created by unclear value propositions, advertisements that over-promise, or the use of unique value propositions (UVPs)  that don’t genuinely align with the value your product delivers. In any case, value gap issues must be identified and addressed as quickly as possible to prevent churn and maximize growth opportunities for your business.

 

Why Do Value Gaps Matter?

When a customer purchases your product or starts a free trial, their purchasing decision is based on a perception of the value that your product provides and an expectation of realizing that value in their own business. 

At a fundamental level, your new customers have a Job To Be Done (JTBD) and they perceive and expect that your product will make it easier, faster, and/or cheaper to accomplish their goal or achieve the desired transformation.

If your new customers find difficulty getting value from your product, or if it doesn’t actually help in the way they expected, they’re almost guaranteed to downgrade their subscription and eventually churn. 

If value gap issues are common for new customers, you’ll experience high customer churn rates that impede your growth, drive down your customer lifetime value (LTV), and kill your marketing efficiency. That’s why identifying and addressing value gaps is essential to maximizing the revenue potential of your business.

 

Three Hallmark Indicators of a Value Gap

When customer expectations and experiences don’t match, you’ve got a value gap on your hands. Here are some of the biggest potential indicators that your business might have a value gap problem:

 

High Customer Churn

High customer churn is the hallmark indicator of a value gap for your product. If you’re unable to retain customers, or experiencing high churn rates, there’s a good chance that your new users simply aren’t getting the value they anticipated from using your product.

 

Slow Customer Acquisition

Slow customer acquisition and long sales cycles can indicate poor messaging alignment throughout your marketing funnel that could be creating a value gap. 

If your ads promise apples, your landing pages feature lemons, your sales team showcases strawberries, and your product delivers peaches – that’s a problem! 

Consistent messaging across campaign touchpoints helps prepare users with realistic expectations of the value your product can provide.

 

Stagnant Revenue Growth

Long-term customer generation and revenue growth is the result of marketing your product to the right audiences and delivering predictable value that matches their perceptions and expectations. Stagnant revenue growth is a result of slow customer acquisition and high churn, conditions that may be caused by a gap between the expected and experienced value of your product. 

 

How to Diagnose a Value Gap

If you’ve noticed one or more indicators of a value gap, your next step should be to determine what’s causing the gap so you can try to correct it.

Your goal at this stage should be to understand and articulate the differences between customer expectations and experiences with respect to your product.

Here’s how to start:

 

Review Customer Data

Your analysis can include data from a variety of sources, such as marketing analytics, sales call recordings, onboarding logs, product usage analytics, support ticket and escalations history, and customer survey responses. 

A value gap can have many different causes, so it’s important to do a broad search. Look for patterns by market segment, customer region, product, subscription level, customer persona, industry vertical, use case, account manager, 

If you’ve noticed high customer churn rates, you may want to segment the data between customers who churned and ones that you’ve managed to retain.

 

Interview Customers

Interviewing your current and past customers is a great way to gain insight into the expectations they had when adopting your product, their overall experience, and why they chose to stay or churn.

 

Interviewing New Users

New users of your product may have yet to see the value it provides, but they can provide great feedback on the perceptions and expectations that led them to subscribe. Focus your interview on understanding their JTBD and how they expect your product to impact their success. 

 

Interviewing Long-term Users

Long-term users who have fully adopted your product can provide amazing feedback on the onboarding process, journey to value, and how your product has helped with their JTBD. Focus your interview on understanding the most important changes that your product has created in your customer’s business and in their daily life.

 

Interviewing Recent Churns

Customers churn when they fail to realize the value that your product provides. A recently churned customer can reveal insight into why that happened – and what you could have done to change the outcome.

 

Two Ways to Start Bridging the Value Gap

1. Revise Your Product Positioning

Poor or unclear product positioning can give your prospective customers the wrong perception or expectations about your product. 

Aligning your messaging, product positioning, and unique value propositions (UVPs) throughout the marketing/sales funnel will help you effectively manage expectations with your new customers.

 

2. Implement and Optimize New User Onboarding

A value gap exists when a customer subscribes to your product, but fails to use it productively due to lack of training or know-how. 

You can bridge the gap by implementing an onboarding process that helps new users learn your product and start realizing the value. You can support onboarding in-person through your customer success department, or leverage in-app onboarding to automate the process.

 

It’s Time To Bridge Those Value Gaps – For Good

For B2B SaaS companies, bridging the value gap really comes down to just two things: 

  1. Effective product positioning that allows B2B marketing teams to capture and convert well-informed prospects with accurate perceptions and realistic expectations, and
  2. Customer success investment that enhances customer retention by supporting new customers (with onboarding, training, etc.) in generating value and experiencing success with your product.

At Directive, we follow a customer-led growth approach as part of our in-house developed Customer Generation methodology. By effectively driving alignment between sales, marketing, and customer success for our B2B SaaS clients, we can identify and address value gaps, opening the floodgates for new revenue growth.

Ready to learn more?

Book an intro call with a member of our team, or Join Society and get connected with our community of SaaS marketing experts and professionals. Hope to see you there! 

 

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