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How do you define Value?

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The simple answer is you don’t, its your client that decides what Value is and what it means to them.

We can give it mathematical definition its

Value = (Tangible and Intangible Benefits) less (Price plus Usage plus Disposal Cost)

There is a theory that Value is made up of 3 elements

  • Revenue Gain
  • Cost Reduction
  • Emotional Contribution

These are the elements that determine the value to the client.

These elements became the Value Triad documented by Harry Macdivitt, Mike Wilkinson here is a link to their work on Value Based Pricing

Once you understand what value is, then you can prepare your Value Proposition.

A business or marketing statement that summarizes why a consumer should buy a product or use a service. This statement should convince a potential consumer that one particular product or service will add more value or better solve a problem than other similar offerings.

The question for us is: what are the critical differences between us and the competition and how does this influence the value we offer? Our success in meeting those requirements is based on the differential value of our product or service offering.

CIMA list the following ideas about how to differentiate in their article Building Value Through Differentiation

  • Consistency
  • Convenience
  • Customised Services
  • Combinations (collaboration and package deals)

How do you determine the value of your products and services?

1 Comment

  1. 3resource says:

    Is this the starting point of Value Based Management principles, whereby Economic Value (aligned to IFRS principles) are considered as opposed to just purely accounting value, which is closer aligned to UK GAAP?

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