How Do You Define Value?

The concept of value is an endemic factor of business life. Every organisation is selling ‘value’; every purchaser (whether another business or consumer) is looking to buy ‘value’. So what exactly is value?

When helping clients with the development of their customer values propositions (CVPs) we a simple but powerful equation:

Benefits – Costs = Value

Viewing value in this way enables a very clear understanding of why one product represents more value to one customer than another. The benefits, which capture tangible needs and intangible wants, plus concepts like quality, are all the positives associated with the purchase.

The costs, both actual (the total amount of money), and circumstantial (things like time, convenience etc) are subtracted giving a notional values ‘score’.

This explains why a meal for two in a swanky restaurant at £150 can be perceived as good value (because of the way it meets the purchasers needs and cost expectations) and a meal in a high street bar at £25 for two can be perceived as poor value because it didn’t meet the benefit/cost expectation equation.


An interesting dimension to the value equation that many organisations would do well to consider is what value (to the customer) does their field sales force add? As customers become more savvy purchasers, salespeople need to be much more than communicators of information and clever negotiators; otherwise the value equation can become distorted in the customers mind, seeing salespeople as unnecessarily expensive additions to their purchasing process.

Examine other parts of your offer (the benefits) for their capacity to add-value. The more they do the more the associated costs will seem in proportion to the whole giving you relatively high ‘value score’ compared to your competitors.

This formula is also helpful when applied to job candidates. The more impressive someone credentials, and the cheaper their total employment costs, the higher their value appears. The opposite is also true!