Value is the result of the subjective assessment that answers the question: “What’s in it for me?” Value is subjective, and is “in the eye of the beholder,” as determined by individuals. But in the business context, we can model value with the following formula:
Value = Benefits – Cost
This means that individuals weigh the benefits they receive against the cost to receive them. This is a wholly personal evaluation: Individual people go through an internal evaluation to arrive at that which they value. This includes agents of an organization evaluating on behalf of the organization.
The internal evaluation is subjective: an individual evaluation of what is the benefit and at what cost. Value to a customer is defined by that customer; that is, each customer decides what is valuable to him/herself.
Collectively (such as in a business or other organization), we strive to apply objective criteria to our collective (i.e., organization) value judgments, such as in the context of accomplishing our business goals and objectives.
Both benefits and cost may contain many different variables; individually determined. That is, both benefits and cost are measured with each individual’s personal units of measure.
This is why it is important to understand a customer’s “values.”