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Do We Really Understand Value?

Strategy

My recent posts, “But Your Price Is Too High,” and “Price Is Meaningless Until You Establish Business Value,” have stimulate heated discussions and debates on LinkedIn and other venues. What’s struck me is we still have very fundamental misunderstandings of value, value propositions, and how we understand, create, communicate and deliver value to our customers. While I’ve written about these issues a lot before, I thought it might be useful to recap and summarize many of the key issues around value. I won’t go to the depth I have in individual posts (just search under Value Proposition) and you can get into great depth.

  1. Value Is Defined By The Customer: We cannot define value, only the customer defines value. Our job is to understand what our customers value, positioning what we deliver in the context of what they value. Our opinions of our value are meaningless unless the customer thinks it is important.
  2. Everything Else Represents Cost: We have long lists of the value we think we create. While we think it represents value, if it isn’t aligned with what the customer views as value, it is only cost. Recently, we were looking for a new software system. One sales person kept declaring all the value they created—but a large part of it was meaningless to us. He was relentless in declaring his great value until I finally said, “All of that is absolutely meaningless to us. It is so meaningless, that if we buy, I want it removed from the product, or if you can’t remove it, I refuse to be charged for it.” He was stunned, he didn’t know how to respond. The other supplier had all those things as well, but he understood what we valued and kept focusing on those elements of the solution that contributed to what we valued. While his product had much broader capability, he knew it was meaningless to talk about it.
  3. Educating The Customer Is Critical, But Not About The Product, Instead About Opportunities To Improve Their Business: Value is always in the context of WIIFM, from the customer point of view. We can broaden the customer’s perception about value, by educating them and engaging them in discussions about improving the business, solving their problems, and so forth. We can broaden their understanding of what can be achieved, consequently, helping them to broaden their view of what they value and the value we can provide.
  4. Each Customer Is Different (I know I am repeating myself, but it bears repeating): That’s why our standard marketing materials, “Dear Occupant” value propositions, laundry lists of features, advantages and benefits are meaningless. What each customer values is different, we must understand what they value and focus on these elements. The “customer” is not the enterprise, but each person involved in the decision making process. So what one person values may be different than others on the team value. So value must be personalized.
  5. Value Has Many Dimensions: At the highest level, there are business dimensions of value, “We improve your productivity by X%.” There are personal and emotional elements, “We can help get your boss off your back, get your bonus, keep your job.” We have to understand what the customer values across all those dimensions and position what we deliver in the context of what they value across each dimension.
  6. Value Is Not Static: What customers value changes over time and situation. It may change within a buying process. What they may have considered as value yesterday, may no longer be important, so we have to re-verify and re-validate value constantly. We can influence the customer’s view of value by educating them (see 3).
  7. Value Must Be Differentiated: We must differentiate our value from all the alternatives the customer is considering. In the absence of differentiation, the only way the customer can make a decision is based on price. Nothing else is ever equal. It’s our job to make sure the customers understand this and we demonstrate our differentiation and superiority for those things most critical to them.
  8. Value Has Little To Do With Our Products Or Services: We tend to address value too narrowly, focusing on our product or service capabilities. But those are just components of what customers really value. There are many other elements, some outlined above, others like, risk, relationship, trust, reputation, credibility. We have to look at value very broadly and not be limited by those value elements of our products/services. Value is about what the customer wants to achieve! Our products are just a component or means to that.
  9. We Create Value In The Process: Value is not just constrained to the solution, but also includes the value we create in the process. It’s the ideas and insight we bring to customers, it’s the experience they have of us through their entire buying, implementation, usage cycle, it’s what we do in helping facilitate their buying process.
  10. The Sales Person Is The Most Sustainable Differentiator And Value Element: Products leapfrog each other or are commoditized. Competitors say, “me too.” How the sales person puts all of this together and co-creates value with the customer is the most sustainable differentiator we can create.

There are many more, but I’ll stop here. Look at some of the articles for deeper discussions of each of these.

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