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Jon Gatrell

Lessons Learned: What is Value? Depends on how/when you look at it

So I spent a good deal of time thinking about value this weekend for a couple of reasons:

1. I had to spend way too much time in a vet hospital for my dog panic and cost/benefit never really entered my mind, but I did do some quick budget math out of financial diligence – couldn’t help it.

2. I need to find Guitar hero and I can’t.  But I did find out some guy paid $10,000 for one, not me though – cost/benefit entered my mind on this one.

3.  The dollar menu at McDonald’s – how are those items only worth $1?  I mean I like double cheeseburgers.

So I thought about it and realized that value is in the eye of the beholder or rather the coveter – but perhaps the marketer as well.   Not sure if value is ever the same or within banded limits at any point in time and this is the most confusing thing about value. Value is about the buyer, so as a marketer and product manager know how can you optimize the value or perceived value of your product.  Effective product placement can significantly change the value of something  – right channel, the right package, the right promotion….   Often the value of something is marketed and delivered to market based on a plan, so perhaps a double cheeseburger is only worth a $1, if [tag]share of wallet[/tag] is a key careabout.  Value is situational for both the buyer and seller.  So I’ve cut in a general overview from Wikipedia on Value for consideration:

The economic value of something is how much a desired object or condition is worth relative to other objects or conditions…

In [tag]neoclassical economics[/tag], the value of an object or service is often seen as nothing but the price it would bring in an open and competitive market. This is determined primarily by the demand for the object relative to supply. Many neoclassical economic theories equate the value of a commodity with its price, whether the market is competitive or not. As such, everything is seen as a commodity and if there is no market to set a price then there is no economic value.

In classical economics, the value of an object or condition is the amount of discomfort/labor saved through the consumption or use of an object or condition (Labor Theory of Value). Though exchange value is recognized, [tag]economic value[/tag] is not dependent on the existence of a market and price and value are not seen as equal.

In this tradition, to [tag]Steve Keen[/tag] “value” refers to “the innate worth of a commodity, which determines the normal (‘equilibrium’) ratio at which two commodities exchange.” To Keen and the tradition of David Ricardo, this corresponds to the classical concept of long-run cost-determined prices, what Adam Smith called “[tag]natural prices[/tag]” and [tag]Karl Marx[/tag] called “[tag]prices of production[/tag].” It is part of a cost-of-production theory of value and price. Ricardo, but not Keen, used a “labor theory of price” in which a commodity’s “innate worth” was the amount of labor needed to produce it.

In another classical tradition, [tag]Marx[/tag] distinguished between the “[tag]value in use[/tag]” (use-value, what a commodity provides to its buyer), “value” (the socially-necessary labour time it embodies), and “exchange value” (how much labor-time the sale of the commodity can claim, Smith’s “[tag]labor commanded[/tag]” value). By most interpretations of his labor theory of value, Marx, like Ricardo, developed a “[tag]labor theory of price[/tag]” where the point of analyzing value was to allow the calculation of relative prices. …

Value in the most basic sense can be referred to as “Real Value” or “Actual Value.” This is the measure of worth that is based purely on the utility derived from the consumption of a product or service. Utility derived value allows products or services to be measure on outcome instead of demand or supply theories that have the inherent ability to be manipulated.

Alas, value is subjective and may or may not have any relationship to production effort ([tag]cost plus[/tag]) or value in use.  The ever changing marketplace makes understanding your products value an ongoing and continuous thread of activity.

Sounds like this value thing is a continuous loop caused by an if-then-goto statement in the business plan.

