What Your Customers Value
At its essence, every transaction is identical. Consumers exchange their money for a product or service they consider of value. Countless hours have been spent by product designers, marketers, and executives identifying what price customers will pay for their product or service.
However, to establish a meaningful price point, companies must consider how their customers define value, not merely what that value is.
Customers aren’t entirely rational when it comes to assigning value. A gold bracelet etched with a celebrity’s name is worth more than the same bracelet from a chain jewelry store. A jar of “Madagascar vanilla” is worth more than a pot of “vanilla,” even when they come from the same place. And as Dan Ariely’s book Predictably Irrational points out, consumers are much more likely to pay for a $100 bottle of whisky when there’s a $200 bottle sitting next to it.
Despite the subjectivity and variability in value, there are still universal constants in what creates value. A 2016 issue of the Harvard Business Review isolated 30 different elements of value. The following are key highlights to get you started on understanding your customers better.
The Elements of Value
The elements of value fall into four different categories. Arranged in a pyramid, they align with Maslow’s hierarchy of needs, a concept first spelled out by Abraham Maslow in 1943.
Maslow’s pyramid groups human desire into a hierarchy, with basic needs like food and shelter at the bottom and more abstract needs like love and self-confidence at the top. Maslow’s reasoning is that while all people strive for the needs at the top of the pyramid, they cannot achieve them without first addressing needs at the bottom. Those who don’t know where their next meal is coming from are not currently concerned with self-actualization.
HBR’s pyramid of the elements of value takes a similar approach:
At the top are abstract values like self-transcendence, while the bottom consists of functional elements of value like reduced cost, quality, and organization.
The Hierarchy of Value
The needs at the top of the pyramid are reliant on the ones at the bottom. For your products to appeal to the emotional or life-changing needs of a customer, it must also deliver on one or several of the needs in the sections below.
For example, imagine a health product like Fitbit. It offers motivation by reminding customers to get up from their desks and walk around. It offers hope, inspiring wearers to regain the physical fitness they miss from their youth. It also focuses on the wellness aspect of the product, allowing you to track exercise, calories, water intake, sleep, and even menstrual health to keep a better tab on your body.
But to be successful, it must also deliver on the basic values that consumers hold dear. If the product is unreliable, low-quality, ugly, too expensive, or too difficult to use, customers will not consider the higher values on the pyramid.
Building From the Ground Up
Like the great pyramids, to build a successful product strategy you must start at the bottom and work your way up. You cannot successfully appeal to the values in the higher tier without addressing the lower tiers first. Conversely, you can assess your product’s proficiency in the lower tiers to determine whether you’re ready to pursue the next tier up.
Coca-Cola is a perfect example of this. For decades, the quality and sensory appeal of Coca-Cola have been unassailable. In recent years, Coke has started to move up the pyramid, associating Coke with fun and entertainment, self-reward, and nostalgia. Their marketing even bills the product as contributing to a sense of affiliation and belonging, raising it to the level of a “life-changing” product rather than simply a functional or emotional one. Coke’s success in meeting one or more of the fundamental values enabled them to move up the pyramid and build an even stronger brand affinity.
Differences in Value
It’s important to note that this hierarchy will vary slightly depending on your customer base, your industry, and your specific product. As HBR dug deeper into their data, they discovered that what customers value most can be significantly different from industry to industry. In the food and beverage industry, aesthetics and sensory appeal ranked highly. In the auto insurance industry, reduced anxiety and reduced cost were much more important.
You should also attempt to read between the lines when your customers tell you what’s important to them. When a customer says that a bank is “convenient,” they mean that it saves them time and hassle. When they say that a piece of CRM software is “convenient,” they mean that it updates automatically and integrates well with other software.
To hit the right values for your customers, you need to know what those values mean.
Creating Value for Your Customers
HBR partnered with Research Now, a consumer research firm, to establish whether the elements of value outlined above can contribute to a company’s success. They surveyed 10,000 people about their impressions of 50 U.S. companies, asking each respondent to rank the companies on each element of value on a scale from 0-10.
What they found was a direct correlation between values and the perceived impression of each company. To quote HBR:
Companies with high scores (defined as an 8 or above) on four or more elements from at least 50% of respondents—such as Apple, Samsung, USAA, TOMS, and Amazon—had, on average, three times the NPS of companies with just one high score, and 20 times the NPS of companies with none. More is clearly better—although it’s obviously unrealistic to try to inject all 30 elements into a product or a service. Even a consumer powerhouse like Apple, one of the best performers we studied, scored high on only 11 of the 30 elements.
Your company can’t be good at everything. When you decide which elements of value to focus on in your products and services, consider what you’re already good at and build from there.
Adapt your messaging to reflect the values that you prioritize. Some companies focus on one element of value to differentiate themselves from the competition, like Volvo emphasizing safety above all other priorities. Others choose to branch into new areas of value to create a distinction — Apple chose to make laptops that were beautiful status symbols when other manufacturers simply wanted to make laptops that were functional.
Don’t immediately resort to changes in pricing. It’s been common knowledge for years that reducing the price of a product will increase demand, but pricing also recalibrates the way your customers perceive value. Any discussion of a chance in pricing should include a conversation about how values will be affected.
Take your customer segments into consideration when emphasizing values in your messaging. Assuming you’ve already created buyer personas and corresponding segments in your customer database, think about which segments are likely to prioritize which values. Some people might buy your product because it’s the most compatible with the software they already use, while others might care only about price. Tailoring your message to each segment will go a long way toward bringing in extra value.
The Bottom Line
Marketing is a constant search to understand how your customers think — the elements they prioritize, the values that appeal to them, and the products they’re willing to pay for. You may never be able to fully map out their every desire, but a value-based approach can help you create a lasting connection with your customers that creates long-lasting loyalty and brand advocates.