The source code for competitive advantage and key to sustained wealth.
Value is always in the eye of the beholder. When your offer/product/service is valuable to a customer, it will provide a high value solution to an affliction or help achieve a dream or desire. In other words, “use value”. Solve a specific problem or help achieve a goal, is how your business will have relevance. Your degree of value is determined by the degree of relevance to the customer’s need or desire. When you’re relevant to a need or desire, you command their attention. Attention is the currency of the marketplace. When your idea of value commands the attention of clients and customers, you will have positioned your value with distinction and razor-sharp precision.
Whenever customers perceive greater value in the use of a product or service than what they paid in cash for it, they become raving, loyal, life time customers, if not outright non-paid word of mouth advocates of your business. To successfully implement this principle in your business, you must believe that value is never created in the competitive realm (win/lose, hard bargains or lowest price), rather it comes from the creative realm (inspired creative thought, innovation, service). Provide your customers and clients with more use value than you take from them in cash value and you will be adding to the life of the world, not to mention making your price and your competitors irrelevant. At the heart of this principle, you ‘ll find the holy grail–strategic positioning of your value that commands premium pricing.
The Essence of Use Value
At its core, use value is defined as the worth a customer places on a product or service based on its utility and ability to fulfill their needs and desires. The mastery of providing more use value than the cash value exchanged is a recognition that sustained wealth is not solely amassed through sales transactions but through the creation of meaningful impact and satisfaction for your customers. It's essential to recognize that the value a customer places on their desired outcomes often exceeds the monetary value of the buy/sell transaction involved. Value is deeply subjective and personal to the customer.
Consider the success of Slack, the team collaboration software platform. Slack didn't just offer a communication tool; but a deep understanding of how teams work in the digital age of remote work; and in the process transformed the way teams work together. By streamlining communication, enhancing collaboration, and providing a platform that genuinely improved people interaction and remote workflow, Slack delivered high use value to a devoted user base willing to pay a premium for the productivity gains and seamless experience Slack provided.
The Gold Standard of Strategic Positioning
Strategic positioning is the decisive move that separates the leaders in a business category from everything else. Providing more use value than what is received in cash value embodies the gold standard of strategic positioning. Salt is common, diamonds are rare. Scarcity is fundamental to supply and demand. People tend to place more value on what is in short supply. Consequently, the idea of value that your business occupies in the mind of a customer or client can only be obtained from you. When you’re the ONLY source in the marketplace where clients can remove pain or achieve their desire, your competitive advantage is guaranteed.
When your strategic positioning is centered in the principle of scarcity, (not many alternatives to the value you offer) you will also command premium pricing. We tend to place a higher value on desired things not in abundant supply. It's not merely about competing with available alternatives; it's about positioning your value as the unequivocal one and only choice that goes beyond meeting needs and surpassing expectations to transforming customers lives–for the better.
The nexus of competitive advantage and premium pricing is where the super powers of entrepreneurial alchemy occurs. Providing more use value than cash value received isn't just a customer service delivery modality; it's the key that unlocks sustained competitive advantage. Customers are not just purchasing products or services; they’re investing in high value outcomes and experiences. Products and services are simply the mechanisms to transform the customer’s current condition to a better one. Reminds me of a familiar story about the customer stranded on a deserted island. If I recall correctly, it goes like this:
Consider the customer stranded on a deserted island (Island 1). It’s very small. There is no food, fresh water, little shelter, or shade. The conditions are unbearable. Now imagine that there is a second island within sight, yet out of reach. On this second island there’s lots of food, fresh drinking water, comfortable shelter, shade, and family and friends who are anxiously waiting to welcome the stranded customer. The customer has a clear desire and is highly motivated to get off the deserted island. The sooner the better.
One day an entrepreneur comes along to Island 1 and offers the customer a boat to transport him to Island 2. Do you think the stranded customer cares if the boat is made of wood, fiberglass or inflated air? Does the stranded customer care if there is a fast motor, comfortable seats, or a shaded canopy for the journey over to Island 2? Of course not! The only thing the stranded customer cares about is will the boat successfully transport him from Island 1 to Island 2 (In other words, achieving the desired transformation). And because there’s not a lot of available alternatives, the customer is more than happy to pay the entrepreneur any price to achieve the desires transformation. (premium pricing)
The stranded man doesn’t even care if it’s a boat (the form of your products and services) that delivers the desired transformation. The mechanism that delivers the transformation could be anything– a rocket ship, a Star Trek transporter, or holding on to the dorsal fin of a dolphin. The stranded customer doesn’t care. The mechanism to achieve the transformation doesn’t matter. The stranded customer is seeking the most effective means to get from one state (stranded on Island 1) to a higher state (getting safely to Island 2).
The moral of the story is simple:
When you are creating value (the mechanism) for your customer, focus on creating a transformation. You are creating the best and only way to help your customer get to their desired higher state. The job of the entrepreneur is to facilitate a desired transformation at the highest price the market is willing to pay to use the mechanism (product or service) to achieve the desired outcome. The more motivated the customer is to achieve the desired transformation, the more valuable the mechanism is to the customer for achieving the transformation regardless of its form or method.
Consider the rise of Spotify in the chaotic music streaming industry. Beyond providing access to an extensive and ever changing library of songs (the mechanism), Spotify understood that users sought more than just music; they craved personalized experiences (the transformation). The use value extended beyond the songs themselves to curated playlists, personalized recommendations, and a seamless user interface. Spotify's commitment to providing exceptional use value allowed it to adapt and innovate its service offering transforming how we listen to music and elevating its position as the leader in the streaming space.
In the landscape of the 21st century marketplace, trends evolve and markets transform seemingly overnight. Your products and services may undergo iterations as conditions require, but your commitment to delivering meaningful outcomes must remain unwavering. As you navigate the wild frontier of entrepreneurship, consider the profound impact of providing more use value than you receive in cash value. More than just a business strategy; it's an oath of abundance demonstrated by the unlimited value you provide customers and clients seeking transformative experiences.
Look beyond the popular business culture narratives and recognize mastery of this core principle is not reserved for the industry titans we all read about. It's a principle within the grasp of every entrepreneur, regardless of the scale of their business. As a new breed 21st century entrepreneur, let the principle of providing more use value than you receive in cash value be your north star in creating scintillating, inspiring and transformation experiences for your customers and clients.
Transform your customers into advocates, your transactions into experiences, and your business into a force for positive change. In doing so, you'll find not just financial success but the enduring wealth that comes from the knowledge and deep satisfaction that your entrepreneurial endeavors created an extraordinary life for you and left an indelible mark on the world.
This is a chapter from my forthcoming book "The White Hot Center Manifesto". If you found this post helpful, please subscribe to the blog in the form below.