A primer on value: How to sell more by understanding these two types of value

Businesses talk about value a lot. But what does it mean and how can you use it to sell your products and services more successfully?


When I say “value”, the first thing that might spring to mind is dollars and sense – such as how much money a prospect is willing to spend or how much money do they save by buying from you instead of from someone else.
But value is much more than that. Here’s what value really is:

People have problems and needs… Lots of problems and needs. These range from the simple and obvious ones like hunger and thirst, going all the way through to need for social acceptance and love. (Maslow’s Hierarchy of Need is instructive here).

People want these problems solved and needs fulfilled and they are willing to exchange some of their own “assets” to solve these problems and fulfill these needs.

The assets they’re willing to exchange can be broadly defined as time, money, and effort. (There might be others but let’s stick with these 3 basic ones for now).

People are willing to give some combination of these three things to solve their problems or fulfill their needs.

There are different factors that determine how much time, how much money, and how much effort they are willing to spend to solve their problems and fulfill their needs. Some of the factors include:

  • Availability or perceived importance of each asset (some people might have more time, others might have more money; some might value their money over their time)
  • Social pressure (peers might pressure someone to spend more money on something)
  • Choice of solution (some problems don’t have a lot of solutions)

(These are just a few; there are other factors as well).

Each of those assets (time, money, and effort) has its own varying amount of importance in the prospect’s mind, and so does the problem or need. Prospects are willing to give some combination of these things if they feel that the problem can be solved to a greater degree than the cost of giving up their assets.

My definition of value is: The importance of the time/money/effort assets compared to the perceived return on investment for the solution to the problem or the fulfillment of the need.


Let’s consider three examples:

Example #1: Bob and Jim are both hungry and since it’s lunch time, they are going to solve their problem with some food.

  • Bob is a busy dude with a lot of money. Since he has money but doesn’t have a lot of time and doesn’t feel like putting in the effort, Bob goes to a nearby restaurant and buys his lunch. He exchanges money plus a little bit of time (and zero effort) to get his lunch at a restaurant. His problem of hunger is solved with a combination of money and a bit of time.
  • Jim is pretty busy, too, but doesn’t have a lot of money. Since money is scarce, he has to spend a combination of time and effort to go home and make lunch. It’s cheaper but his problem is solved by a combination of time and effort.

Example #2: After lunch, both Bob and Jim realize that they have transportation needs. They need to get somewhere and it’s time to solve those transportation needs.

  • Bob has money so he goes and buys a new car. It takes some money but very little effort or time. Since Bob has a lot of money, he might also ascribe some level of importance to the social status that his car might provide him. But he also considers the future effort of having a black car (which might show the dirt more clearly and need constant washing) versus a red car (which his wife loves and might want to drive all the time) versus a white car (which his neighbor owns and will think he’s copying him) versus some other color of car.
  • Jim considers his options: He could walk everywhere. It’s cheap but it takes a lot of time and effort. He could take the bus. He could ride a bike. It’s cheap but it takes slightly less time and effort (except when going up hills). He could take the bus. It costs a bit of money and takes even less time and effort than a walking or riding. He could buy a used car. It costs money (although it’s cheaper than buying a new car) and it will be faster (although it could take some effort if the car ever breaks down).

Example #3: That afternoon, Bob and Jim both experience nasty pain in one of their molars.

  • Bob has the money for the dentist, and he also has the time to take the afternoon off and go there… but he hates dentists and the effort of putting up with the pain is too much. It’s not worth the money and the time. So he puts up with the pain, buying increasingly large doses of pain killers to help him cope.
  • Jim doesn’t have a lot of money for the dentist and he doesn’t have a lot of time. He doesn’t like the dentist but he knows that the pain will last for days and could distract him from his work. The effort of putting up with the pain is more than the money and time and effort needed to go to the dentist. So goes to get his tooth pulled.

So in these three examples – of their hunger, their transportation needs, and their dental pain – we see how Bob and Jim consider the value of their solutions as being related to time, money, and effort.


Prospects don’t consciously weigh value in the way I’ve described above – it’s all unconscious and behind the scenes. Ultimately, every time a prospect realizes they have a problem or need and encounters a potential solution or fulfillment, the prospect unconsciously asks themselves three questions:

  1. Will this solution satisfy my problem/need?
  2. If so, what combination of my own assets can I use to gain access to that solution?
  3. Will the solution be better than the sacrifice of my time/money/effort assets?

Okay, we’ve seen how each assets time, money, and effort is ascribed its own degree of importance in the prospect’s mind, and they ascribe a degree of importance to the problem. When the cost of the assets are outweighed by the benefit of solving the problem or fulfilling the need, the prospect becomes a customer.

Think of this as two types of value: The Perceived Value (which is the benefit of solving their problem or fulfilling their need) and the Market Value (which is the amount of their time, money, and effort that they will have to give up).


The Value Gauge is a way for you to understand how perceived value and market value work together.

