Helping you start and build a profitable and growing business
Consulting Growth breaks business down to basic building blocks (like Lego) and tells you how to assemble them for success.
This is the stage at which your organization gets paid. The question is, how much of the total value should you take? Simple math dictates that you would get whatever amount is left after subtracting your costs of value creation and delivery from the offering’s sales price. But it’s never that simple because of other considerations; such as, your competitors’ pricing, the amount of surprise-and-delight you are trying to create for your customers, and your longer-term market strategy—just to name a few. For example, you could divide some of the excess value (above and beyond a reasonable profit margin for you) with your customers so that their value-capture opportunity exceeds expectations.
This phrase is a bit of a misnomer because it implies that all you need to do is be willing and able to deliver something to be successful. If we take a more customer-centric view, we will realize that value is less “delivered” by you, and more “accepted” by your customers. The ultimate decision to do the deal always lies with the customer. Customers are willing to accept and use your value because of their awareness of your company (nurtured by your marketing message), their belief that your offering will solve a business problem (reinforced by your sales approach), and their expectation of improved operations (made credible by your customer service practices). If you can provide effective marketing, sales and support, then you will inevitably be asked to transfer more value to an ever-expanding number of willing customers.
Value can be created in two ways: First, by producing an offering (a good or service) that is worth more to customers than its cost to produce; and second, by preventing the production of an offering that is worth less to the market than its production cost. Clearly, expending more to produce something than its market price destroys value. Value must be created and delivered to customers before any of it becomes available for capture by your company. Value creation is the “buy low” part of the old adage, “buy low, and sell high.”