We’ve written quite a bit here on the blog about value-based pricing. But a question that has gone unanswered so far is what ‘value’ is. Knowing what value is, and what it means to your clients, is critical for being able to charge for it.
First of all, what is your definition of value?
That’s not an easy question to answer. While we all know what it is, putting it in words is harder.
The Oxford Dictionary of English defines it as:
“The regard that something is held to deserve; the importance, worth, or usefulness of something.”
Regard, deserve, importance, worth and usefulness all have something in common – they’re subjective.
What’s valuable to me isn’t necessarily valuable to you. Consequently, your client’s idea of value is probably not the same as yours. The only way to learn what is specifically valuable to your client is through conversations and genuine listening. You simply have to ask them.
Misconceptions and Myths About Value
Value is hard to nail down. It can feel like trying to hold a jellyfish, something I have vivid memories of from my childhood (it wasn’t the burning variety). Or what I imagine it’s like trying to get a hold of a well-greased hog accelerating through a fence. That’s why many people carry misconceptions and hold onto myths about what value is. Here are three common myths and one science-based truth about what value is.
Myth: Value Is Money
No matter how much it may feel like it, money isn’t value. Money is what someone pays you in return for value. That’s why many people say their salary isn’t important in itself; it’s what their salary symbolizes that’s important.
You can view money as a substitute for value since it’s the most common form of value exchange. In our economy, money is an enabler that gives you access to some forms of value such as good eating, travel, and a comfortable home.
Myth: Value Is Goods
While products are often valuable in terms of money, that value isn’t intrinsic to the item itself. The value starts to exist the second the item is in the hands of the consumer.
That’s why you can argue that a hammer is more valuable to a carpenter who can sell services and earn money using it compared to a layman who uses it to repair the roof. The form of value provided by an item differs from person to person. It’s one reason why different people have different degrees of price-sensitivity.
Myth: Value Is Services
While services are valuable if provided to the right person, the services themselves have no value in themselves. It’s only if those services enable the buyer to create or unlock value that they can be said to be valuable.
For example, an agency building a website for a client hasn’t necessarily created any value unless that website helps the client earn or save money. Similarly, just managing a social media account isn’t necessarily valuable unless it leads to valuable results such as new customers.
Truth: Value Is Contextual and Co-Created
Value has no set universal definition. All we can say is that it’s desired and what can be seen as valuable can range enormously from person to person. Value appears to be context-bound and rooted in culture, expectations and brand promise. Research suggests that value is a social construct that is co-created by provider and buyer.
Common Types of Value in Client Relationships
While the idea of value differs between individuals, there are some forms and ideas of value that appear to be more common than others. Here some forms of value that are often mentioned as being important in an agency-client or freelancer-client relationship.
Safety Through Proven Competence and Risk Reduction
An agency or consultant that can prove or provide evidence that they bring lower risk than any other option the buyer considers provides a form of value. Such proof can be in the form of testimonials or certifications. Also, offering some form of guarantee or insurance will also reduce client risk.
Interest By Attention to Needs
It may sound obvious but companies blessed with fast success can grow arrogant. Just today I heard about an agency that, after having won an important account, started to try to shape the client’s product and strategy to be a better fit – for the agency. It was either an attempt to make the work fit the agency’s portfolio of cases, or to do something that agency was more comfortable with.
An agency or freelancer that is attentive wouldn’t even think of doing that. It goes against the basic idea of being consultative.
Validation By Showing Genuine Interest
Buyers are people and people yearn for validation. As a consultant, you provide a truckload of value by being attentive and interested. This is a truly easy win as all it takes is being human.
Likability Thanks to Warmth and Competence
In the book “The Human Brand” (paid link), the authors promote the idea that we perceive brands the way we view people. According to them, when we meet someone new, we immediately try to determine their warmth and competence.
People who are warm (which in this context means interested, helpful and caring), combined competence (an ability to act), are those we frequently like. Brands that give us the same feeling are treated much the same.
By being helpful without an expectation of return, and acting decisively, you can build tremendous relationship value.
Convenience Resulting From Reduced Work and Complexity
The more you can reduce the workload for your client, the better. Forcing clients to adapt to you isn’t the way to go. Agencies that lose track of this simple fact can easily be recognized by insisting that their clients have to use this amazing thing called JIRA that their lead dev just can’t stop raving about.
Instead of shoehorning clients into your world, try to build solutions and processes that are efficient for both of you.
Trustworthiness Due to Transparency, But to a Degree
Being perceived as transparent usually means being seen as trustworthy, which is good. However, transparency should be provided with a bit of caution. Providing too much information can sometimes overwhelm a client. The simplicity they sought after and hired you for will be lost if you force them to get involved in technical decisions. That doesn’t mean you should withhold information; instead, ask what the client wants and do not assume.
Consistency Thanks to No Surprises and Proactivity
Contrary to popular belief, people hate surprises. There’s nothing charming with something unexpected happening. In fact, there’s a very good reason why major fast-food chain burgers all taste the same: turns out it leads to higher customer satisfaction.
Consistency appears to beat quality, sadly. This principle is true across industries. In the case of a freelancer or agency, it could mean developing a culture of consistent proactivity. You would actively look for things that are out of the norm and then decide what an appropriate response would be. Similarly, take the initiative to dig into ideas you believe the client would find useful. A combination of consistency and proactivity will take a load off any overworked marketing manager.
Knowledge Through Education And the Consultant Sharing What They Know
Freelancers and agencies that educate and inform their clients often enjoy strong loyalty. In fact, one of the reasons companies bring in consultants is to learn what they know.
But it’s not uncommon that companies don’t have the people or processes in place to collect that knowledge and spread it internally. This offers the opportunity to beat them to it by actively sharing what you know, through seminars and workshops.
Conclusion: Value Is In the Eyes of the Client, But That Doesn’t Make It Meaningless
While value differs so much from person to person that there are few universal rules, it doesn’t mean that value is abstract or meaningless. It’s always worthwhile to find out what your buyer or client considers desirable, important and useful. Make value discovery an integrated part of your buyer qualification process.