Build your Value Equation Tools and Resources

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Fail to communicate your value and you miss out on profits that could be yours…

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The value of your products and services is fundamental to the success and long-term future of your business.
When you reliably deliver high-quality products and services, you not only meet the needs and expectations of your customers but build customer trust and loyalty as well.
This ensures that your brand stands out, even in a competitive market, allowing you to attract new customers whilst retaining existing ones. It also fosters customer satisfaction and positive word-of-mouth, which are critical for long-term growth and profitability.
Ultimately, the perceived value of your products and services directly impacts your reputation, your customer relationships, the prices you can charge and your overall business performance.So, think about your products and services right now and ask yourself this one question:
Am I doing enough to build perceived value so that I can increase pricing – and profits?
STOP leaving the value equation for your products and services to chance.
START working on answering the 4 questions that make up your value equation.
The one ‘BREAKTHROUGH QUESTION’ you must ask to help yourself…
Am I doing enough to build perceived value so that I can increase pricing – and profits?
Building the perceived value of your products and services allows you to command higher prices, as customers are willing to pay a premium for what you are offering.
This perception is built through a combination of product quality, branding, customer experience and the unique features that make your products and services stand out from those of the competition.
When customers recognise the distinct benefits and added value that you provide, they see the price as justified, associating higher costs with better performance, durability and status.
Building the perceived value of your products and services not only boosts profitability but also enables you to position yourself as a market leader, fostering customer loyalty and attracting customers who prioritise excellence over cost.
This means that you can charge more for the products and service you are selling and, what’s more, your customers are willing to pay the higher price.
Consider the effect a 1% price increase would have on your profitability…
The price you charge for your product or service has the biggest impact on your business profits.
McKinsey and Kearney are both highly respected consulting firms. Turn-of-the-century research by both shows that a 1% price increase in price has a significantly greater impact on net income than a 1% improvement in fixed and variable costs and increasing volumes. This table from McKinsey shows the impact on EBITDA.

Pricing clearly increases profit more than any other aspect of business improvement. Delivering and communicating greater value earns you the right to charge higher prices. Your customers are only willing to pay more if they believe (perceive) they are getting more (value).
Are you doing enough to build your value perception?
The 4 essential elements of the value of your products and services, courtesy of Alex Hormozi (from his book, $100M Leads: How to Get Strangers to Want to Buy Your Stuff)
You can find many value equations if you type those words into Google, but Alex Hormozi's value equation is a framework that offers a comprehensive and practical approach to understanding and enhancing the perceived value of your products and services. It is particularly well-regarded for its clarity and applicability across various industries. Here are some reasons why Hormozi's value equation is considered effective:
Clarity
Hormozi's value equation breakdowns the complex concept of value into a straightforward and easy-to-understand formula:

