Show Notes
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-Added
Intrinsic Value - Commodities
A 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 Products
On 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 Luxuries
Of 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 Quality
Sometimes 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 & Features
Specific 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.
Durability
Does 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 Identification
How 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 Experience
What 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-Added
How can small business owners get a good understanding of what value they are currently adding?
Ask
One 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.
Observe
Watching 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.
Compare
By 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 Action
Alright 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.
What is The Up and to the Right | Small Business | Practical, Actionable, Sustainable Improvements?
Welcome to Up and to the Right, the no-nonsense podcast where we blend your passion with proven business principles and practical tips, empowering you to create the impact and success you envision.
Hosted by Stephen Krausse, the show covers what matters to small business owners, startups, and people interested in becoming entrepreneurs. No buzzwords and no hyped-up trends!
A graduate of Colorado State University's College of Business, Stephen has an academic background that compliments over 25 years of business operations and management experience. He started his first business as a freshman in college in 1987, recording and producing demo tapes for local bands. Since that time, he’s been involved with numerous successful small businesses, including the operation and management of a niche high-tech company with customers and suppliers worldwide.
As a business professional by education and trade, he works with select business owners to blend their passion with proven principles, giving them the edge they need to achieve their unique impact. Stephen is always researching new products, ideas, and innovations - consuming content through audiobooks, podcasts, and online resources, and connecting with other professionals locally and abroad.
Now he’s sharing practical tips and ideas to help you get real work done. This isn’t about fancy solutions requiring a considerable investment or changing how you do your best work. You’ll discover ideas that will allow you to integrate proven principles into the way you already get things done. You’ll get practical ideas to easily replicate, modify, and integrate into what you already do.
Up and to the Right covers topics like getting value out of a business model, outsourcing, hiring for small businesses, working across platforms, productivity and efficiency hacks, building revenue streams, communication and planning, and more! Some episodes will have related downloads available from the show notes page below or unique segments with guests who have industry-specific tips that would be helpful.
It’s time to roll up your sleeves and get to work. Listen to Up and to the Right with Stephen Krausse today.