FOCUS ON VALUE
When customers evaluate a product or service, they weigh its perceived value against the asking price. Marketers have generally focused much of their time and energy on managing the price side of that equation, since raising prices can immediately boost profits. But that’s the easy part: Pricing usually consists of managing a relatively small set of numbers, and pricing analytics and tactics are highly evolved.
What consumers truly value, however, can be difficult to pin down and psychologically complicated. How can leadership teams actively manage value or devise ways to deliver more of it, whether functional (saving time, reducing cost) or emotional (reducing anxiety, providing entertainment)? Discrete choice analysis—which simulates demand for different combinations of product features, pricing, and other components—and similar research techniques are powerful and useful tools, but they are designed to test consumer reactions to preconceived concepts of value—the concepts that managers are accustomed to judging. Coming up with new concepts requires anticipating what else people might consider valuable.
The amount and nature of value in a particular product or service always lie in the eye of the beholder, of course. Yet universal building blocks of value do exist, creating opportunities for companies to improve their performance in current markets or break into new ones. A rigorous model of consumer value allows a company to come up with new combinations of value that its products and services could deliver. The right combinations, our analysis shows, pay off in stronger customer loyalty, greater consumer willingness to try a particular brand, and sustained revenue growth.
“Value” is not Monolithic – but is built from elements, sometimes several elements
Maslow’s “hierarchy of needs.”
Psychologist Abraham Maslow’s “hierarchy of needs,” which was first published in 1943. Then a faculty member at Brooklyn College, Maslow argued that human actions arise from an innate desire to fulfill needs ranging from the very basic (security, warmth, food, rest) to the complex (self-esteem, altruism). Almost all marketers today are familiar with Maslow’s hierarchy.Our focus on value approach extends his insights by focusing on people as consumers—describing their behavior as it relates to products and services. Marketers have seen his hierarchy organized in a pyramid (although it was later interpreters, not Maslow himself, who expressed his theory that way).
At the bottom of the pyramid are physiological and safety needs, and at the top are self-actualization and self-transcendence. The popular assumption has been that people cannot attain the needs at the top until they have met the ones below. Maslow himself took a more nuanced view, realizing that numerous patterns of fulfillment can exist. For example, rock climbers achieve self-actualization in unroped ascents of thousands of feet, ignoring basic safety considerations.
Our Focus on Value Model
The focus on value pyramid we use is a heuristic model—practical rather than theoretically perfect—in which the most powerful forms of value live at the top. To be able to deliver on those higher-order elements, a company must provide at least some of the functional elements required by a particular product category. But many combinations of elements exist in successful products and services today.
Most of these elements have been around for centuries and probably longer, although their manifestations have changed over time. Connects was first provided by couriers bearing messages on foot. Then came the Pony Express, the telegraph, the pneumatic post, the telephone, the internet, e-mail, Instagram, Twitter, and other social media sites.
Our focus on value can lift products and services above commodity status. Our model has four levels of elements:
Social-impact elements - what value to society?
Life-changing elements - how does it change my life?
Emotional elements - how does it feel?
Functional elements - what does it do?
We use a co-creation exercise that brings together various best practices into an accelerated solution environment to problem solve the focus on value for your offerings to your customer.