There is an equation that governs commerce, and business in general, that we need to understand backward and forward. I call this the ‘Value Equation’ because at its most fundamental level . . .
Buying and selling is trading one kind of value for another.
Our customers need the functional capabilities that our products and services can provide in order to achieve their goals. Since it’s our job to sell those products and services, we arrange a trade. We deliver value to them, and they deliver money to us.
Like an algebraic equation, this exchange has to balance. The value we deliver needs to be at least equal to, if not greater than, the money we are asking for. It doesn’t really matter to our buyer whether or not we think the trade is balanced. What matters is whether or not they think it is.
If your customer thinks that the value of what you are offering is not equal to or greater than the money you are asking them for, they probably won’t buy. In order to balance the equation, the customer’s proposed remedy is almost always ‘lower the price.’ But is that the only way this equation can be brought into balance? Another way to balance the trade is to increase the value on our side of the equation. But we should always remember that . . .
It’s not the actual value of what we sell, but the customer’s perceived value, that really matters.
This perception is, of course, a subjective opinion, but it’s the only opinion that counts. We have to accept that the buyer’s perception of value governs all of their decision making and behavior. In this chapter we will explore how our customers perceive value, as well as the things we can do to influence that perception, by looking at:
- The kinds of value our customers want to derive from a relationship with us and our company, which I call the ‘Denominations of Value.’
- The things we bring to the table that provide that value, which I call the ‘Sources of Value.’
- How the two tie together in our customer’s mind.