Definition
Business value is a critical concept to understand, and while its calculation may vary from business to business, it often includes a mix of benefit to the organization, benefit to the customer, as well as factoring in risks and/or costs associated with a particular initiative or effort.
A formula for calculating business value
Let’s explore the business value realization formula, introduced originally by Andrew Kaminski, and modified slightly for our purposes[i].
It is a relatively simple formula that looks like the following:
The formula: BV = aBV1 + bBV2 + cBV3 – dBV4
Business Value = BV
BV1, BV2, and BVn each different elements of value to the business. For instance, potential to generate revenue, increase customer retention, delivery efficiency, etc.
a, b, c, and d = different weights of relative importance for each of the items. For instance, BV1 may be more important to the business than BV2, therefore “a” would have a higher value.
We subtract the last item (dBV4) if this is a negative value. For instance, if there is risk to the organization, we might weigh that highly (i.e. “d” would be a high value) and subtract it since it is a negative value.
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How It Relates to Marketing
Marketing departments increasingly operate with accountability for performance and return on investment. The BVR formula enables marketing leaders to justify and track the effectiveness of investments in tools, processes, and initiatives. It serves as a foundational mechanism for aligning marketing outcomes with business goals, supporting stakeholder communication, budget justification, and continuous improvement.
How to Utilize the Business Value Realization Formula
Common Use Cases in Marketing:
- Marketing Technology ROI: Evaluating if a martech stack upgrade led to improved campaign performance or automation efficiency.
- Campaign Performance: Determining if a new channel or creative approach produced the intended lift in leads, conversions, or sales.
- Customer Experience Initiatives: Measuring improvements in customer satisfaction, loyalty, or Net Promoter Score (NPS) after a CX program.
- Brand Investments: Assessing long-term financial value from brand awareness campaigns using attributed revenue and sentiment improvements.
Steps to Apply:
- Define success metrics aligned with business goals.
- Establish baseline and forecasted benefit values.
- Track actual performance and costs regularly.
- Use the BVR formula to report outcomes to stakeholders.
- Iterate or adjust investments based on findings.
Comparison to Similar Approaches
| Approach | Focus | Formula Example | Use in Marketing |
|---|---|---|---|
| Business Value Realization | Actual value delivered vs. expected | (Actual Benefits – Actual Costs) / Actual Costs | Ongoing measurement of marketing investment value |
| ROI (Return on Investment) | Profit relative to cost | (Gain – Cost) / Cost | Campaign and media spend effectiveness |
| TCO (Total Cost of Ownership) | Total lifecycle cost | Sum of all direct and indirect costs | Budgeting for martech and platforms |
| NPV (Net Present Value) | Time value of money | Future cash flows discounted to present | Long-term investment planning |
| KPI Tracking | Outcome measurement | Metric-specific formulas | Performance monitoring (e.g., CTR, CAC) |
Best Practices
- Tie benefits to strategic goals (e.g., revenue growth, market share).
- Use both qualitative and quantitative measures where applicable.
- Establish clear measurement timelines—realization may be phased.
- Use cross-functional input from finance, operations, and marketing to validate assumptions.
- Communicate findings with context—show how outcomes support broader business objectives.
- Reassess benefits periodically to ensure they remain aligned with evolving priorities.
Future Trends
- Integration with real-time dashboards: Automated tracking of business value through data platforms.
- AI-driven forecasting: Using predictive analytics to refine expected benefit models.
- Agile value realization: Aligning with agile methodologies to measure incremental value over sprints or releases.
- Cross-enterprise standardization: Enterprises are beginning to use BVR as a standardized part of program governance and PMO structures.
- Sustainability and ESG metrics: Expanding value definitions to include social and environmental returns.
[i] https://www.linkedin.com/pulse/measuring-business-value-devops-agile-projects-andre-kaminski/ Sourced on June 20, 2022.
Related Topics for Business Value
- Business Value (Terms)
- Business Value Pyramid
- Key Performance indicators (KPIs)
- Customer Lifetime Value (CLV)
- Business Lifetime Value (BLV)
- Marketing Attribution
- Return on Investment (ROI)
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