This simplicity makes it accessible for business owners and managers, allowing them to quickly grasp and apply the principles to their own products and services.
Customer perspective
The equation focuses on value from the customer's point of view. It considers what the customer wants to achieve (Dream Outcome), how much they believe they can achieve this using your product or service (Perceived Likelihood of Achievement), and the costs in terms of time (Time Delay) and effort (Effort and Sacrifice). This customer-focused approach ensures that you as the business owner never lose sight of who you are selling to.
Benefits
Hormozi's equation balances both the benefits and the costs associated with a product or service. By multiplying the desired outcome by the perceived likelihood of success, and then dividing by the time and effort required, it provides a rounded view of value.
You are in control
The components of the value equation offer clear and actionable insights, allowing you to improve or make obvious the benefits and results your customers can expect. You can build trust and credibility through testimonials and customer feedback, increase delivery times or simplify processes and increase ease of use. The work of doing is in your hands.
Works in any industry
The value equation can be applied across various industries, from startups and service-based businesses to retail and manufacturing, making it a valuable tool whether your run a sandwich shop, a production line or an accountancy practice.
Because Hormozi’s equation focuses on perceived value, it reinforces the importance of branding, marketing, communication and customer perception. It reminds businesses that the way they present their products and services and manage customer expectations is crucial in determining how much customers are willing to pay.
Ask yourself the right questions…
As Alex Hormozi suggests in his book, you can turn this value equation into 4 questions for your own products or services:
- How could you better deliver and communicate the way you meet your customers’ dream outcome?
- How could you increase the believability of delivering a dream outcome for your customer?
- How could you reduce and communicate a reduced time delay in getting their dream outcome?
- How could you tangibly lessen and better communicate the reduced stress and sacrifice needed to achieve their dream outcome?
Consider the 4 questions at work...
Which of the 4 value questions helped the iPhone when it was launched, compared with other phones available at the time?
Uber’s radical rise to prominence is down to improving which elements of the value equation compared with traditional taxi services?
Which of the 4 questions do fast track airport passes and priority boarding answer?
If you rate your IT provider because they do a great job of helping your team when it matters, in which aspects of the value equation are they brilliant and how do they communicate this?
Below is a table which illustrates how Uber's success can be effectively analysed through the lens of Alex Hormozi's value equation. By breaking down Uber's strategy using the equation, you can see how they maximised value for their customers.

Below is a blank table which you can populate for your own products and services.
You may also want to print additional copies and run this exercise for some of your favourite products.
In your industry sector, compare and contrast the best- and worst-selling competitors’ products or services to better understand the 4 value questions at work.
And when you’re ready...
...answer the 4 questions on your product/service/company and act on the answers to build a greater sense of the value of your offering and the way you communicate that value.
BLANK TABLE FOR YOU TO FILL IN (GET YOUR TEAM INVOLVED)

