Defining Value
Value is ambiguous.?People think they know what they mean when they say it, but it has so many different meanings.?A couple of years ago I asked my LinkedIn followers what it meant and had some fabulous responses.?Yet, I still struggle to find the right definition.?Here is my latest thinking.?
There are 4 meanings of value that I use regularly.??
The first three meanings can be measured in profit dollars, meaning they are great definitions in B2B business.?Inherent value and relative value are great concepts in B2C but they aren’t quantitative.?Instead, we use them as frameworks.?Willingness to Pay works for both B2B and B2C, but it is the only quantitative definition to use in B2C.??
The word “Value” in the phrase “Value-based Pricing” has a singular meaning in my mind.?Willingness to Pay.?Value-based Pricing means charge what a buyer is willing to pay.??
These are the definitions of value that I’ve landed on.?I’d love to hear where you agree or disagree.??
Share your comments below.
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Marketing Science @ Annalect
1 年In B-school, we learn about economic value and willingness-to-pay (WTP being the cornerstone of our pricing classes). We learned the way to do Economic Value Analysis by looking at near competitors and quantifying the differentiating points between the products. However how our product saves the customer money compared to the alternative is our added value, and we can add upto that amount to our product's price (so if you are selling product Y and your competitor has product X, and a customer buying product X would have to pay $Z additionally to product X's price to attain the same value your product Y could give, you can price your product Y UPTO price of product X + Z) Could you give some examples of inherent and relative value?
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1 年Thank you Mark! Your weekly newsletter has become required reading for me. This one is a meat sandwich I'm taking in bite by bite.
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1 年Interesting way to define value. I agree with a lot of the conversation so far though; the value of something can be very personal. I do wonder how corporate value pushes against the market and how that transforms over time. For example, if I add AI to my product/service so sales rep can have better visibility on forecasted sales, that brings value to the company but not to the customer. So it might be "cool" for you but meaningless to the customer (i.e. so what).
Emotional value Mark Stiving, Ph.D. ?
Chief Marketing & Customer Experience Officer | Business Leader | Communications Specialist | Pricing Professional
1 年I believe that WTP is a critical aspect of Value. However, I would be concerned that the well-meaning desire to make things crisp will lead to an over-simplification.