Adding Value as a Small Business | Up and to the Right | Episode 045
Reminder: What is a Business Principle?When I talked about what made a business principle I ended up here:A business principle is a concept that is both foundational and relevant to all businesses.This set a pretty high bar when it came to identifying what were business principles and what were strategies, missions and tactics.Communication made the cut and that’s what I want to cover today.What is Value?According to Merriam-Webster the definition of “value-added” is: “a product whose value has been increased especially by special manufacturing, marketing, or processing”I want to change the word “marketing” to “experience”. Marketing is a tool to communicate but it’s the experience that changes the value of a product.Why is adding value a business principle?Value qualifies as a principle because of the fundamental requirement to offer something that your customer values more than the money they wish to exchange for it and it is universally applicable to all businesses.Examples of Value-AddedIntrinsic Value - CommoditiesA commodity is an item that can be easily compared on price and is generally just as easily replaceable by another, similar product.Examples might be automobile gasoline or general food items.Luxury ProductsOn the opposite end of the spectrum we have luxury items which are difficult to compare on a cost base and are less replaceable than a commodity.Differentiating Commodities and LuxuriesOf course, the scale between a commodity and a luxury item is wide. One of the key goals of marketing is to differentiate brands from competitors but also from the nearest commodity. This increases the overall perceived value of a product with the intent of increasing sales volume, margins or both.A practical way to look at value-added is simply how we separate what we have to offer from the nearest commodity.Consistent QualitySometimes you just want to be sure that you know what you’ll be getting every time you use a product.Many ‘mass produced’ products rely on this characteristic. Fast food restaurants and automobile gasoline for example.Functions & FeaturesSpecific product functions, features and capabilities are a common way to differentiate your products and services from both competitors and commodities.The Swiss Army Knife differentiates itself by adding the value of a combination of useful tools to the standard pocket knife.DurabilityDoes your product last longer than other, similar products? Can your product be used in harsher conditions?Durability makes it easy for customers to rationalize a higher cost when the product will last longer or work in more difficult circumstances.Customer IdentificationHow a product makes us feel about ourselves can play a big part in our purchase decisions. We’d all like to imagine that we’re more rational than we really are when it comes to how we spend our money.Helping customers identify positively with our products and services in ways that also give them a positive outlook on their own values can add value that is powerful but difficult to quantify.Hybrid cars, health food stores and gyms often add this kind of value to their products & services.Customer ExperienceWhat is the environment in which your customer experiences your product or service? Is the environment part of the value? Think about flying first class versus coach or getting coffee in a boutique coffee shop rather than a convenience store.Customer experience can be another way to add value that doesn’t necessarily add a great deal of cost.How to Identify Your Value-AddedHow can small business owners get a good understanding of what value they are currently adding? Ask Observe Compare AskOne way to find out what your customers think the value of your product is would be to simply ask. You can do this with a survey or in person. While this may be a good start it’s important to understand that survey data may be affected by the customers feelings and perceptions about the survey itself.ObserveWatching what your customers actually do and say when they are in your store or using your product can tell you a lot about what they value and how they really feel about your business.CompareBy comparing both the observations you make and the direct questions you ask you can get at least a somewhat comprehensive view of the value your customers see in your products and services without the cost of outside market research.Practical ActionAlright so let’s get practical!Here’s a quick way to get started understanding the value you add and adding to it! Find out what your customers value through observation, direct conversation and/or by using a survey. These should be benefits you already offer as well as those that you may be able to add. Answer the question: How does the value perceived above match the value you originally intended? What can you do to enhance your product or service to add additional value? Reminder: Look for ways to separate your product or service from the nearest commodity!Do you have a creative way to add value? Drop a comment with your thoughts. Connect with me to keep in touch and share ideas!References“Value-added.” Merriam-Webster.com Dictionary, Merriam-Webster, https://www.merriam-webster.com/dictionary/value-added. Accessed 25 Jun. 2020.