What the experts say about value…
Harvard Business Review – click the link to read more.
“The amount and nature of value in a particular product or service always lie in the eye of the beholder, of course.
Yet universal building blocks of value do exist, creating opportunities for companies to improve their performance in current markets or break into new ones. A rigorous model of consumer value allows a company to come up with new combinations of value that its products and services could deliver. The right combinations, our analysis shows, pay off in stronger customer loyalty, greater consumer willingness to try a particular brand, and sustained revenue growth.
What consumers truly value, however, can be difficult to pin down and psychologically complicated. How can leadership teams actively manage value or devise ways to deliver more of it, whether functional (saving time, reducing cost) or emotional (reducing anxiety, providing entertainment)?
We have identified 30 “elements of value”—fundamental attributes in their most essential and discrete forms. These elements fall into four categories: functional, emotional, life changing, and social impact. Some elements are more inwardly focused, primarily addressing consumers’ personal needs. For example, the life-changing element motivation is at the core of Fitbit’s exercise-tracking products. Others are outwardly focused, helping customers interact in or navigate the external world.
...when the owner of a $10,000 Leica talks about the quality of the product and the pictures it takes, an underlying life-changing element is self-actualization, arising from the pride of owning a camera that famous photographers have used for a century.”
Philip Kotler on VALUE – click the link to read more.
“Leading marketers see modern marketing to be all about value creation. Marketing aims to meet human needs by creating value. The marketer chooses the product features and services that will deliver value. The marketer chooses prices that will create value in exchange. The marketer chooses channels of distribution that create accessibility and convenience value. The marketer chooses messages that describe the value their offerings create. I do not know what you thought marketing was, but in my mind, marketing is intrinsically a value-creating discipline.”
“Marketers are value engineers by definition.”
“In top companies, chief marketing officers (CMOs) spend 50 per cent of their time guiding other company officers on how to create real value for their target customers.”
Ted Levitt repeatedly pointed out that customers rarely buy just a product. Usually, they buy a total proposition—an entire package of perceived values.
“Companies do not compete on the basis of what they make in their factories,” said Levitt, but rather between “what they add to their factory output in the form of packaging, services, advertising, customer advice, financing, delivery arrangements, warehousing and other things people value.
The augmented product of IBM was not only the computer but a whole set of accompanying services, including instruction, canned software programs, programming services, maintenance and repairs, guarantees and so on. IBM’s outstanding position in the computer field is due in part to its early recognition that the customer wants all of these things when he/she buys a computer...
The systems-view leads the sellers to look at the buyer's total consumption system–the way a purchaser of a product performs the total task of whatever it is that he or she is trying to accomplish when using the product.
Stated differently, companies differentiate their offerings by including a set of value-added services that competitors find difficult to duplicate.
People buy the expectation of benefits, not the generic products themselves.”
Elements of value – B2C and B2B
Improve the value equation of your products or services or of your business as a whole and people will pay more, you’ll be more profitable and your future success will be secure.
Fail to improve your value equation and you’ll experience price pressure, lost profits and an uncertain business future.
Only when you understand how to build your product’s value equation can you charge more and increase your profits.
From Bain & Co – click the link to read more.
Bain & Co collaborated with Research Now (an online sampling and data collection company) to survey more than 10,000 US consumers about their perceptions of nearly 50 US-based companies. Each respondent scored for one company, one from which he or she had bought a product or service during the previous six months, using a 0-10 scale for each element. When companies had major branded divisions such as insurance or banking, they conducted separate interviews focused on those divisions. They then looked at the relationships among these rankings, each company’s Net Promoter Score (NPS) – a widely used metric for customer loyalty and advocacy – and the company’s recent revenue growth.
Their first hypothesis was that the companies that performed well on multiple elements of value would have more loyal customers than the rest. The survey confirmed that.
Companies with high scores (defined as an 8 or above) on four or more elements from at least 50% of respondents – such as Apple, Samsung, USAA, TOMS, and Amazon – had, on average, three times the NPS of companies with just one high score and 20 times the NPS of companies with none. More is clearly better – although it’s obviously unrealistic to try to inject all 30 elements into a product or a service.
Even a consumer powerhouse like Apple, one of the best performers studied, scored high on only 11 of the 30 elements. Companies must choose their elements strategically. Companies that scored high on four or more elements had recent revenue growth four times greater than that of companies with only one high score.
Here are some great infographic images that explain the difference between B2B Elements of Value (Business to Business) and B2C Elements of Value (Business to Customer).
There is A LOT to take in, but Bain and Co have a lot of really insightful and useful information to share. If you would like to delve deeper into this, click the links below the images.
Bain & Co – B2B Elements of Value – © COPYRIGHT 2018 BAIN & COMPANY INC



© COPYRIGHT 2018 BAIN & COMPANY INC For more information click this link - https://www.bain.com/insights/eov-b2b-infographic/
Bain & Co – B2C Elements of Value - © COPYRIGHT 2018 BAIN & COMPANY INC

