This post is part of a series on ten foundational principles of being an entrepreneur.
On the surface, “value” might seem quite simple—the price or amount of money your product or service is worth. But value is about much more than a price tag; ultimately, value is the reason why someone should buy your product. Fully understanding your value impacts every aspect of your business—from your marketing to how you deliver your product or service.
So, how do you truly know the value you provide to your customers?
Understand the problem your customer faces.
Chances are your customers are coming to you because something in their life isn’t working or some desire is not being met. Your customer has a problem that they can’t easily solve on their own.
The first step to knowing your value is understanding this problem. Many entrepreneurs miss the mark by failing to see the world through their customer’s eyes. Do the extra work to discover your customer’s pain points to fully grasp the conditions creating this need.
For example, let’s say your customer is a busy mom who needs a jolt of caffeine to get going in the morning. Although she could make coffee at home, she’d prefer a morning latte to start her day. Running into a coffee shop would be nice, but it requires getting the baby out of the car seat. It’s too much hassle, so she goes without.
Your customer’s problem is costing them something. Find out what it is. When you see the world from their perspective, you have a starting point for knowing your value.
Identify how you solve the problem.
Once you deeply understand your customer’s problem, you are ready to demonstrate how your business solves it. On one level, it’s straightforward: you solve the problem through the product or service you’re offering. A cup of coffee, a class, an article of clothing, an hour consult. Your solution provides the customer with something tangible or experiential to address the problem.
But you need to go deeper. Think about the benefits—the intangibles—your product or service provides. What are you saving your customer from? Unnecessary frustration, wasted time, uncertainty? Or, what are you adding to their life to improve it? More joy, comfort, free-time?
By providing the busy mom a drive-through coffee option, you save her the hassle of running into a shop along with the comfort of a good latte. She doesn’t have to forego the small luxuries anymore. That comfort, the hassle-free experience, is worth something to her.
Your value becomes clearer as you understand why your offering matters to your customer.
Know your advantage.
In fact, take it even further. What does your customer lose out on if they solve their problem another way? What sets your business apart?
Your value is unique to your business. If your customer can get the same exact product or service elsewhere, then why should they come to you? You need to identify how you’re different. The customer needs to know how you’re different. Some advantages are easy to see; for example, you’ve built something truly innovative, and there is nothing else like it. Others might be more subtle—personal attention, greater efficiency, unusual expertise.
Coffee chains like Starbucks often have drive-thru options. But if your place offers small-batch, locally roasted beans and well-trained baristas, you have something special.
Apply what you learn.
At its essence, your value is the sum of the above components: if you truly understand your customer’s problem and are offering a solution that addresses the problem better than anything else, the benefit you provide brings value to your customer.
Once you understand your value, it informs every part of your business. You’ll get your customer to know, like, and trust you by appealing to this value. You’ll ensure that delivery of your product or service maximizes your value.
Moreover, you’ll be ready to set a price that communicates your value well. The benefit you’re providing saves the customer something—usually time, energy, or money. When you know what your offering is worth to them, you can choose a price that reflects that value.
Many entrepreneurs get this backward and base their price on their costs. While costs should inform your price (you need to make more than you’re spending!), they shouldn’t be the primary consideration.
The busy mom might be willing to pay a little more for the convenience and quality of the coffee you’re providing. Keeping in mind what she can afford, charge what it’s worth to her.
Knowing your value is everything for a business. Be sure you know yours.