The extraction model has a shelf life. I wrote about it this week. You can read all about how the World Cup is the point at which the extraction model in sports may have broken down.
The pricing that assumes infinite elasticity. The buyer treated as a mark. The number must go up forever…even if it can’t.
Naming the problem is one part of the job.
Naming the other side of the problem is the tougher, most important part of the job.
What does a business designed to create value look like?
Here are five things I consider essential.
- Start with the customer’s definition of success.
An extraction based business begins with a target: maximum transaction value.
It may not be stated that clearly, but that’s the goal. The customer is a number to be “optimized.”
Value creation begins with a question: what does success look like for the customer?
Not for you. For them.
In marketing terms, we call that market orientation.
This is the first question of the Strategy Stack, exaggerated to ensure you think about the customer first.
What do they need to achieve? What does success look like when your product or service is used?
If you can’t answer that clearly, you don’t have a value proposition. You have a price tag.
- Use a different internal motto.
Every business has a rule that guides decisions when the customer isn’t in the room.
You may say it clearly, but often, it is unstated.
The extractor says: “What can we get away with?”
A value creator: “How will this person be better off when we’re done working together?”
That question changes everything.
The scope of work. The price you set. The way you manage challenges in a relationship.
It is the decision filter that no one sees but everyone feels.
- Price for mutual benefit, not maximum extraction.
Extraction says: “What the most the market will bear?” Extraction prices for the limit of what the customer will tolerate before they say, “No.”
Value creation says: “What’s a fair price for both sides?”
This isn’t charity. It’s not being soft.
It’s strategy.
A price that works for both sides, built on you delivering value and the customer receiving value means you aren’t constantly replacing customers.
You have relationships that last. Loyalty.
That creates less churn. It lowers the cost of constant selling.
This is an asset.
- The customer is a partner.
Extraction looks across the table and sees a wallet. A transaction waiting to happen. A commodity to harvest.
Value creation looks across the table and sees a partner. A comrade. Someone you’re working with to achieve a goal.
That orientation changes things.
The offer. Your communication. The POV you have when things get difficult.
The extraction model says, “Good luck. You are on your own.”
The value model says, “We’re here when you need us.”
- Measure success in tangible and intangible terms.
Revenue matters. Margin matters. Anyone who says otherwise is selling you a line of BS.
But extraction is addicted to the number going up forever. More clients. More revenue per client. More transactions.
Growth as oxygen. Growth as the only meaning of the enterprise.
Value creation allows for different kinds of wins.
Same money, better clients. Higher margins on fewer transactions. A stable customer base.
Intangibles that extraction never prices for.
Time. Autonomy. Enjoyment. The ability to look at your calendar and not flinch.
Extraction demands constant feeding. Value allows you to say enough is enough.
Your choice.
Extraction. Value.
Extraction feels like a trap…because it is.
You harvest. You grow. Harvest some more. The machine demands it.
Eventually, you hit a wall. You stop growing. You wonder why.
The answer isn’t a new pricing trick. It isn’t a rebrand. Not a discount.
The answer is a decision.
Extraction or value creation. Harvest or cultivate. A mark or a partner.
You already know which side you are on. Those questions you think about when the customer isn’t in the room already told you.
If you like the answer…great.
If you don’t…pick one of these five to start doing now.