For more information, please click this link.
To see how Apple can charge a premium price for the iPhone because of the way they apply the elements of value, please click this link.
Worksheets and the book
It’s likely that you have a smartphone in your hand, in your pocket or next to you.
Have you ever considered the elements of value your smartphone gives you, value elements that mean you’re willing to pay £1,000+ for your phone, or to sign up to pay a similar amount over a contracted number of months?
There are now more smartphones than humans on the earth. They must be valuable tools!
In today's fast-paced digital world, smartphones have become indispensable tools for communication, work, entertainment and much more. With so many options available, ranging from budget models to high-end flagship devices, the question arises: what determines the perceived value of a smartphone? Understanding this perceived value equation can help consumers make informed decisions and help manufacturers design products that truly resonate with their audience.
You already know that the manufacturers of smartphone products – Apple, Samsung, and LG – are not short of financial success. So what can you learn about the value equation and how you can apply it to your business, as they have?
Use the B2C elements of value (in the infographic above) and work with your team to identify which 6 elements of value are most important in establishing the value of your smartphone in your heart and mind!
Work on the Value Equation Worksheets with your team
When you’ve set the scene for the value equation, use Value Equation Worksheet 1 to work together with your team on one of your firm’s services or on the firm as a whole.
When you’re ready, go on to Value Equation Worksheet 2 and build the questions you can/should ask to help clients, prospects and business contacts see (without you telling them) what’s valuable about working with you.
Value Equation Worksheet 1
Your chosen service/product:
......................................................................................................................
EXERCISE 1: Pull your team together for 90 minutes. Use the 30 (B2C) or 40 (B2B) elements of value to work out which 6 elements are the most important for your chosen service/product.
Use the B2C or B2B elements of value from Bain & Co to help.
EXERCISE 2: Add your chosen 6 elements to the circles opposite. Do what you can to use the hierarchy to put the most valuable element in the top circle.
EXERCISE 3: Work out how each element of value is currently being communicated, demonstrated and proven.
EXERCISE 4: Work out how each element of value could be better communicated, demonstrated and proven.
IMPORTANT: If time runs out, simply agree to run another team session on value in the near future – next week.
If necessary, use an extra sheet for your thoughts, insights, workings and doodles.

Value Equation Worksheet 2
EXERCISE 5: Now that you have your 6 elements of value worked out, you can start to apply your new-found clarity around value to your product/service.
Working again with your team, start by developing questions you could ask your customers to help you understand their appreciation of value connected to the 6 value elements you have selected for your product/service.
These questions, and the answers that follow, provide you with all the words you need for your marketing and sales processes, building your product/service value in your customers’ hearts and minds.
The more pertinent and relevant your questions, the stronger the value perception you’ll create with customers and prospects. But before you can create high-quality questions, you’ll need plenty of questions from which to choose.
To start, take one element of value and ask a question starting with each and every one of the 6 open questions you see on the green tiles below.
6 elements of value x 6 question words = 36 possible starter questions!

SOME EXAMPLE QUESTIONS:
- How is the wasted time impacting your day?
- In what ways is having the delivery show up on time every week reassuring you and your team?
- What is the impact of a lack of expertise when it comes to your confidence in achieving the outcome you want?
NB: The words in red represent the elements of value.
2 quick ways to increase your question count:
PAIN OR GAIN: Look at the example questions above – some are pain-focused and others are gain-focused. All 3 questions can be flipped from pain to gain or gain to pain so that you quickly turn 3 questions into 6.
Question 1 can be changed to:
How is the saved time impacting your day?
Now it’s your turn – how would you change Questions 2 and 3 so that 3 become 6?
BEFORE AND AFTER: What question do you think should come before and after Question 3?
This will add another 2 questions for the 6 questions you have after the pain/gain addition.
STARTER: What is the impact of a lack of expertise when it comes to your confidence in achieving the outcome you want?
BEFORE: What makes you think there’s a lack of expertise?
AFTER: If this lack of expertise continues over time, what are the long-term implications for your business?
Six questions become 18.
Apply these 2 techniques to your 36 starter questions and you have a possible 216 questions – plenty to enable you to work out which are the strongest, most impactful and most valuable.
This is a great exercise to do with your team to build their knowledge and skill.
Now work out how you can use the insights generated by these questions to improve your marketing – website, case study stories, social media, etc.
“This book contains the playbooks that took me from sleeping on my gym floor to owning a portfolio of companies that generate $200,000,000 per year in under a decade. Wanna know the biggest difference between those two time periods? How many leads I was getting. The problem is – most business owners don’t know how to get leads.” – Alex Hormozi
What people are saying about this book:
“Boiling business truth down to its essence is difficult. Alex Hormozi is one of those rare business people that makes it possible for anyone with a desire to build something, the commitment to work at it despite sucking at first, and the discipline to keep moving forward on the stuff that actually moves the needle, to win.”
Harvard Business Review
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