Value means many things for many stakeholders of a business.
For a shareholder, the price appreciation of his share portfolio is of ‘value’, for a logistics department of the same corporation, enhanced efficiency by a new ERP system is ‘value’ while for the customer, receiving a higher rate of utility from the product or service of the corporation is their ‘value’ proposition.
Often measuring the cost of a product is straightforward since costings for raw materials can be calculated and such total costs can be used as the base but its value for each customer could be different from customer to customer. Measuring the value of service also is not simple: First, do customers get what they require? Secondly, is the service delivered within set expectations? Thirdly is the service value for money?
Therefore, it is clear that searching for a singular definition of ‘value’ takes us nowhere.
Still, we CAN prioritize its definition based on whose idea of ‘value’ is the most critical for a business.
It’s not impossible to fathom-we can propose that the customer’s idea could be most critical.
After all, does it matter when the company perceives its value but the most critical stakeholder, the customer, has still not perceived the product/service as value for money utility of the business?
Loss of the customer leads to the ultimate end of the company/corporation.
With this tentative understanding about ‘value’, one can safely guess how value, in business, needs to be monitored.
The test: Is there any business value to the customer? Does the customer benefit from it in anyway? Will the customer return?
Seth Godin, the reputed marketer and business executive says:
“The true, current value of any one customer is a function of the customer’s future purchases, across all the product lines, brands, and services offered by you.”
On the other hand, should cost be the base to appraise the value? Cost is a determinant of value, and should not be relied on, to monitor value. Ultimately its ‘business value to the customer’ that matters-in that, the quality of utility and the satisfaction derived from the product/service.
