How do you define value?

(And the law of diminishing returns)

In a discussion last month, the question of defining value came up. Essentially (the quick version), why do some see great expense whilst others see value for money? And of course does the law of diminishing returns come into play?

I'll use the humble electric guitar as an analogy and we will keep it simple. Retail prices range from £100 to in excess of £10000 for a 6 string, solid wood, electric model. You can pick up any of these instruments and play melodies, chords, jam with friends etc. They all fundamentally do the same thing but yet the difference can be huge!

Just for fun, try and put these electric guitars in price order. No clues and not the best images (on purpose), give it a go - try and attribute their value relative to each other. (Answers at the end of course)

A guitarist will tell you that below a certain price point the instrument doesn't feel as good as it could under your hands, doesn't sound quite as nice to your ears or play quite so easily - it takes more effort to get what you want out of the instrument. Those same musicians will also say that once you get to a certain value, the difference in all of those 3 things disappears and it becomes perhaps more about aesthetics yet people still buy these more expensive instruments - throwing extra £1000s at an instrument for very little in return.

Certainly from a practical sense, a well setup mid-priced guitar will be almost indiscernible from one many times its price (check out the Andertons Music Co YouTube channel and their blindfold challenges if you don’t believe me!) And here is the law of diminishing returns - at some point, simply throwing more money at something doesn’t bring you the equivalent gains / return on investment / value.

Using our guitar example:

💲 If you spend £300 on a guitar. It’ll likely need a good setup before you start, possibly £60-£100, however it will play well enough after that and you will functionally be able to perform. It might not sound quite to your liking and it might be a bit rough around the edges but it's a practical thing right? You could swap out the pickups / electrics for another £200-£300, swap the tuners for another £100 and upgrade the saddle and maybe the nut… Essentially you can keep making incremental improvements to the fundamental instrument to get nearer to what you want but still with no guarantee you'll achieve what you want or need.

💲💲 Spend around £1000 - £1500 and you would expect out of the box the guitar to feel good, sound good and look great. Nothing bad to say. A solid performer that delivers gig after gig - it just does what is required and well. No need to start replacing bits, it is there for you every performance. Solid investment / value you could argue.

💲💲💲 - 💲💲💲💲 Start spending more and you’ll see nothing like the difference that moving from budget (£300) to mid-range (£1500) made. You start getting into fractions of a percent improvement even for thousands more but people want them still…

So why pay even more for something that does essentially the same once it has met your requirements?

• Aesthetics (shape / colour)
• Brand name (loyalty)
• Particular function (tremolo / pickup type)
• Reputation (independent reviews)
• Just feels ‘right’ (something about that one instrument calls to you)

All of the above (and perhaps a few other practical factors) influence a musician choosing a guitar. The last point (feeling right) is probably the most important when it comes to making the right choice but we humans are sometimes shallow creatures and the reputation, brand allure, colour etc can sway us. (Again, there are a few Andertons Music Co blindfold challenges that show this)

When investing in systems for your organisation, does the same reasoning apply?

There are many options that seemingly do the same and with similar features yet there is undoubtedly a range of prices and the law of diminishing return definitely applies. Most software applications given the right setup and time will do a reasonable job of meeting whatever the demands of your organisation. Like the guitar though, it could be argued that the less expensive end of the market will take more work to get a desirable end result, perhaps taking greater effort to achieve desired outcomes (or may never quite get there 100%) and may need additional applications / features bolting on. At the other end, throwing money at the 'gold standard', premium A+++ priced system (built on reputation or brand) may bring you nothing over and above an option in the middle, just cost your organisation more for the privilege.

That is where we at PacSol come in. We have looked at the market and we know what is available for your organisation.

Our task is not to find you the cheapest way to digitally transform your organisation but instead to find the best value proposition. Find the system that will give you the greatest benefit / return on your investment without compromising or unnecessary further investment.

If your organisation has looked at digital transformation and been put off by the apparent cost or been disappointed at the lack of features in more seemingly reasonably priced alternatives, come and talk to us and lets see if we can find your organisation some real value.

*Guitar value order: 3, 5, 2, 1, 4  (£119 to £10,999!)

Toby Gilbertson, Director of Operations. March 2024

#pacsoluk #pacsoluk #value #digitaltransformation #returnoninvestment