Understanding Value Is a Valuable Understanding

Your ability to achieve is vested in providing a product or service that has perceived value. Note the word perceived. Effective marketing or positioning adds value which may exist only in the consumer's mind. These perceptions, however, are real. If the buyer thinks there's value, there's value. 

Misconceptions exist as to what constitutes value. Most believe it's a function of price. If the price is low, there's more value than if the price is high. But price is only one component of value. 

Value is actually a ratio of price to quality. Increasing price while keeping quality constant reduces value. Increasing quality with a constant price increases value. When both increase proportionally, value is constant. Quality divided by price equals value. 

The most successful companies and products, those that have demonstrated the highest rates of growth and profitability over the long-term, are value-driven. The alternative, cost-driven, has a more volatile and less profitable history, perhaps because seller needs, not customer desires, determine pricing. When pricing your product, don't think cost. Think value.