Value Work in Progress
From Ron B Palmer's Wiki Home > ITSM > Definitions > Value
Introduction
Aristotle thought that goods held some intrinsic value that can be divined.
Karl Marx defined value as the product of labor that is "socially useful." The turmoil this idea caused has occupied the world for the last hundred years as politicians and dictators defined what is “socially useful.”
The current view, proposed by Carl Menger, is that value is whatever an individual believes it to be. In other words, value is not intrinsic to a good. Value arises from a belief that someone holds. Value is in the eyes of the beholder, much like beauty. This means that value is relative. To a person with an abundance of a good one more is likely to be of no value hower if the good is hard to find and desirable then value is high, supply and demand. Likewise, what holds great value to one person may hold little value for another. A wine coneseur might value one bottle of wine over another by hundreds of dollars, while an average consumer, who may not taste the difference, values the bottles equally.
What holds true for goods also holds true for services. A person may value a waiter enough to provide a 15% tip but would have no use for a second waiter during the same meal.
This last definition holds great value for IT Managers because it provides a practicle method for delivering value, identify your customers, determine what they value, and deliver that.
Understanding Value
"Value in business markets is the worth in monetary terms of the technical, economic, service, and social benefits a customer company receives in exchange for the price it pays for a market offering.
First, we express value in monetary terms, such as dollars per unit, guilders per liter, or kroner per hour. Economists may care about “utils,” but we have never met a manager who did! Second, by benefits, we mean net benefits, in which any costs a customer incurs in obtaining the desired benefits, except for purchase price, are included. Third, value is what a customer gets in exchange for the price it
pays. We see a market offering as having two elemental characteristics: its value and its price. Thus raising or lowering the price of a market offering does not change the value that such an offering provides to a customer. Rather, it changes the customer’s incentive to purchase that market offering. Finally, considerations of value take place within some context. Even when no comparable market offerings
exist, there is always a competitive alternative. In business markets, one competitive alternative may be that the customer decides to make the product itself rather than purchase it."
"Suppliers can use their understanding of value to strengthen performance and create competitive advantage in several ways. For example, a supplier can use its knowledge to tailor supplementary services, programs, and systems in its current market offerings and to guide the development of new offerings. Integrating everything it has learned about value into its marketing efforts, it can also gain new
customers. Finally, it can better sustain customer relationships by documenting its delivery of superior value over time and by discovering new ways to update and reinvigorate those relationships."
"Knowledge of how their market offerings specifically deliver value to customers enables suppliers to craft persuasive value propositions."
"Understanding value in business markets and doing business based on value delivered gives suppliers the means to get an equitable return for their efforts. The essence of customer value management is to deliver superior value and get an equitable return for it, both of which depend on value assessment."
"Most companies rely solely on measures of customer satisfaction instead of assessing the value of their services. Because the former identify customers’ expectations and how well the supplier lives up to them, they do serve a function. But their findings can be misleading, and depending exclusively on those findings, instead of measuring the value of services, can lead to serious errors in judgment. For one thing, customers are understandably happier when they receive services for free than when they have to pay for them. While giving away an ever greater number of services will undoubtedly increase customer satisfaction, it will also cause costs to soar and profits to shrink."
ITIL's definition
ITIL does not define value.
See Also
"The difficulty in creating value for customers often comes from untested assumptions about their behavior and perceptions "
Frances X. Frei (ffrei@hbs.edu), Breaking the Trade-Off Between Efficiency and Service
References
Business Marketing: Understand What Customers Value, James C. Anderson, James A. Narus, HBR Reprint #98601
Working notes
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