Some people represent complex relationships with mathematical equations; how does this work with customers and what they value?

I recently wrote that Customers buy value, not products, services, and experiences as such. What I left out of the buying scenario was the monetary Price that Customers pay as well as the non-monetary Access Costs, such as waiting in a queue or driving across town.

There is a tendency to create models of the world to help us to understand how things work. One type of model is the mathematical formula. Creating models with real-world variables can be helpful to understand the outcome or end result if one or other variable is increased or decreased, but a few points need to be made:

  • Expressing certain phenomena, such has human activities or commercial interactions, in mathematical formulas is imprecise. The benefit is mostly in the modelling, not the absolute value of the result.
  • A mathematical formula is a model, for the purpose of understanding relationships between variables. The thing to remember is that “all models are wrong but some are useful,” George Box, 1978.

 

In summary:

  • Although I’m sure you could turn the terms in the equation into numbers if you tried hard enough, especially easy are Price and Access Costs, the value of the equation is that it represents a model of what comprises value for a Customer.
  • I doubt if many people have the Customer value equation anywhere in their minds when they seek solutions, I know I don’t. The value in the equation is in providing a model and a holistic understanding of the impact of changing the variables that affect the Customer.
  • If, holding everything else constant you can increase the features the Customers want in your products and services, then the Value for Customers will increase.
  • If, holding everything else constant you can increase positive experiences that Customers have obtaining, using, and maintaining your products and services, then the Value for Customers will increase.
  • If, holding everything else constant you increase the price of your products and services, then the value for Customers will decrease.
  • If, holding everything else constant you increase the access costs, i.e., you make it more difficult to obtain, use, or maintain your products and services, then the value for Customers will decrease.