All of your customers have a need or a want that has to be met. They buy from you because your product or service meets their needs. But, that doesn't mean that you are the only company they buy from or that all of their needs are being met. That's where potential value comes in.

The amount of a customer's want or need that isn't being fulfilled by you is considered that customer's potential value. And, it can be quantified by asking some very specific questions.

Let's say you sell cereal - Really Healthy Cereal, a whole grain cereal targeted at health conscious customers.

The answers to the following questions give you the information you need to quantify each customer's potential value.

Once you know the answers to these questions, you can do a few calculations to determine how much a customer is willing to buy, how much she buys from you, how much she buys from your competitors, and how price sensitive she is (as long as you ask about generic substitutes).

Here's how you would do it using the attached Quantify Potential Value Template.xls

Step 1. Multiply the answer to question A. by 4 to determine how much cereal the customer could be eating in a month and divide by the number of servings per box (in this case 5 servings per box) to establish the number of boxes that person would have to buy to satisfy her need.

Step 2. Subtract the answer to question B. from the result you calculated in Step 1 to determine how much need is currently unmet by the customer's purchases.

Step 3. Subtract the total number of boxes bought from your company, answer to questions C., from the answer to question B. to find out how many of the total boxes purchased come from competitors.

Step 4. Add the results from Step 2 and Step 3 to quantify the potential value of each customer based on unmet needs and needs being met by competitors.

Now that you know so much about your customers, you can make more informed decisions on how to spend your marketing dollars.

As always, feel free to email me if you have any questions or would like some help better understanding your customers.