Marketing 101: Every Business says it ‘Delivers Value’. Do They Even Know What That Means?
Here’s a quick exercise for you. Turn on your television set and watch it for a couple of hours. It doesn’t matter what programs you watch, because what I want you to focus on are the commercials.
Now, every time the word value is spoken or appears on your screen, imagine taking a drink of your favorite recreational beverage. (If you choose to do this for real, then all disclaimers apply, including don’t drink and drive. If you don’t drink, then use your imagination).
Now, how long do you think it would take you to get lit in this exercise? I’m betting not too long.
So, what’s the point?
The word value is often used in advertising, like “We deliver value”, “When value matters”, “Value is our middle name” blah blah blah. It is often thrown around to sound impressive, or because the advertising manager was too lazy to create a compelling message.
So what, then, does value really mean? In other words, what is the value of value?
Before we can dive into this concept, we have to understand the circumstances from which value is created — an exchange. When two or more parties voluntarily agree to trade things with each other, an exchange takes place. We tend not to give much thought to what an exchange actually is however, assuming that it just means paying for a product or service with money.
This is a narrow view of an exchange however, so we need to examine it more fully. In an exchange, two or more parties make a choice to give up something that they own for something that another party owns. Money is typically one of the things offered in an exchange, but you can also exchange goods, services, baseball players, and even time — for example, when you go to work, you are trading your time for your employer’s money. In return, you gain the benefit that the money provides, and your employer gains your skills, experience, and hard work to grow its business.
For an exchange to potentially occur, though, several conditions must be met. The most obvious are that there must be at least two parties involved, and they must want to enter into an exchange together. And of course, each must possess something that one of the other parties wants.
But in addition, each party must be able to communicate, or exchange information with each other, such as what they are willing to give up and what they want in return. And each must be able to deliver the good, service, or currency they are going to exchange. So for example, an exchange can’t occur if you try to sell someone your neighbor’s car. Finally, each party must have the ability to accept or reject the conditions of an exchange. You don’t have an exchange if someone is forced to give up something they own.
If all of these conditions are met, an exchange may occur, but it’s not guaranteed to occur. But it won’t occur if any of the conditions are not met.
So what then is value? A synonym of the word value is benefit. So something provides value if it provides a benefit to the person who possesses or utilizes it. Money has value because it provides a benefit — it can be exchanged for a can of cold soda on a hot day, for example.
An exchange creates value when both parties receive greater benefits than they were receiving before the exchange. This is why people choose to enter into an exchange to begin with.
Remember, I said earlier that in an exchange, each party has to give up something that they already own and from which are receiving a benefit. If they agree to give it up in an exchange, then they will no longer receive that benefit. So if each party chooses to give up that benefit, then they should expect that after the exchange occurs, they will receive more benefits in return.
Value creation can be easily seen in the classic story of the wheat and chicken farmers. A wheat farmer has more wheat that he needs, while a chicken farmer has more eggs than she needs. So they agree to exchange some of their excess goods with each other. Now, with both of them having wheat and eggs, they can each bake a loaf of bread, or a cake, or something else that they couldn’t have made before their exchange took place. They both gave up something they valued, but got more value in return. And in turn, they can exchange their bread and cake with other parties, and create more value. Value builds upon value.
Value is not always created in an exchange however. If an exchange results in one of the parties receiving less benefits than they were receiving beforehand, then value is not created for that person even if value may be created for another person in the exchange. So suppose the can of soda I mentioned earlier cost $25. Has value been created? Likely not because I could have spent (exchanged) that $25 in other ways to gain greater benefits. Both parties must end up with greater benefits after an exchange takes place for value to be created.
The last thing I’ll say about value is this. Sometimes it’s clear to a person if an exchange will create value for them, perhaps because they’ve had similar exchanges in the past, or because a product or service in an exchange is simple to understand. But many times it is not clear, because one party (such as a consumer) lacks information to make such a determination. That is the job of the marketing team — to clearly articulate the value that their product or service will create for their customers. It’s not a matter of creating value in and of itself (e.g. “We deliver value”). That must be created in any exchange. Rather, what’s important is the specific value that will be created. As I outlined in a previous article, that is what customers are looking for — they aren’t looking to buy your products or services. And as I said above, customers enter into an exchange by choice to make their lives (or businesses) better, but at the same time, they can also choose to decline an exchange — and they will do so if they don’t see that value will be created for them. However, if value is clearly understood and desired by a customer, then they are more likely to buy your product or service.
So what is value and why is it important? Value is created through exchanges, it creates new benefits that people want, it builds upon itself, and increases economic growth everywhere. Pretty darn cool.
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Kevin Larsen is a software Product Marketing Manager and an Adjunct Instructor in Marketing, Software Engineering, and Computer Science courses. Follow me on LinkedIn.