Over the past several years, the word “Value” has moved down the ladder of usefulness in an organization’s efforts to portray their offerings to the marketplace. It has slid from signifying differentiated great worth to one that has ironically become cheap and easy to use when nothing specific can be declared. We hear “Value Add” and “This Valuable Offer” so regularly that our internal voice responses, “Sure, you along with everyone else”. In a business context, declarations of a product or service having value are so commonplace that it seems everything has value, if one believes each organization. This leads me to conclude that its definition is unclear and inconsistent across its users.
First and foremost, value is an assessment, a relative one, to the needs of a particular individual. One person’s assessment of the value of something is not often shared among the masses. How could it be if individuals have unique, individual needs? The second element involves how significant the product or service is to taking care of the specific needs of the individual. If it does not address what a person is trying to take care of, then its value is low. Finally, the last ingredient for creating value is the scarcity of what is being offered. If it can be found on every street corner, then the overall value is once again diminished. Put simply, the relative value of anything being offered in the world, be it a product, service, or even relationship, boils down to the simple mathematical formula of:
Value = Relative Assessment (Level of Significance * Level of Scarcity)
In order for an organization to increase “the value of its value”, it needs to get back to the basics of determining what its customer needs are (really) from a relative perspective (what else they can choose from). After understanding this aspect at an individual level, a company must look honestly at its offering(s) as to how well it addresses what the individual is trying to take care of (really) and how many other competitors the individual can go to (scarcity) for the same offering. Often when selling their value, companies forget that individuals buy from the seller, not companies. In order for any sale to take place, it is at the individual buyer level where concerns need to be understood, how well the company’s offering can address those concerns and in the end, who else is offering something along the same.
Consider the following example:
You are in New York City and are thirsty and on every block a vendor sells water, pop, sports drinks, etc. You want to take care of your thirst (concern), a nice beverage would do that (significant) and the sources are many (not too scarce)…value of the drink? Whoever has the cheapest kind you prefer. Now, you are transported to the middle of the desert, where standing before you is one person, with one bottle of water. Value of the drink? “Priceless”.
It works in the business context the same way as in an individual’s private situations, from products to services to people, the formula never changes.