Perceived Value (PV, pictured as the orange box) is the value that a prospect and/or customer ascribes to your product or service. It’s the benefit they expect to get from your product or service to solve their problem or fulfill their need. It could be derived from a combination of marketing and sales presentations, social proof and word of mouth, and the prospect’s feeling of urgency about their problem or need.

Market Value (MV, pictured as the blue box) is the value that the prospect is willing to spend for your product or service. It’s the cost they will have to pay to get the solution. Remember: It’s a combination of time, money, and value. Market Value is derived from some of the following things: The price tag, the expectation that the customer will assemble the product themselves, the time required to implement the solution, etc.

Perceived Value is what your business gives and what your customers get. Market Value is what your customers give and your business gets.

There are really only 3 possible variations of the Value Gauge.

Some businesses charge a lot (Market Value) but provide very little benefit (Perceived Value). It’s important to note that the Perceived Value may only be lacking if the business isn’t doing a good enough job marketing and selling the product. Perhaps they are not highlighting the benefits of the product enough. But sometimes, businesses simply overcharge for what they promise. So sometimes this problem is solved by improving marketing and sometimes this problem is solved by lowering the price.

Some businesses charge very little but they provide a lot of benefit. This might seem like a smart customer acquisition strategy but it can be dangerous: If the price is too low, businesses run the risk of not honoring their financial commitments to vendors and employees. And, businesses set a dangerous precedent if customers love the ratio of Perceived Value to Market Value and then later resent the adjustment that the business needs to make to the price. (This is exactly what happened when Netflix tried to raise its price last year). Even if your Market Value is profitable and your Perceived Value is extremely high, you could create a “too good to be true” syndrome among your prospects.

Some businesses strike a balance between the benefit and the cost of the solution. This is the best option. They provide sufficient benefit for the amount of time/money/effort that the customer has to “pay”.

Within this optimal range, there is some flexibility – within a specific “sweet spot”. You can move your price higher or lower, as long as it is within this sweet spot. You find out what this sweet spot is by testing your price point and testing your marketing.

  • Both Perceived Value and Market Value are made up of a combination of time, money and effort.
  • The relationship between Perceived Value and Market Value is a kind of “tug of war” or zero-sum game one side always gives while the other side always takes.
  • Every prospect and customer will create their own Value Gauge for the product or service. (Some customers, for example, might perceive more value than another). Businesses who want to use the Value Gauge to help them will need to make some assumptions based on their average target market.
  • Perceived Value (PV) can be anticipated Perceived Value by those who have not yet bought the product or service, and it can be experienced Perceived Value by those who have bought the product or service.
  • Increasing your Perceived Value may increase your expenses if you add additional features to your product or service.
  • Improving your marketing will also increase your Perceived Value. Just remember that your Market Value needs to be in that sweet spot. If your Perceived Value is too great and your Market Value isn’t at an appropriate ratio, you could create skepticism in your prospects who consider your product or service too good to be true.
  • Your Market Value is best determined by testing different price points but that’s not the only way to adjust Market Value: Time and effort are also “assets” that your customer has to “spend” to get your product or service.
  • Ultimately, this is a tug of war with profit as the deciding factor. At the extremes, profitability drops.

Here’s a great example to understand how Perceived Value and Market Value work together:

When I was remodeling my kitchen, I explored a number of different options. My wife and I went to kitchen centers that specialize in custom-built kitchen cabinetry and we went to Ikea for a DIY option… and to some of the offerings in between (like those big box home reno stores). We looked at the Perceived Value and Market Value of each offering (although obviously we didn’t use that terminology!) and we decided that an off-the-shelf kitchen with a few customized pieces was the way to go. With the kitchen cabinetry stores, their Market Value was too high for our Perceived Value of what we were wanting in our kitchen. And the same with Ikea’s build-it-yourself models: The Market Value was too high (not in terms of money but in terms of time and effort) compared to the Perceived Value of what were getting.

So, how do you figure out the Perceived Value and the Market Value of your product or service?


Start by listing the benefits of your product or service. List as many as you can. Don’t jump over some as being too obvious or because they’re a standard that everyone in your industry must adhere to. List everything. (Need help? Check out my blog post 9 easy steps to discover all of the benefits of your product or service).

Compare what others in your industry are pricing their products or services at and what benefits they offer to boost their offering’s Perceived Value. Add more to your Market Value if you have more benefits; discount your Market Value if you have fewer benefits.

Choose three Market Values and test them. Identify your sweet spot – the upper and lower points at which you remain profitable and can still offer a good balance between Perceived Value and Market Value. Remember that your Market Value is more than just price; it’s also influenced by the time and effort that your customer has to put into the purchase.

Value is such a HUGE topic! There is so much more to talk about. I’ll build on these concepts in future blog posts.

Published by Aaron Hoos

Aaron Hoos is a writer, strategist, and investor who builds and optimizes profitable sales funnels. He is the author of The Sales Funnel Bible and other books.

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