Value can no longer be defined as What a Customer will pay for!


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When we use money as the premise for value, “What a customer is willing to pay for” makes sense. We certainly pay for the value of a Ferrari. Using this argument, money can be the determining factor of value. However, something about it rubs me wrong and by the way, I am a capitalist at heart, so it is not the warm and fuzzy stuff that is causing me to think this way. The term is widespread but in present day scenarios, I think fundamentally flawed. We live in a world that has excess supply and as a result we have to start viewing the market from the demand side. So the connotation what a “Customer will pay for” is problematic for me since it seems to be from an internal focus. The term stems from the process improvement mindset of the 90’s and has stayed with us through the Customer Experience decade. Now as the User Experience decade is upon us, it is simply not useful anymore (excuse the pun).

Many organizations justify improvements by using the word value and customer, internal or external. In fact, the process at times becomes more important than what the customer values. If it is not tied to the marketplace and improvement shown there, why should you do it? The other problem is that someone shows how much savings they create (Cycle Time, Space, etc.) when in fact there was none. I equate it to politicians when they slow down the growth of government spending and proclaim it as a cut in spending. What purpose does creating internal value serve without a demand for utilization? Should value not be perceived and created from an outside-in approach versus an inside-out approach? Is that not what pull is all about?

A good dominant marketing logic arguably limits the mind-set for seeing the opportunities for co-creation of value with customers and other stakeholders of the firm. In a similar way, a transactional exchange view ignores customer loyalty and puts constraints on developing the lifetime value of the customer to the firm. The S-D logic proposes broadening the logic of exchange, both social and economic. – Lusch and Vargo Marketing Theory, 2006

I have seen a significant shift in the concept of value. Facebook, Twitter, LinkedIn, Craigslist, software companies and others that allow “use” free of charge. It is not a free trial offer. We derive value from it. If we want to extend that value or increase it we pay; Ads, users, membership, etc. Value is something (product/service) that someone uses. For example, if I download software or buy a book but do not “use” it, it has no value even though I purchased it.

It is in the use of the product/service that value is derived. I think of value in 3 ways: Functional, Emotional, Social. Thinking of a Ferrari (example from my esteem colleague Graham Hill), I use it to drive (functional), makes me feel good (emotional) and what others think – I am successful (social). All provide value but without the latter two, I could buy a bike. Using this as a guideline, value (Functional, Emotional, Social) is embedded in the use of the product rather than the price.

Forrester predicts that by 2012 half of all consumer purchases will either be transacted online or driven by online research and word of mouth. To succeed in the digital marketplace, it’s no longer customers that matter most, but users—anyone who interacts with your company digitally. Keep users happy, and customers follow.

If we only leave price be the governing factor, would value only be a commodity? I think it is more about users and the use of the product that determines value, Facebook being a prime example.

Today’s most successful companies organize their business around users and building user satisfaction,” writes Aaron Shapiro CEO of digital agency HUGE in his book Users, Not Customers: Who Really Determines the Success of Your Bus….

Today’s most critical driver of success is usability excellence. Users will be your growth engine for your customer base and for your entire organization!

Republished with author's permission from original post.

Joseph Dager
Business901 is a firm specializing in bringing the continuous improvement process to the sales and marketing arena. He has authored the books the Lean Marketing House, Marketing with A3 and Marketing with PDCA. The Business901 Blog and Podcast includes many leading edge thinkers and has been featured numerous times for its contributions to the Bloomberg's Business Week Exchange.


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