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The Paradox of Value in Business

Just imagine something so intrinsically simple, yet so precious and essential to life itself, that without it, we would die within a few days.

This is, of course, water, the very lifeblood of our existence. Without it, we literally could not survive.

Despite this, water flows quietly through most of our lives, existing largely as an unsung hero. We drink it, cook with it, shower in it, freeze it for cocktails, clean cars with it, and water gardens with it. Yet still, it’s rarely acknowledged for the vital role it plays or even for its life-sustaining properties.

And then there are diamonds.

History is littered with slave labour, cruelty, fighting, deceit, and death caused by the sheer desperation to control diamonds, yet they’re sought after, cherished and treasured by us, the people who buy them. And we’re willing to pay a small fortune to acquire or own diamonds, even though they add almost no practical value to human life.

Diamonds are just shiny rocks.

The water and diamonds example is known as the paradox of value. It’s not just a quirky peculiarity of economics; it’s a confounding pattern of human behaviour.

Of course, in reality, every person on the planet, including the fabulously wealthy, would ditch the diamonds in a heartbeat if their very survival was threatened by the sudden disappearance of drinkable water.

Oh, and for the record, the rarity of diamonds is largely a phenomenon that’s manufactured by the diamond industry. But that’s another story.

It’s not what you look at that matters, it’s what you see

Henry David Thoreau

The Paradox of Value in Business

For business owners, understanding the paradox of value is key to understanding the significant difference between how valuable something seems to customers (its perceived value) and how useful it is in practical terms.

At its core, the paradox of value puts the spotlight on a unique aspect of human psychology: we often place a higher value on things that are perceived as rare or luxurious but are largely unnecessary. A Ford Fiesta and a Rolls Royce Phantom each have four wheels, five seats, an engine, four doors, rubber windscreen wipers, a radio and a boot. Yet the Ford Fiesta costs £20,000, and the Rolls Royce Phantom costs £500,000. Buying one instead of the other is about choice, not utility.

In service-based businesses, in particular, this raises a critical question: how do you demonstrate the worth or value of your offerings, especially when they might not yield immediate, tangible results?

It’s a question you might want to stop and consider because it requires you to think about shaping perception, and that’s pivotal in every business.

Your marketing messaging should not just highlight what you offer but why it’s valuable. It’s about painting a picture that transforms your service from a nice-to-have luxury (a want) into an essential or strategic investment (a need). And, in doing so, transferring the perceived value that’s naturally associated with the ‘want’ over to the ‘need’.

Consider Apple, a brand that transcends the practicality of electronic devices. Apple doesn’t just sell gadgets; they sell a lifestyle, an immersive experience, a self-affirming ecosystem if you will. This distinction is the result of not only incredibly astute product development, but clever marketing that elevates their products from functional tech gadgets to coveted, high-priced – some say over-priced – luxury goods.

Our perception is that the value of prestige (Rolls Royce, Apple iPhone, diamonds) far outweighs the value of practicality (Ford Fiesta, basic mobile phone, costume jewellery) despite performing largely the same function.

A cynic is a man who knows the price of everything and the value of nothing

Oscar Wilde

Practical Steps for Business Owners

The lesson is clear: articulate the value of your services beyond what’s immediately obvious. Use marketing to weave creative stories that resonate with your audience, demonstrating how your service is not just a purchase but an investment in their success.

1. Evaluate your service offering: Start by assessing what you really bring to the party. Ask yourself, beyond the basic service, what value does your business provide? This could be expertise, customer service, innovation, or a unique approach to solving a common problem.

2. Craft your narrative: Develop a compelling story around your service. Highlight aspects that resonate with exclusivity or bespoke solutions, even if your service is a basic necessity in your industry. This narrative should align with your brand’s ethos and appeal to your target audience’s wants and needs.

3. Focus on long-term benefits: Emphasise the long-term advantages of your service. Whether it’s sustained growth, efficiency improvements, or strategic insights, ensure your marketing communicates these enduring benefits.

4. Consider your pricing strategy: Sometimes, pricing higher can actually enhance perceived value, as it suggests premium quality or exclusivity. However, ensure that this is backed by the genuine value of your services, especially if you’re in a competitive business. Also, setting higher prices naturally limits your target audience. That may well be your aim, but it’s something to be acutely aware of.

However, small, local restaurants frequently make the mistake of increasing prices during times of economic hardship in order to counter the losses they sustain as customer numbers reduce. Our high streets are littered with failed restaurants because this strategy rarely works.

Instead, if they were to swallow their pride and reduce their prices, the increase in customer numbers who see a different type of value would solve the revenue issue overnight.

Only you can decide whether higher prices will mean an overall increase in revenue from fewer customers. Sometimes, you must think outside the box and see value from a different perspective.

5. Educate your customers: Use your marketing and sales channels to educate potential clients about the value of what you offer. This could be through case studies, testimonials, thought leadership articles, or other informative content, such as long-form articles that position your service as not just a purchase but an investment.

Since the late 1940s, owning diamonds has been seen as an investment in the future. Whether it’s a commodity increasing in value or as a metaphor for a lifelong relationship, we’re all familiar with the phrase, ‘Diamonds Are Forever’ – one of the most successful and impactful marketing phrases ever written.

6. Gather feedback and adapt: Regularly gather feedback from your clients and adapt your approach accordingly. Understanding how they perceive the value of your service can provide invaluable insights for refining your marketing strategy.

The customer’s perception is your reality

Katie Zabriskie

In Summary: Rethinking The Concept of Value

Two words: Bottled air.

We could just leave it there as you’re probably thinking about bottled air from a student perspective now – ridiculous, expensive, pointless, and complete nonsense.

But let’s just consider it. Simple yet profound, it’s not just any old air but air captured directly from the Swiss Alps or the Scottish highlands.

But let’s just consider it. Simple yet profound, it’s not just any old air but air captured directly from the Swiss Alps or the Scottish highlands.

Just imagine living in a city that’s constantly polluted by exhaust fumes from planes, trains and automobiles and then being able to fill your lungs with clean, pure, fresh mountain air.

Intriguing, isn’t it?

Is it, though, really? Fundamentally, it is indeed just air, an essential and consistent concoction of naturally occurring nitrogen, oxygen, and argon (and a tiny bit of a few other gases), and it’s something we breathe freely every day, wherever we are in the world.

OK, so some air is cleaner than others, but on balance (considering the 100 billion or so people who have ever lived on this planet), air is air wherever we are.

But think about it. There’s an undeniable logic to the concept of a particular type of air being captured and bottled, whether it’s capturing crisp, clean mountain air, the breeze on a sunny, tropical beach, or the pure, misty air from the Scottish highlands. Bottle it, craft a story of purity, exclusivity, and uniqueness, and voilà – you have a luxury product that people are willing to pay for, yet one that is of no practical use to anyone.

Now, consider how, within your own business, you can infuse that ‘mountaintop mist’ essence into your services.

How can you make your services not just a necessity but a sought-after experience?

Remember that it’s not about inflating what you offer but elevating the perception of its value.

Just as bottled mountain air captivates the imagination (and opens wallets), your services also have the potential to transcend their basic function. It’s all about how you package and present them – the story you tell, the experience you promise, and the unique value you deliver.

Understanding and embracing the paradox of value affords you the power to shift the perception of your business from being a detached service provider to a sought-after, valuable partner.

With more than 30 years experience in business and marketing, Clive is the visionary behind The Marketing Alliance, launched in 2018. Clive leads a curated tribe of accomplished marketing and business support professionals who consistently delight clients through their creativity, innovation, strategy and an unwavering commitment to excellence.
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