A Question of Value

"What's the value-add?" "I just want to add some value." This question and comment are ubiquitous in business conversations all over the world, and are abstract enough that they apply to myriad customer situations and interactions. When you hear these questions/comments, you should then ask: How do you define value? What does it mean to "add value?" How do you know if you're successful? And finally, what do you do if you know that the value attributes are changing and/or migrating?

How Do You Define Value?

I've seen many definitions of value over the years. One definition that seems accommodating enough to be applicable to most situations is: Value = Benefits - Costs. This cost-benefit equation is flexible enough, definitionally, to include both tangible and intangible inputs in modeling each equation component (i.e., Costs and Benefits). Of note in that definition is "intangible:" a benefit or a cost may not be directly ascertainable given that costs-benefits are often subjective, individual, and fluid (Hence the word perceived could be put in front of each term). Thus, the message from this section is that value, like beauty, is often in the eye of the beholder.

What Does it Mean to "add-Value?""

If value is in the eye of the beholder, how do you determine the importance of the cost-benefits customers' place on what they behold? This is where the world of negotiation sheds some light. In negotiation, one of the key tasks is to find out what someone's underlying (implicit) need is for each of his or her (explicit) wants. Essentially, if you uncover a customer's need, you can be more creative in brainstorming the many wants that would satisfy it, and not just the want that is top-of-mind for them.

For example, a piece of property may have a fair market value of $20,000, but if you uncover that the buyer has a daughter that lives on a lot that is adjacent to the property, and the parent has a need to live closer to this daughter, it is likely that he or she will value this piece of property quite a bit higher than someone who does not have such a need. You might offer another piece of property that is on the other side of the daughter for another family member to build on given that you have uncovered that "being close to family" is a highly valued need. Thus, the message from this section is that in order to better understand how a customer values a product or service, you should uncover his or her underlying need, and attempt to place some sort of quantifiable (what is additive?) value on this need.

→ end article preview
Read the Full Article

Michael L. Perla is a principal consultant at a sales and marketing consulting firm. He can be reached at michaelperla@bellsouth.net.