The Five Essential Elements of Value Drivers
Want to know what are The Five Essential Elements of Value Creation?
What is Value Driver?
A value driver is a factor that increases the worth of a product, service, asset, or business.
In this blog post we will list five elements of value drivers.
The Five Essential Elements of Value Drivers
At the heart of every business you can find five-part framework that helps understanding the value drivers of the business:
- value creation part
- marketing part
- sales part
- value delivery
- finance
Without any one of these five parts, the business doesn’t have a real value or the value is not maximized.
let's explore each part so that we can become better able to analyze a business and make better business decisions, as an employee of a business or an entrepreneur trying to start a business.
Value Creation
A business a venture that doesn't create value for others, is nothing but a hobby
The question we need to ask here is are we creating something people will actually pay for? The first thing to understand when building a successful business is understanding what drives people to buy a product or service in the first place.
There are two primary characteristics that drive buying decisions convenience and high fidelity.
Convenience means quick reliable easy and flexible people pay a premium for convenience.
Fidelity means high aesthetic appeal, high emotional impact and high social status.
Rather than going into hiding for months and making something that you think people will value, it's much better to build an early version of a product and measure
your customer's response to it from that point you can make incremental
improvements to your product until it's good enough for people to be willing to
pay for it.
Marketing
venture that doesn't have proper marketing is a flop.
The second part of any business is marketing and the question we need to ask ourselves here is how well are we attracted and holding our customers attention.
An amazing metaphor to illustrate this marketing principle is cows. let's say you're driving down the highway and you see a field full of brown cows a field full of brown cows is ordinary and boring but if you suddenly saw a purple cow. It would be conspicuous. It would violate your expectations and it would hold your attention.
Any business that can have a purple cow effect has a great chance of getting their customer.
Sales
A venture that doesn't sell the value it creates is a non-profit.
The third-stage sales in the area of sales. we want to ask ourselves the following question - how well do our customers believe and trust us if a stranger walked up to you at a bus stop and offered you one hundred dollars in exchange for ten dollars. You probably wouldn't make the trade because it seems unbelievable. You don't believe or trust them enough to make the deal and the same goes for sales people aren't willing to give up their hard-earned money unless they believe and trust a business can deliver on their promise one way to quickly build up belief.
Trust is to get social proof if you had a friend standing next to you at the bus stop who could vouch for the stranger you'd probably take the deal.
The equivalent for any business would be getting the recommendation of a key influencer. If a business is unable to build up social proof it simply needs to
perform on a consistent basis and be around long enough for people to trust
it the more trust a business has the more sales the business makes.
value delivery
A venture that doesn't deliver what it promises is a scam.
The fourth part of every business is value delivery. The question we need to ask ourselves here is are we exceeding the customers at spectators. If you want the customer to be satisfied, come back and buy from you again and recommend the business to their friends one way to exceed customer expectations is to build highly efficient systems that deliver high-quality products in a fast and reliable manner.
Finance
A venture that doesn't bring in enough money to keep operating who will go bankrupt.
The final part of every business is finance and this is where we need to
ask ourselves are we making more money than we're spending? If not you need to
reduce spending in one of the four parts mentioned previously or produce something of greater perceived value.
Conclusion
In conclusion, in this article, we discussed the five essential elements of value creation. We hope the explanation was helpful. We would love to hear your notes regarding our blog post. If you are looking for a business valuation report, you can start creating it for free using our intuitive ai based business valuation software.