December 16, 2007 by
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Top 5 Tweets

This week is just about fun, nothing more, nothing less:

  1. Phenobarb Found the nicest bar last night for a game of [tag]yahtzee[/tag] and a Manhattan with delicious little Italian cherries.
  2. mitten The[tag]snow[/tag] is going past my window horizontally. Glad I don’t have to go anywhere. Onwards to photo files cleanup! Huzzah!
  3. heidigoseek SNOW!!!!! Wheeeeeee!
  4. gapingvoid Can’t decide if I find the [tag]Facebook[/tag] “social graph” advertising model that compelling.
  5. Veronica Violet, Ariel and I just got shushed! We talk too loud.
December 16, 2007 by
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Social Media requires a coordinated effort and understanding

So I continue to see more B2C and B2B companies deploying social computing technologies just want to be part of this whole web thing, which many don’t even recognize as social media only perceived as a necessity for success. Damn you Ad Age! The most recent reminder of this was a comment of “we gotta be on [tag]facebook[/tag]” from a friend about his business, but really didn’t know what he meant which is why he rang me up. Next he’s going to ask me about [tag]second life[/tag] or twitter. As an aside, Twitter was featured on a CSI show a couple of weeks ago and clearly was not explained well and this type of random reference will continue to drive a tactic oriented approach to online activity.

I spent some time asking my friend about his product, his target demographic and other buyer class attributes.   He explained the his demographic so far from over 2000 orders is typically a female suburbanite over 35 and their pre-launch demographics indicate they typically a master’s degree with a household income north of $150K. Not a typical facebook user, but what the heck – more people are joining everyday and the recent investment and gabillion dollar valuation is changing the mix everyday.
Based other research his team has done he indicated the product requires multiple touches and education.   After talking some more he did say and interesting thing is happening where a given instance of the product is sold, clusters are beginning to develop geographically.   He was clearly under the impression that “word of mouth” is driving the clustering, so after explaining groups, social networks and other general social media concepts he went back and out a plan for how to use facebook after he browsed around.

So what did he decide to do?  He created a group on facebook and invited his customers.     The group immediately received 6 customer friends and every day is gets at least 3 new randoms everyday.   After a month of Facebooking, his website analytics and sales are showing promise based on this effort.

This truly begs the question of how do you effectively use social media for a given company or product?   Here is an excerpt from a forrester report by [tag]Charlene Li[/tag] and [tag]Josh Bernoff[/tag] which I have been thinking about and collecting data on for a while, albeit anecdotal, but the recent post on travelers, reminded me to return to this concept and below is the excerpt from the original piece in April:

Many companies approach [tag]social computing[/tag] as a list of technologies to be deployed as needed – a blog here, a podcast there – to achieve a marketing goal. But a more coherent approach is to start with your target audience and determine what kind of relationship you want to build with them, based on what they are ready for. Forrester categorizes social computing behaviors into a ladder with six levels of participation; we use the term “Social Technographics” to describe analyzing a population according to its participation in these levels. Brands, Web sites, and any other company pursuing social technologies should analyze their customers’ [tag]Social Technographics[/tag] first, and then create a social strategy based on that profile.

Not only is effective delivery of a social media strategy based on metrics and knowing your customer, it needs to be one of relevant tactics which encourage community:

http://blogs.forrester.com/photos/uncategorized/2007/04/24/ladder_3.gif

So if I think about survey above, this has a little “dewey win’s” feel to it, since it is a % of a % of a segment who buy online, which is minimally transferable to the general population and may not capture the REAL influence of social media effectively, but at least SOMEONE is trying to quantify in an objective way. The graph below is what drove me to the Dewey concept which indicates a significant segment of the popluation are apple users, or in the Dewey scenario, telephone users:

http://blogs.forrester.com/photos/uncategorized/2007/04/24/profiles.gif

While there is a little dewy in this, it clearly validates that random social media tactics, such as just getting on Facebook or setting up a blog because you “have to” typically will not drive conversions for online sales and may in fact be a big time sink which causes frustration.

Back to my friend, his company has had a blog since launch, but the traffic was minimal which over time resulted in less posting and a near abandoment of the blog – not the case now, but this is what can happen if you look at it from a technology perspective and not a way to coordinate awareness, interest and demand. Now with the new multi-channel approach he has seen a growth in blog traffic, increased reader consumption of the RSS feed and online sales growth.

Somewhere I lost the point and this has become a “captain obvious” post, so I’ll close on the following sound bites:

  • Online tactics do not equal an online strategy.
  • A social computing platform deployment doesn’t mean you are doing what you should be doing.
  • You have to link your business goals, social media efforts and strategy to planned out tactics
December 15, 2007 by
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