What’s it worth?

One of the mysteries of the market is what determines the price of goods and services. At one level, price simply reflects supply and demand – the balance between what the buyer is willing to pay and the seller is willing to accept is determined by competition in the market that drives the price down. But this classical Adam Smith viewpoint doesn’t account for many other relevant factors – the buyer needs information to compare and understand the market; the buyer may want to pay a premium price for a premium brand (‘conspicuous consumption’ as Veblen called it), the seller may want to discount to capture new market, and of course, inertia – humans are creatures of habit and often we stick with what we know and trust rather than switch to new suppliers.

The Iron Triangle

Price is perhaps better described as a reflection of value – what the customer values and is willing to pay for. In this regard, cost is only one element of value, alongside quality and speed of delivery. Of course, we want all three, but the argument is that you can only have two of the three elements – so a customer who values low cost and quick delivery will have to sacrifice quality to get this. This is sometimes known as the Iron Triangle. 

The weakness of this Iron Triangle model is that quality is something that is difficult to measure because it is what is perceived by the customer. Quality is more than just being ‘fit for purpose’, it’s also about the additional value that the product or service brings.

Hence our aim here at Adding Value Consultancy is to provide a high-quality service that provides plenty of additional value that can improve your whole organisation and save you money over the longer term – and to charge fairly for the value we deliver.

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