Value creation can be considered the core of marketing. It is to understand what the market needs and creating a product or service of value to fulfil that need. You can only create value for the market when you know what it needs.
One reason why businesses are not as successful as they can be or why they fail in general is because they fail to research the market. They end up creating a product that does not have a place in the market or does not add value to customers in the target market.
Sometimes we fall in love with our product or service and think that everyone will feel the same way. Unfortunately, that is not the case.
So, the right approach is first to examine your market feasibility, viability and potential business opportunities. It is the understanding of your market opportunities that guides the creation, presentation and marketing of your product. Unfortunately, most businesses work the other way around.
“Don’t fall in love with a product; fall in love with a market. If you spend all your effort building the most perfect product and hope that there’s a market, you’re going to be disappointed.”
~ Russell Brunson, Creator of Click Funnels
Another way of looking at is:
“Don’t find customers for your products, find products for your customers.”
~ Seth Godin, New York Times Best-selling Author
Understanding the market does not mean just soliciting feedback from stakeholders or industry partners in the market. The goal of the value creator is to identify opportunities that you can exploit.
It takes a high degree of creativity to analyse feedback, market data and indicators and identify where value is needed.
After all, Henry Ford was right when he said, “If I had asked the public what they wanted, they would have said a faster horse”. The same can be said of Apple with the introduction of the iPod and iPhone.
Of course, you might not consider yourself the next Ford, Jobs or Zuckerberg, or have a revolutionary product and have the resources to market it. However, the basic principles of value creation can still apply to your business.
Once you understand your market and have identified an unfulfilled need, you can think of how you can create value in the form of a product, service, solution or even content.
But, what exactly is value?
The basic underlying concept of value in marketing is human needs. The basic human needs may include money, food, clothing, shelter, freedom, companionship and love, to name a few.
Society, culture and individual personality shape human needs, and therefore their perception of value.
Value in marketing is known as customer-perceived value. The critical phrase in that sentence is ‘customer-perceived’.
Value is subjective and relative.
The derivation of value is not equally important to all customers. The value is defined by the individual or collective individuals when talking about a market segment.
It is also essential to understand the difference between value and price.
One of Warren Buffett’s most famous quotes (via Benjamin Graham) is:
“Price is what you pay; value is what you get.”
Essentially, price is the amount of money that you are asked to pay for it, while value is what you feel the thing you paid for is worth.
The most important distinction between price and value is the fact that price is arbitrary, and value is fundamental.
For example, if you receive a meaningful gift from a close friend, you may treasure that gift immensely and would not consider selling it for even $1000.
You may value the gift at more than $1000 even though your friend paid $10 for it. That $10 price tag was set by the seller, for reasons known only to him. If a 3rd party offered to buy the gift, she might offer only $8 because she does not value the same gift as much as you do.
So, the price of the gift is arbitrary, but the value is fundamental as the underlying value has meaning to the individual.
At times price may be one representation of value as well, which is something we will discuss below.
During the value creation process, you should not be overly influenced or concerned with price at this point. You want to create a product or service that provides customers with solutions and benefits that give them the most value and satisfaction.