Introduction
Before we go:
I am not a sociologist by profession. All that is included in this blog are interpretations of other people’s research as well as a personal understanding of the concept of value.
Where does a man get value? What’s it for? Why is value important for business?
Value is the sense by which we perceive the things that are important to us.
In the same way that a person reacts to his environment by touch, hearing or other senses, he also reacts to value. People react to value with EMOTIONS.
If something is outside our hearing threshold, we don’t hear it. If something does not affect our value system, we are indifferent to it.
By his nature, man constantly perceives and VALUES things in his environment. This evaluation is not based on the intellect, but lies in the emotions we feel.
These emotions help people to EVALUATE someone or something in a reliable way. This means that the valuation is not about the OBJECT (product) but about the SUBJECT (buyer) who attaches value.
Emotion arises as a reaction to the assessment of something that is IMPORTANT to us.
For example: If we care about Christianity and in our presence someone belittles our faith, we may feel anger. The emotion of anger will awaken as a reaction to the assessment of injustice in relation to what is valuable to us (Christianity).
The same behavior doesn’t have to evoke the same emotion in someone else.
That is why in business it is very important to put yourself in the position of customers and see the world through their eyes. Value is always in the eyes of the buyer.
In business, value is seen as currency. Something is valuable if people would be willing to WORK or PAY for it.
For the buyer, this is not the case. The customer is willing to give you money because they value what you offer more than their money.
What is valuable for the customer is:
- What he NEEDS,
- What he LACKS and
- Something for which he is motivated to PAY in order to achieve a certain GOAL.
In order to know what the customer needs, what he considers valuable in your (or competing) offer, and how much he would be willing to pay for it, you need to understand how people value things.
How do people Value things?
Values are like fingerprints — unique to everyone. However, although each fingerprint is different, it is in many ways similar to the others.
Likewise, although each person values things in their own way, there are universal values that are common to all people. These values are organized into a VALUE SYSTEM. The Value System was perhaps best explained by Abraham Maslow with the following text:
“It seems to me that there is a lot of evidence that the things that people need are not numerous. It’s not very complicated. They need a sense of protection and security, a sense of being cared for while they are young so that they feel safe. Second, they need a sense of belonging, a kind of family, clan, group, or something they feel they belong to and are part of. Third, they must have the experience that people love them, that they are worthy enough to be loved. And fourth, they must experience respect and appreciation. And that’s about it.”
Abraham Maslov
This understanding led to the creation of the now widely known Maslow theory of the hierarchy of needs:
The theory states that people progress through five general stages in order to achieve what they want:
- Physiology
- Security / Security
- Belonging / Love
- Respect / Status and
- Growth
According to this theory, Physiology represents the lowest level of human need, while Growth is at the top of the pyramid. According to Maslow, you must first meet the needs at the bottom of the hierarchy, and then gradually climb, level by level, until you reach the highest level. For example, if you don’t have enough food or are in danger of life, you don’t pay too much attention to how much other people accept/love you or how you experience personal growth – you have bigger worries!
As this theory suggests, the point is PROGRESS (moving from the lower level to the higher level), and this is the highest life value of every human being. In order to achieve this progress, he orients himself towards GROWTH. However, man equally values his SECURITY, so he tries to move towards growth in such a way that he does not endanger it.
Since man is a social being, he can achieve growth and security PERSONALLY or through SOCIETY. A person can have personal or social values.
For example, a person can come to protection through society. By obeying the Rules, Traditions , or by avoiding harassing other people, the community will give him protection. Likewise, a person can come to protection by personal means by creating the image of a dominant person and securing himself a higher STATUS within the group (he will defend himself).
Regardless of whether a person wants to achieve growth or security personally or through society, Status is an indispensable factor when assessing any offer.
Need for Status
Status greatly affects our desires and what we consider valuable.
When the opportunity to increase status arises, most people will take advantage of it. People often offer money in exchange for status. Moreover, they pay beyond the “real” value of a product because they want to be associated with other people and companies that they consider to be important or exclusive.
People want others to be aware of their status (if you don’t believe it, take a look at Instagram ;)).
Status helps us to:
- To assess our rank of “power/influence” within the group,
- To make it easier to access resources (money, opportunities, services that others would do for us),
- Choose a partner (business or marriage),
- Protect other members of the group.
As a result, status considerations affect most of the decisions and actions of each of us.
