Unpacking product value
Insight #10: Putting functional and empathic value on equal grounds to create more valuable products
Product value is a big topic for any company. Every business wants to know if the product is a hit or a miss in addressing customer needs to improve its chance for success. This initial validation leads to another important question - how good is your product pricing strategy for maximizing the return on investment? Because, your product remains relevant when you continuously iterate on the two to provide a win-win proposition.
The challenge with product value is that it is an external metric that depends on customer use and engagement but is created internally during the product development process. The product value is an interesting venture, and to pass the ultimate test, you must look at the concept of value more holistically:
Who are you really designing for?
What are the true costs to your customers and your business?
What is the lifespan of a benefit?
Product value isn't a fixed but a fluid concept that can and will change over time. It depends on the market conditions and the evolving customer context and purpose. Therefore, you must continuously iterate to find the best product/market fit. That's where the real challenge resides - to design for a sustainable impact.
Product value is subjective. It can take time to pin it down and understand how customers assign it. The perceived value of the product as imagined may be very different from its real value. The cost only sometimes equals money, especially when it involves time, attention, social ties, opportunities, or well-being. It is important to extract insights to map customer motivation and validate the main product attributes.
Product value is not one thing but an umbrella of different elements that customers find valuable. Not all value is the same, and according to Bain, it is useful to consider and prioritize values based on the four levels of impact they achieve:
Functional value (1st level) fulfills the user's expectation of providing greater benefits than the price (quality, simplicity, saving cost and time, variety, information, etc.).
Emotional value (2nd level) is determined by the user perception when comparing two competing products (attractive, fun/entertainment, design/aesthetics, wellness, access, etc.).
Life-changing value (3rd level) relates to the spectrum of individual experiences (belonging, motivation, hope).
Social value (4th level) captures the broader impact of the product on a community, local, or even a global level (self-transcendence).
The importance of creating impact makes product design a very competitive space, requiring critical thinking, empathy, and a design mindset to holistically uncover customer needs and value. Value is volatile but intrinsic to how customers assess experiences. The hard work begins once you discover the functional benefits that are tangible and easy to grasp. After that, you enter an ambiguous and fast-moving space, but that's where the real opportunity to unlock value resides. And the better the story that ties together the functional, emotional, life-changing, and social values, the more desired the product and the more fulfilling the experiences are.
There are three main insights to keep in mind as you enter and navigate uncharted territories in building more relevant products:
1/ Commodifying value is the beginning of the end for product value.
Companies often invest in new tech to provide value to users. Some innovations pay off, while others turn into billion-dollar expensive discoveries that reveal value to reside elsewhere. The latest lesson comes from Alexa, the virtual AI assistant from Amazon.
Amazon's strategy has long been to lock consumers in its ecosystem by offering products for every aspect of life and facilitating everyday tasks. In 2014, the giant envisioned that users would benefit from ambient intelligence to anticipate and automate needs via voice commands. The answer was to build a conversational AI for the connected home experience. Amazon thought it could commodify AI as it did online shopping.
But the response was different. AI was not ready to become a commodity because its value must first become recognizable in people's eyes. Consumers didn't find the tech valuable, and the developers didn't build apps to enhance the experience. Besides, the functional product values (technical accuracy, privacy, cost) were weak. And the emotional (reduced anxiety) and life-changing (motivation) values were, at best, questionable.
2/ Blind spots in the functional values are a recipe for disaster
The EU Commission is on a mission to become relevant to young people (18-to-35 old) who are currently not politically engaged. And it has a valid reason: under its Global Gateway initiative, it plans to spend €300 billion for building new infrastructure in developing countries by 2027.
So how did they want to connect to the youth? If you followed the campaign on social media, you already know they opted for an event in the Metaverse. The Commission's foreign aid department spent €387,000 for a metaverse where one can explore Global Gateway through a series of hero stories in a virtual environment. The problem - only five people showed up at the Metaverse party on 29 Nov 2022. The blunt truth, as reported, is that "avatars dancing to house music on a tropical island doesn't draw a crowd." But there is more to that. Generally, making something useful is a safer bet than making it "cool."
Value creation always starts with functional value. If it is dismissed, there is no point in adding other layers of value, thinking it will compensate for it because it won't. The likely scenario is that you will end up at the party alone.
3/ What you measure influences the span of the product value
Television was once a captivating medium. It was considered the ultimate means to reach millions and drive social change. There are many reasons for its decline in popularity and influence. But one thing that stands out is the KPI that still matters most: viewership. Success is if somebody watches the content once. The content is there to simplify reality and promote a certain viewpoint. It is not created to be consumed multiple times or to represent the ambiguity and complexity of the world and the human experience. In hindsight, the wrong metric leads the way toward the doom of TV.
In their pursuit to improve efficiency, companies are becoming very data-driven, putting in place hard KPIs to track performance and gather customer feedback. This approach works to a point, but you should uphold the power of empathic value and its role in the value-creation process. When you do, you risk stifling creativity and innovation, dismissing the empathic value during decision-making. The stakes are high and will affect the product success.
Value creation requires a holistic approach to customer needs, putting a functional and empathic value on equal grounds. The word "holistically" here means something else, not the usual.
"Thinking holistically means gauging what you know in light of what you don't yet understand. Ultimately, thinking holistically is valuing holistically."
If we allow it, there is room for targeted creativity to explore new value spaces and design more relevant products. You begin by creating possibilities and continue to pursue them until the future takes shape. Strategic design allows everyone to mold and contribute without fearing the loss of other ways things "could have been."
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