Vol. 1 — No. 1

Creating Business Value

Businesses are in business to create value. We strive to create value for our customers so they buy our products; for our employees so that they will be fulfilled by their work and have opportunities for career growth; and for our stockholders so that they will receive the return they seek and continue the investment stream. So why is creating value so elusive when it is what we spend a lifetime trying to achieve? To generate business value we must understand what drives it.

Volume generating price reductions and internal cost cutting, tactics often used to drive revenue and subsequently value, are short term measures. They are usually indicators of a company planning to sell the business, generate a higher stock price or buy time while a value creating strategy is developed.

Creating long term value in your organization requires a well aligned strategy that drives meaningful value through to your customers so that the customers return that value to you through immediate purchases and increased loyalty over time. The steps that follow provide a guide for defining your businesses’ value through your customer’s eyes, the key component in yielding long term business value.

First, decide what value you provide to your customer. Your strategy must define how your product or service is different or better than your competitors. If it is the same, why buy from you? And chances are they may not much longer. Does your product perform better? Are you priced lower? Do you have more effective customer service? The benefit you provide may be tangible but it can also be emotional. Many products, especially those sold in the retail market, rely on emotional differentiation. Hallmark executive Claire Brand wrote a whole book on the subject, which is titled “Emotion Marketing; The Hallmark Way of Winning Customers For Life”. Remember, that the value must be meaningful to the customer or it is irrelevant even if it is different. The best buggy whip is still just a buggy whip.

Secondly, make sure your customer understands the value that you offer. Be sure the value, or the total benefit of doing business with you, is clearly communicated to your customers. If a bank accepts same day deposits until 6pm when most cut them off at 2pm, do you think it changes the way the bank is perceived by its current and potential customers if they aren’t aware of the difference? It is not enough to tell customers that you accept same day deposits until 6pm if they don’t know that others do not.

If you are a manufacturer who sells components to another manufacturer, many times you face very competitive pricing situations. But if your product reduces your customers manufacturing time, or if you will maintain sufficient inventory to enable their just in time manufacturing program or if your product reduces overall line maintenance, you are providing more value. Are you calculating that in the sales presentation to show how your price (which may be identical to the competitor), combined with the other benefits you offer, provides more total value?

Third, stay vigilant that the value you offer is significant and relevant. As market conditions change and competitors respond, the value you provide may shift. Conduct regular reviews to determine that the product or service you offer is valued in your market place and revise as needed.

Finally, reinforce the value you offer as often as possible. Regularly communicate the value to your customers so that they are aware of it and appreciate it; share it with employees so they may seek to conduct their work in a manner that further enhances it and delivers on it; calculate how the value you offer to the market has impacted the value of your business and share that with stockholders so they continue to support your long term strategy and business goals.

Providing meaningful value to your customers is a critical component in building long term business value. Start today!