The Dynamic Nature of Value

One of the dangers of believing that there is one enduring and absolute definition of value in your business is that there will be times where your prior understanding is irrelevant to the situation you find yourself in.

The circumstances customers find themselves in are always changing. They may have to respond to a competitor, a short term production crisis or a financial circumstance that causes the company to favour short- or long-term perspectives. They may wish to reposition their brand, reinvigorate their innovation capability or expand into new markets.

Whatever the reason, there is no guarantee that what was regarded as good value yesterday will be seen as good value today. Today value is the best price, tomorrow it’s product customisation. An example of this from our own experience was when one us had a damaged house door. The initial replacement considerations were aesthetic: making sure the door was the right style for the house and the neighbourhood. Sourcing this customised door took longer than expected, and whilst waiting for it there was an attempted burglary on the home. The priority shifted urgently from aesthetics to home security. This type of value shift occurs all the time in B2B sales, to the extent where we know of examples where customers have to pay a premium to get a larger allocation of a limited production supply.

So the next time someone in your company starts talking about ideas of value for money or the idea of ‘value added’, which has been popularised in trade publications and consultancy books, be sure to deeply understand the sort of value for money they are talking about or the sort of value supposedly being added.

Value is a multi-faceted moving target. It varies by customer, even within the same sector. It varies by circumstance and it varies by personal interpretation of the buyer. Let’s give the final word to Robert Vargo and Stephen Lusch who in their article ‘Service-dominant logic: Continuing the evolution’ invite us to always treat value as:

Idiosyncratic, experiential, contextual and meaning laden.

In summary, the common things we need to bear in mind when we talk about value are that it is essentially subjective, it involves a trade-off between benefits and sacrifices, that these benefits and sacrifices are made up of many dimensions, and it is always judged relative to alternative competitive offers. Other researchers have offered up useful classifications of types of value which you might also consider. Brock-Smith and Colgate, in their article ‘Customer value creation: A practical framework’, classify value types as Functional/ Instrumental, Experiential, Symbolic and Cost; alternatively Sheth, Newman and Gross in their book Consumption Values and Market Choices suggest Functional, Social, Emotional, Epistemic (knowledge) and Conditional value types.

And they say elephants can’t dance!

Use the checklist below to capture examples of all of the different types of value you can think of that are relevant to your markets and customers.

  • 1. Economic value—includes price considerations and basic utility of the offer
  • 2. Perceived value—includes brand image and symbolic value
  • 3. Relational value—includes knowledge value
  • 4. Experiential value—includes emotional value
 
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