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Should you Create Value or Profit?

There is an important distinction in business between creating value and creating profit. Many people ask themselves “Should I create Value or Profit” within my business? Some argue that you have to create value in order to profit, and others would say that profit is more important and you have to plan the profit first, value second. However I think they are one and the same, with the difference being the emphasis of the word.

Value emphasizes the benefits of your customers. The customers receive the value so they are happy. Profits emphasize the benefits to the business or individual. The customer is just a pawn in a game of “profits”. Making a focus of profits seems like a very selfish viewpoint, whereas creating value seems selfless. But what is value really, and what does it mean?

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The Source of Value

Value never used to be represented by physical money, what we call “profits” today. Numbers in a bank are a very modern way of interpreting value, and the truth is, it’s harder than that to define value.

Things were once bartered and traded, my value for your value. I’ll give you a cow, if you give me a silver sword, and vice versa. Value was considered trading, and the people who decided the value was the people who were making the deals.

So people define value, whereas profits are set numbers. If you focus on profits then you are focusing on specific numbers that you want to achieve. If you focus on value, then you are defining what you are selling by what the people consider valuable.

Perspective of Value

When you look at what value truly is, it seems like it’s whatever a person considers valuable to them. What is valuable to me may not be valuable to you, however profits are the same for everyone. The root of the word ‘value’ comes from the Latin word ‘valere’, which means to ‘be worth’ something. Whatever you consider to be worth something to you, gives it value.

So the perspective of value to your customers is a service or product that they think has worth. When you focus on creating worth and value for your customers they will dedicate their lives to growing your business so they can get more value from you.

Create More Profits or More Value

The selfish perspective of making profits takes out the human element and removes you from connecting to your customers. Why would someone want to buy something from you if all you care about is what’s in their wallet. If however you think about what they value, and you set out to deliver it to them, then they will empty their wallets for you every time.

It’s counter intuitive to think of providing value first, but it’s the only thing that drives short term and long term profits. When you consider what the customer values and you deliver it to them, your profits will increase dramatically.

If you get really good at creating and presenting value then you can even charge more, because the customer doesn’t care what you charge, they just care about getting more value. If you focus on profits and you charge more in order to make more money for yourself, then you will turn off customers and you will lose business.

The lesson here is to focus on creating more value for your customers in order for your businesses to profit. Focus first empathetically on what the customer considers valuable, or “worth” and set out to deliver that.

The Perspective of Value

Value can change depending on who looks at it. You will certainly value that stone that you found on the beach during your honeymoon much more than anyone else will value it. People value their personal belongings more than other people will value them. And people of different hobbies and skills will value different objects or ideas differently.

It’s obvious that value is based purely on our subjective perspective of the world. This is a really good thing and also a bad thing. If you just try to create value for your customers based on what you think is valuable, then you are only offering them what you consider to be valuable, not what they actually want.

However if you find out what your customer truly values, then you will be able to deliver that to them and give them exactly what they need. The best way to find out is just by asking them, in a survey or questionnaire, or by interviewing different customers, or thought leaders in that market. If you are just starting out and you don’t have any customers then it’s easy to build a small list of customers or Facebook fans and find out that way. Either way, its imperative that you find out what your customers value before trying to make something and offer it up.

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How Much is Value Worth?

We already saw that the words ‘value’ and ‘worth’ are the same thing, so asking how much is value worth is kind of like asking, how much is value itself. This again comes down to the perspective of your customers.

If you found out exactly what your customer’s value the most, you will be able to charge the most possible in your market for it. At some point, you could offer so much value that the customer doesn’t even care if its over priced, because they know they are getting an extreme amount of value for what they are paying.

This is how coaches and trainers and product creators are able to charge so much for their services. This is why most PC users think Macs are grossly expensive, but Mac users would happily pay more for the same thing.

The perspective of value between different customers is different, so you should focus on delivering the highest value to your customers and charging more for it.

Charging more Increases Value

When you charge more for your products or services you are actually increasing the value in your customers eyes. When you are offering high value to your customers, and you are charging more than usually for it, then they will assume its because you are offering more value. The higher price only makes the offer even more valuable. This also works the other way. If you offer something of extreme value but for an incredibly low price, it actually loses value in the eyes of the customer because they assume its low price, low value.

A great comical example of this is the man who was holding a sign offering free hugs in public. I’m sure you have all see something like this before. But this time, another man came and stood next to him with a sign that said ‘Premium Hugs – $2”. Here the second man is creating a perceived value of ‘premium hugs’ and he is charging more for it. Instantly the man who was charging for premium hugs was getting more hugs than the one who was offering them for free. The hugs were longer, and the customers appreciated it much more than anyone who got a free hug.

The key to big profits is being able to do what the premium hugger did. Find out what your customer values and create the value for them. Then display this perceived value by making it sound better, and then charge more for it. If you can do this then you will be on the path to big profits and happy customers.

Value First, Profits Second

So by focusing on creating massive value you are actually helping your customers and your business. If you suit your value to the customer’s personal needs and you charge more for it, then you will get more and happier customers. By adding perceived value to everything you offer by making it look and sound more valuable, and then you follow through by providing the right type of value that your customers think is “worth” it, you will grow your business and make your customers stay with you for the long run.

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