As a businessperson, it’s important to know that status considerations are present when valuing your offer. Whenever you make an offer to a potential buyer, he will automatically and unconsciously examine how your offer affects his social status.
What do customers Value in our offer?
When customers evaluate your offer, they also measure how important it is to them in relation to the asking price. This is called PERCIEVED VALUE.
In business, to assess perceived value, customers are guided by ELEMENTS OF VALUE.
HBR (Harward Business Review) identified 30 value elements that influence the determination of perceived value. These elements can be classified into four categories:
The more elements of value a product possesses, the greater its perceived value in the eyes of the customer.
The approach developed by HBR extends Maslow’s hierarchy of needs. At the bottom are security needs, and at the top are the needs of growth. The most powerful value elements are at the top, but it is always better to cover as many value elements as possible. Of course, some elements are more important than others. In all industries, perceived QUALITY affects customers more than any other element. No element can compensate for a significant lack of quality.
While value elements indicate characteristics that customers consider valuable, FORMS OF VALUE define the form that value can take within a business.
Value Forms
Most people are familiar with two forms of value – Product and Service.
According to Josh Kaufman, author of the book “Personal MBA”, there are twelve forms of value in business. The value usually takes one of the following forms:
- Product – With products, you need to make something tangible, then sell and ship it for more money than it cost you.
- Service – Offer assistance and then charge a fee for your work.
- Share Resource – Create or obtain an asset that is permanent (that can be used by multiple people simultaneously) and then charge for access.
- Subscription – You offer something valuable for a longer period of time and charge for access.
- Pre-sale – Buy something valuable from wholesale and then sell it to a retail buyer at a higher price.
- Lease – Acquire something valuable and allow the other person to use the asset for a pre-arranged period of time in exchange for compensation.
- Agency – Advertise and sell value that is not yours on someone’s behalf, and then collect a percentage of the earnings price as compensation. (Real estate agencies – do not own real estate in most cases, but sell it on behalf of others)
- Audience Gathering – Attract the attention of a group of people with certain characteristics, and then sell the access to them in the form of advertising to another company that wants to reach that audience. (Seminars)
- Loan – Borrow a certain amount of money and then collect payments over a predefined period of time at a predefined interest rate.
- Option – Offer someone to use the service for a certain period of time, in exchange for a fee. (With vouchers, the user has the option to use the voucher for a certain period of time)
- Insurance – Take the risk if something bad can happen to a policy holder in exchange for a predefined set of payments, and then pay off receivables only when the bad thing actually happens.
- Equity – Buy an ownership stake in the company and then collect the corresponding portion of the profit as a one-time payment or current dividend.
A business should not be limited to delivering value in one form (let’s just say in the form of a product). The more complementary offers (in any form) you offer around the original value offering, the more successful your business will be. Think about how a magazine works:
- You can sell magazines individually as a product,
- You can offer a subscription,
- You can offer advertising to other companies through the audience it has aggregated (Audience Gathering) etc.
Think about what form the value your company creates can take so that the customer perceives you as more valuable.
Conclusion
Value is a sense that helps people evaluate the things that are important to them. People react to values with emotions. In business terms, value is something that a customer needs, lacks, and for which he would give money to achieve a specific goal. Value for a company is economically important (work/money), while for a customer value means the achievement of a certain goal by using your product/service.
Finally, I would recommend a couple of books on the subject of value:
- Psychology of Values (link) – an excellent study on the notion of value of author Zoran Pavlović.
- Consumer Behavior (link) – very good insight into how people perceive the value of products and what affects their behavior.
- The laws of Human Nature (link) – can serve as a good manual for understanding human behavior in various situations.
Examples of human values:
Reliability, Beauty, Courage, Compassion, Self-Confidence, Collaboration, Creativity, Discipline, Diversity, Education, Excellence, Experience, Focus, Flexibility, Freedom, Growth, Happiness, Health, Honesty, Modesty, Humor, Integrity, Intimacy, Leadership, Love, Loyalty, Attentiveness, Openness, Optimism, Originality, Passion, Professionalism, Logic, Respect, Sacrifice, Safety, Sensuality, Sensuality, Simplicity, Significance, Stability, Strength, Success, Support, Speed, Trust, Uniqueness, Vision, Warmth, Wisdom, etc.
For a complete list, visit the https://link.sean.co/100-values.