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Creating, Recognizing & Measuring Value

 Article Body:

Price is what you pay - value is what you get.

Warren Buffett, Chairman of Berkshire Securities 

Deliver value that your customers recognize, appreciate and reward. If you would like your customers to value what you offer - you want to demonstrate that you simply value them. 

Value implies trust so start by building trust. Always under-promise and over-deliver. Be known for keeping your promise then some. Be honest. Never promise what you can't deliver. 

Don't confuse value with cost. A product's value is nearly never adequate to its cost. for instance , your product may cost you $2 and you sell it for $10. the worth to you is $10. the worth to the customer will usually be quite the asking price . If it had been only worth $10 to the customer then they need no motivation to shop for . But if the worth to them is bigger than the asking price , they're motivated to trade their money for something of greater value. it's going to be worth $25 to the customer. Then they're going to gladly hand over $10 of their money for the merchandise . The more that value exceeds the value of the acquisition , the more the customer will want to shop for from you. Always offer value that's greater than the worth they pay. Your challenge is to make sure the customer sees far more value than their cost. 

The Value Formula

How can value be so different from cost? Examine the subsequent formula, then discover where you'll concentrate your efforts to reinforce value. 

Total value = real value + perceived value 

Let's take it apart to know it. Real value comprises the tangibles. it's relatively easy to live . Real value are often expressed during this manner: 

Real value = function/cost 

Function is what the merchandise or service does in mechanical or analytical terms. Imagine you're buying a replacement car. If you're buying the simplest real value, you'd get the foremost function efficient ground transportation for rock bottom cost. you'll measure the car's function factor by comparing it with the value of your practical alternatives; transportation system , car pooling, taxi, bicycle, limousine, various car models. you would possibly wish to think about the prices of those alternatives in terms of your time and inconvenience. What does your new car offer you that these other modes of transportation don't? 

Having determined the new car's function factor, you'll divide it by its cost. Is its function worth more to you than its cost? If so, the new car has real value. At the top of your analysis you'd buy the most cost effective car. Not necessarily. Remember that what you're willing to buy your car is predicated on the entire value to you, which may be a factor of both real and perceived value. So, sometimes without realizing it, you assign value to less quantifiable benefits and buy something that you simply like. Liking isn't a part of real value, it's a part of a product's perceived value. 

Perceived Value = belief x emotion 

Compared with real value, perceived value is harder to live directly. Yet it can have greater impact on total value. Perceived value is that the product of belief times emotion. it's influenced by intangibles like image, credibility, beauty and feelings - all the advantages you ought to emphasize in your marketing efforts. Emphasizing your perceived value is that the surest thanks to differentiate yourself from the competition - and gain you more profit. Perceived value is what makes a name more valuable than a no-name. Nike is one example of a corporation that built a fortune on perceived value. As individuals we expect differently, perceive differently, and place different values on things. watch out for that. Use it to your advantage. When your prospect wants to barter price, remember to create up your product's perceived value. 

How are you able to enhance the worth of what you sell? If you're only watching the value of paper and ink then you're forcing yourself to compete within the commodity game. Instead find ways to stress the worth of your relationship, the creative, - the intangibles. 

Always deliver real value too but compete on the perceived value.