Focus on Value

Value is something which is created by businesses in the work they do (how often do we talk about "value add"; "added value"; "the value creation process" and so on?) . A bit like beauty, it is also in the eyes of the beholder - it is a perception. The art and process of selling and marketing is to create, for customers, a positive perception of value.

Interestingly this notion of 'value creation' means that value is an output or an outcome from a business process. In the current "down market" (as our American colleagues have been quick to euphemistically call our situation) customers are more focused on value than they have been in many, many years.

And yet so many businesses seem blind to this customer need; to the requirement to deliver real value. In fact many don't seem to have any concept of how their customers might perceive value.

I seem to have had a few of these tough and frustrating conversations with service providers in the last few months where I have very clearly felt that they have not delivered value. There is a common theme in the way they deliver their defence - they fall immediately back to two points:

1. "But look at the amount of "input" (which is usually time or materials) we have used in creating the outcome",
2. "You should have intervened earlier to prevent the inputs (costs) mounting up"

I'll come back to the first point in a moment, but to address the second point, it is my contention that there is no point having a dog if you are going to do the barking! It is not my role as a customer to police the input process of my service providers.

To provide some context for this, my concerns have ranged from situations at home, such as one involving a house painter, to work, such as various marketing services providers.

For example, my house painter did some touch up work around the house over an extended period of a few weeks. Some days he was there, others he wasn't; some days he started early, others later. Mostly he worked alone during the day when we were at work and was long gone by the time we arrived home. We were pretty relaxed about the arrangement both because we had no time pressure to complete and because we have used this painter for a dozen projects over the last 8 or 9 years. When he finished the bill was presented and it blew me away. It was thousands and thousands of dollars. I simply didn't believe that the output represented many thousands of dollars of value, so I queried the bill.

The response was that he had arrived at the bill by looking at the number of hours spent on the job and that if I had been concerned about the possible cost I should have called a pause earlier in the job (in other words I should have monitored and policed the hours involved).

Now I could have possibly averted the price 'sticker shock' by getting a fixed price quote and, perhaps if we didn't have such a long standing relationship with the painter, I would have, but that misses the point.

I don't believe there was thousands of dollars worth of value in the work that was done. I am the customer. The service provider is responsible for my perception of value. Telling me the number of hours spent doesn't cut it as a solution. The number of hours are an input to the process and they are a measure of efficiency not a measure of the value of the output. We all know of people who are more efficient than others - some painters might do twice as much in an hour as others.

There are ways the painter could have changed my perception of value. For example, he could have taken me around the house and shown me places where there was intricate cutting-in work necessary which was extremely time-consuming but vital for the quality of the finished job; or he could have shown me places where extraordinary surface preparation was required before painting; or he could have shown me places where there were 5 coats of paint and so the surface was so hard it could resist minor scratching unscathed; and so on.

Instead he told me the number of hours involved multiplied by an hourly rate. Since this is only a measure of efficiency that leaves me with a perspective that he must have been inefficient and I am paying the price - ergo, the output is not valuable. Despite my many attempts to get him to see things from my point of view, the painter simply couldn't step into my shoes as a customer.

When customers don't see value they don't come back and they don't spread positive word-of-mouth (even worse, they often spread negative word-of-mouth).

The key lessons in this for successful business are:

1. It is necessary to focus on, understand and deliver value to customers. What value is your business delivering?
2. It is your responsibility to manage the customer's perception of value.
3. Value (i.e. as an output) is in many instances divorced from the quantity and value of the factor inputs.
4. It is vital for businesses to be able to stand in the shoes of their customers if they are going to understand customer value perception.