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It's About Increasing the "Other Value"
By Jonathan Narducci, Narducci Enterprises

Usually when management talks about "value" they are describing what their company is "worth" in various terms. The "other value" they are now focusing on is the "value" customers buy! Increasing this "value" is what leads to increasing "worth."

As a management consultant, I decided to focus on the understanding, importance, and identification of the "other value" a company needs for success. Usually when management talks about "value" they are describing what their company is "worth" in various terms. The "other value" they are now focusing on is the "value" customers buy! Increasing this "value" is what leads to increasing "worth."

Management is recognizing that the "value assets they own" - what I call "competitive value" - is the real engine driving their success and that their "worth" is the scorecard defining their level of success. It's these assets that, when effectively combined, results in "value" customers buy.

Assets include, for example:

  • The ability to obtain a deep understanding of the customer's business and turn customer information into customer knowledge.
  • The unique skills, experience, and expertise of the company's people.
  • The company's processes and management capabilities.

The real goal of a company is to use these assets to optimize its "value" and turn it into "value" a customer can use to increase their success in their quest to run their business, solve a problem, or enhance what they "own." To achieve this goal, companies must keep in mind:

1. It's successful customers that "buy,"

2. They have to learn all the reasons why customers need to buy, and

3. If they offer effective, total solution value, customers will pay for it.

There is a tight relationship between these three items: successful customers solve their problems and satisfy their needs by buying the best, complete solution that may even take care issues that may be unrelated to the products and services they are buying. This means that customers look for providers who constantly seek an understanding of all their business problems and needs and who offer effective solutions with a value proposition that increases with those needs.

Because "value" has several meanings, if businesses want to increase their value proposition, they have to think of value the way customers do. To customers, "value" is considered to be "what they get" in return for what they "pay," represented by one (or more) of the following equations:

  • Value = Benefits/Price, where "benefits" are described in terms of, for example, quality, uniqueness, time, and popularity.
  • Value = Utilization/Price, where "utilization" can be defined in terms of versatility, ease of use, and effort to learn.
  • Value = "Degree of Fitness for Purpose"/Price, where "fitness for purpose" can be defined by the varying skills needed to "use" the product or service, environmental traits, and business processes involved.

Regardless of which one (or some combination) of the three is applied, each of the two common parts, the "value proposition" and the "price," indicate how "value" can be increased: Either raise the "proposition" or lower the "price."

Companies can lower prices by cutting costs, accepting lower revenues (profits), increasing the quantity sold or all of the above. They can increase benefits by supplying customers with more products and services, additional features to existing products and services, and added operational intangibles (such as on-time delivery).

But which way is better? Well, that depends on a lot of different factors, including, but not limited to, short/long term goals, economic conditions, market entry strategy, and the definition of "who are the right customers."

But because I believe


Jonathan Narducci uses his 30+ years of experience in business, management, and quality systems to lead international companies in their search to locate and implement the ideas that helps craft the business performance needed for the business results expected. For more information visit www.narduccienterprises.com

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