In the negative spiral, fueled from below (input costs) by inflation, good understanding of the process of creating and capturing added value becomes even more important; otherwise, many industries will be doomed to failure or, at best, to a long period of very low margins, which will naturally deter capital and investments, the attractiveness of industries to talent, and strongly impact many companies and employees.

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When I speak of added value, I am, of course, referring to a business rather than an accounting category, which means, simplified, added value arises when someone is willing to buy a certain service or product on the market. Commercially viable, of course, at a price higher than production cost. But with this, we have only succeeded in taking the first step, creating added value (value creation). At this point, we still don't know the value that a particular buyer attributes to a particular service or product, except that this value is higher than the offered price. Otherwise, the purchase does not happen (except, of course, in exceptional cases such as monopoly positions, rare and essential goods, etc.).

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In this process, communicating value (value communication) is crucial, whereby brands and organizations (among other functions) actively influence the perception of added value and stimulate additional demand. This, of course, is well known to all of us working in the field of communications. However, what is often lacking in most discussions and what is most often forgotten in discussions about added value is the third phase, i.e., value capture.

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The essence of the latter is, on the one hand, finding ways to achieve the highest possible perception of created value by the customer, and on the other hand, the ability of companies and brands to charge a price higher than the previous one or the industry average. The goal is to achieve both: if we (short-term) raise prices without increasing the perception of created value, the consumer (or business partner in B2B industries) will become increasingly less interested in purchasing the service or product, as the difference between the perceived value and the charged price will decrease at the expense of reduced customer satisfaction. In the long run, there is a high probability that in such a position, the customer will switch suppliers or start looking for substitutes.

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Here you can read the second part of the column.

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Read the rest of the text (in Slovene) here.

The column was originally published in the print magazine Marketing magazin, March 2023, #501. You can order the magazine at info@marketingmagazin.si.