In the last class we were talking about the “creation of a customer”.

We talked about the 4 Ps of marketing and the marketing funnel…

And as we ended, I said that the funnel was ultimately more of a sales tool than a full marketing tool…

It focused on selling something—anything—to the customer or potential customer, but didn’t have much to do with what that something, that product or service was.

What was it that someone aware of, or interesting in, or desired or took action to buy?

And looking at the 4 Ps—the funnel had nothing to say about the Product.

It didn’t address the key question that any business has to answer: what is the Value of our product or service to the customer?

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That’s what we’re going to talk about today—The meaning of "value".

Remember when we talked about the Business Model Canvas?

The Offering, or Value, or Value Proposition, sits right at the center of the Canvas.

And I’ve said a couple of times, Value is the most important idea in business—and one of the most important ideas in life itself.

We could do a whole course just on value.

But in this introductory class we’re going to do three things:

First, we’re going to talk about products and services. We’re going to define products and services.

I promise it’s not as simple as you might assume.

Then we’re going to jump into a definition of Value – or rather we’re going to talk about why it’s so hard to define value.

Then finally we’ll get into an example that I hope gives you a clearer understanding of how the idea of Value works in business.

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Okay so first off, let’s consider the difference between a product and a service.

That might seem obvious.

We talk about products and services all the time.

Products are things that you can touch. Services are experienced.

Another way to say that: Products are “tangible” and services are “intangible”.

I can hold a product in my hand, but I can’t hold a service…

Another thing people say: A product is made but a service is delivered.

Or a product is owned but you can’t really “own” a service.

Think about it this way: if you own a product you can resell it to someone else—if you don’t need your bike anymore you can list it on Craigslist or FB Marketplace.

There are exceptions, but usually a service has to be used by the original buyer.

These are some obvious characteristics, but when you really stop to think about it, the difference between the products/services isn’t as clear as we assume.

What do I mean?

The truth is that products are sold as services and services are sold as products all the time.

Think about a credit card. We assume it’s a product, because it’s a physical thing that we carry around in our wallet.

But really it’s a service. A bank lends you money that you can easily spend to buy stuff.

Or think about a piece of software or app with a monthly subscription…

It’s a product, but we buy it as a service. They even call it “Software as a service”

The key thing to remember is that in today’s digital world, the line between what is a product and what is a service has never blurrier.

Companies today blend products and services to create offerings that have more value than a plain product or service might have on its own.

And there’s that word again: Value.

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The second thing we were going to do in this class was talk about why the meaning of Value is so hard to pin down…

Like so many of our words, the word Value comes from Latin.  And its roots are even older.

It shares the same root as words like Prevail and Valor and Valiant,

These are all words that have to do with this idea of strength and wellness and power.  

We hear different versions of the word Value all the time.

And the problem is that many of these meanings of the word Value contradict each other.

We actually use the same word to mean opposite things. No wonder it’s confusing!

The first meaning that comes to mind for most people is that value is the same as price.

If I ask you about the value of something you might tell me how much is cost you or how much it would cost to replace.

This seems obvious. The more valuable something is, the more expensive it is.

But ironically, we also use the word value to describe the exact opposite.

We use value as way of saying a product or service or store is inexpensive.

A value product is the opposite of a premium product.

“Good value” means that you get a lot without having to spend too much.

We also talk about our Values. These are the things that matter the most to us in our lives.

They are things that are so important to us that they’re literally priceless.

You couldn’t pay us enough to sacrifice our principles, our beliefs, and our standards.

Our relationships with other people, our self-respect and respect for others, honesty, creativity, kindness, education…

So are you confused yet?

Well, this is a course about Business, so I want to add yet another meaning of value.

This is how we understand Value in the context of business.

A useful shorthand for this comes from Warren Buffett, who put it this way:

“ Price is what you pay. Value is what you get.”

When businesspeople and entrepreneurs talk about “creating value” or “value propositions”, this is what they mean.

Value is what the customer gets. It’s the reason that someone buys a particular product or a service.

For the utility or benefits they get.  

But even this notion of the value of a thing is much more complex—and interesting that we usually assume.

Most of the time we don't really think about why we buy something.

The value we get is usually a mix of functional, financial, and psychological or emotional benefits.

Some can be measured—they are quantifiable. Others are qualitative—they are experienced or felt.  

To make what I mean a bit clearer, let’s get to the third part of the class: an example that I hope will help you to see just how layered and rich our perception of value is.

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Think of a simple cup of coffee.

People love coffee. I love coffee.

Most Americans drink it every day, and coffee is a $100 billion business in the US.

Let's consider some of the different kinds of value that you might get from a cup of coffee.

Most obviously, there's the pleasure you get from the taste and the smell of coffee.

The warmth of it or the coldness of it.

Coffee is delicious. It’s satisfying.  

But coffee is also a social drink.

We enjoy drinking coffee it in places like cafes where people get together.

We say, "Let's meet for coffee".

So there's the conversation and connections and the relationships that we associate with coffee.  

Then of course, there's the caffeine.

Coffee is stimulating. It gives you energy and focus.

Perhaps even a sense that it's helping you accomplish things.

Many people can’t start their day before having a cup of coffee.

Coffee has become a bit of a luxury item.

Today a cup of coffee can set you back you 5 or 6 bucks or more.

So there's a sense of spoiling yourself with something special.

Coffee's a treat or a reward.  

And as coffee has become more exotic in terms of where it comes from, it may give you a sense of exploration or adventure.

You may imagine you're drinking something that links you to people in places far, far away.

Because it’s only grown in mountains with very specific climates, many of these places are beautiful and appealing…

Finally, because you feel that link to those people growing your coffee in beautiful, far away places, you might be willing to spend a little more to make sure that the farmers who grew your coffee are earning a fair wage.

Coffee can give you a sense of fairness or even economic justice.  

The value we get from anything, even a simple cup of coffee, is complex.

And what makes it even more complex, is that value is different for each of us.

Value is subjective. It varies from person to person.  

We may buy the same cup of coffee from the same cafe, but we’ll do it for different reasons.  

Value is in the eye of the beholder.

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