“All value is subjective.” Ron Baker said it, so it’s true.
And since value is subjective, we need to keep that front and center as we create value for our customers. In other words value should be created in the following manner:
- Your customer ultimately determines what goods and services are valuable and how valuable those goods and services are.
- The value that is imbued by the customer is translated (in a messy, subjective way) into a price that the customer is willing to pay.
- Your firm, keeping profits in mind, then backs into an acceptable cost.
- Your firm creates goods or services that provide value to your customers while adhering to the cost constraints necessary to earn an acceptable profit.
Your customers determine value. But it’s your job to create value.
Because of this value creation often feels like a snake eating its own tail. Ideally the customer tells us what they value and how much they’ll pay for it. Then we innovate and come up with a deliverable that we think the customer will find valuable. But we have to create it and deliver it to the customer — who is the ultimate arbiter of value — before we know for sure that the customer values the thing we created.
So how should we navigate the human centipede of value creation? Here are two ways. Or maybe four ways. Technically it’s two ways with two sub-ways of one of the ways. Just relax and keep reading and stop being an accountant for one second, nerd.
Offer a Service Guarantee. When you get into uncharted waters, offer your customer a money back guarantee. This is a great way to capture as much value as possible while at the same time making your customer comfortable with paying a premium price. It also has a strange way of both lowering the stakes and raising the stakes for you as you innovate. It raises the stakes because you must deliver value to your customer or else you will eat the cost of whatever it is that you did. But it lowers the stakes because the doubts that may have prevented you from pitching an idea in the first place are gone. “Can we actually do this? I don’t know, but let’s go for it and if we fail, the customer won’t be pissed and we can chalk it up to R&D.”
Two cousins of the the Service Guarantee are the Tip Clause and the Flexible Invoice. And like cousins in South Carolina, sometimes they go together. The tip clause is an explicit understanding between you and your customer that if you provide more value than expected, the customer is welcome to thank you by paying more than the agreed upon price. This has been successful for firms when a client hires them expecting that their work will help them save a certain amount of money, but when all the dust settles, the the client ends up saving much, much more. So while the client is feeling rich and generous and grateful, they kick a little gravy back at you because you kick ass.
A Flexible Invoice is just like a normal invoice in every way except it includes an extra column where the customer can change the price on any particular line item of the deliverable. This works as a service guarantee on a sliding scale. If there is a particular part of the deliverable that the customer didn’t value as much as they expected, they can reduce the price to a level that they feel good about.
All of these ideas — the Service Guarantee, the Tip Clause, and the Flexible Invoice — convey tons of confidence to your customers because if you’re willing to stand by your work, you must be pretty damn good at what you do.
It’s also reassuring that most firms who implement Service Guarantees report that their customers never exercise the guarantee. Never. This partly reflects the reality that while customers receive comfort from service guarantees, generally they’re not too comfortable cashing in on service guarantees. But even more so, it shows that firms offering service guarantees are damn sure that their customers are delighted. It’s a great way to make sure you never start slacking on providing an exceptional customer experience.
Rapid Prototyping. Another strategy that can be used in tandem with the Service Guarantee is Rapid Prototyping. This is an iterative process with you and your customer. It’s like when you go to the optometrist and she puts that huge dealie in front of your face and clicks back and forth between lens strengths, asking you, “Number one or number two?” In Rapid Prototyping, after having the value conversation with your customer, you make a mockup of your deliverable as quickly and inexpensively as possible. Then you review your mockup with your client, getting their feedback about what works and what doesn’t work. You incorporate that feedback into another quick and dirty prototype, and repeat the process until you both you and your customer know you’re killing it.
Rapid prototyping requires engagement from both you and your client, so make sure you don’t do it with one of those clients who just wants you to take their problems and run off to your nerd cave and not come out until you’re finished. (I’m looking at you, Joe Pine.)
You create value. Your customer assigns value. It’s a dance. And accountants typically suck at dancing. But now you’ve got a two to four new more moves.
Greg was born in Akron, Ohio, in the shadow of the Firestone tire factory. He began to swim competitively when he was eight, swimming for the Mountlake Terrace Lemmings. He graduated in 1995 from the University of Washington with a math degree. He chose math for the ladies. After serving ten-years as an 8th grade math teacher, he decided it was time for a career change, mainly because he “couldn’t stand those little bastards.” He began his accounting career with a local CPA firm in Orem, Utah, where he consistently failed the QuickBooks ProAdvisor advanced certification exam. Greg currently works as the Controller for the Utah Valley Physicians Plaza. He lives in Utah, but manages to make it to Greenville, SC once a year to emcee Deeper Weekend. He enjoys eating maple bars, drinking Diet Pepsi, and swearing.