The Hidden Truth About Creating Value: If You Don’t Create It, You Destroy It

Posted by Doug Davidoff

Dec 20, 2005 2:18:41 AM

Over the last month, I’ve received several questions about creating value. For those who are not familiar with my views on this subject, creating value is the foundation for everything a company does to accelerate or sustain growth. If you do not create value you are a commodity. If you are a commodity, your growth and profits are at risk.

Value, in the business sense, means providing something people are willing to pay a premium for. This is the only useful definition of value for fast-growth businesses. If your company doesn’t do something your customers are willing to pay more for, you are not creating value. You may be doing things that enable you to keep your customers, but you are not creating value.

This applies to everything you do. It is especially important when you assess your business development efforts. Here is how to determine whether or not your sales and marketing efforts are creating value for your company. Answer this question: Would your prospects be willing to pay for the opportunity to read your advertising or talk to your salespeople? If you need an example, look at the people in your industry who charge admission at conferences and other events to let people hear them talk about what they do. Look at the people who publish their ideas in the business journals people pay to read.

Think about it. The next time you go on a sales call (or go on a call with one of your salespeople) ask yourself, was there enough value created in the conversation that prospects would have paid for it if they had to? Was it a special event? Was it a conversation where the prospects sincerely appreciated getting some insights that could help them do their job better? My experience says the answer more than 90 percent of the time is, “No.”

Here’s the critical point: Value is binary. If you are not creating it, you are reducing it. If someone meets with your salespeople and they wouldn’t have paid for the privilege of the sales call and they end up buying anyway– they are buying in spite of your salespeople, not because of them – and that’s dangerous. Every activity has a cost, whether it’s time, attention, opportunity or money. Any time a customer or prospect interacts with your company and they don’t feel they’ve received more benefit than what it cost them in time, they feel cheated. Your salesperson has reduced the time your prospect has to work with without providing enough value in return. Even if the interaction is "neutral,” neither negative or positive, the prospect has lost the opportunity to take advantage of other opportunitities.

If you want an example of what you don’t want your salespeople to be, think about checkout people at the grocery store. They may be friendly, collect money and sometimes provide some assistance by bagging your ice-cream separately, but the transaction doesn’t add value to your grocery-buying experience. In most cases, it reduces the value of the transaction because of the time you lose dealing with them. Grocery stores have employed checkout people despite the lack of value because, until now, they didn’t have an alternative. When our local supermarket introduced self-checkout, customers (including me) took advantage of the new service quickly. Imagine that -- by taking out the "service component," the perceived value was actually increased. Talk about being a commodity.

Want another example? Travel agents used to account for just about every airline ticket sold to travelers. But guess what -- they only communicated value, they did not create it. They were nice and everything; but people used travel agencies in spite of the travel agent. Once direct booking became viable and travel agents began charging for service to cover their costs, people deserted them in droves. I wouldn't want my sales efforts to rely solely on the fact that there isn't an easier alternative...yet.

If you want to know more about how to create value, click on the blog post on the bottom or view the article on my website that explains this further.

Until next time, Doug

By the way, not creating value is only one major barrier to growth. I have an excellent tool to help assess what other barriers to your growth may be. If you are enjoying my blog, take a look at my Growth Barriers Diagnostic.