Value creation is a concept that has been around for a while, but is rarely properly understood.
Unlike many proponents of value-based selling who advocate that the seller should create value for the buyer (customer), there is a growing body of researchers in marketing and sales who state that value cannot be created for someone, but only by someone. At first, this may seem like a minor difference, or “merely semantics”, as someone recently told me. Well, in fact there is a rather significant difference and it is an important discovery. Additionally, it does not stop there. Value for the buyer cannot be defined by the seller. This means that it is the buyer who judges and decides if something is of value or not.
So, if it is not for the seller to decide what value for the customer means, how can the seller create value to the buyer? The short answer would have to be: “The seller can’t”. However, before rushing from the euphoria caused by what is promised by sales trainers who advocate value-based selling to despair triggered by these above mentioned discoveries from research in marketing and sales, let’s pause in the middle and think about what this all means.
Instead of providing or creating value for the customer, there are researchers who state that value is co-created by the seller and buyer. This would be a nice compromise to the problem, should that really be the case. As stated earlier, it is the buyer / customer who defines value. This implies that co-creation is not really a concept that would be applicable either. However, if we move even further than this from where the seller was believed to create value for the customer, we land in the proximity of the point on this conceptual dimension where the customer would create value. Well, let’s not go quite that far, but rather move back a step. Good. Somewhere here would be the spot where the customer creates value for themselves with the service provided by the seller. In order to create value, the customer uses the means provided by the seller. In other words, instead of providing or creating value for the customer, the seller can – and should – facilitate the customer’s value-creation. This is what buyers (customers to become) are looking for when selecting suppliers. It is interesting though, that many buyers are not even themselves aware of this. They think that they buy a product, service, and so forth, but what they are in fact acquiring are resources or means in order to create value for themselves, and in order to enable their customers to create value.
Another important point that is often misunderstood or misinterpreted is how this process of facilitating or enabling value creation works and who should do what. What are the responsibilities of the seller and buyer. If the seller is active and forthcoming in facilitating the customer’s value creation, this is a good start. However, should the customer not enable the seller’s facilitation for value-creation, not much will – or can – change. In other words, if the seller is not aware of what the customer needs in order to create value, the seller is going to face a very tough sale, and the buyer is likely to become frustrated. The more exact input the seller is provided by the customer, the more the seller can facilitate the customer’s value-creation. In other words, more openness in terms of needs, requirements, policies, and business processes between the parties is likely to have a positive effect on value creation. Hence, value creation should be regarded as something that requires mutual participation by both the buyer and the seller.
Having helped companies to understand the concept of value and to discover the necessity of co-operation, and having witnessed the positive effects of this, we know that this will improve both the seller and buyer’s business performance.