How do consumers form their perceived value of a product or service? This is the question that Bain & Company has attempted to answer in a very noteworthy brief published by Harvard Business Review. It opens up a new perspective on perceived customer value, beyond the hackneyed Maslow pyramid. This is the subject of today’s news flash.
According to the Harvard Business Review in which this unique article was published:
“Three decades of experience doing consumer research and observation for corporate clients led the authors—all with Bain & Company—to identify 30, ‘elements of value’.”
“Their model traces its conceptual roots to Abraham Maslow’s “hierarchy of needs” and extends his insights by focusing on people as consumers: describing their behaviour around products and services.”
The beginning of the article points out that companies often focus on price, omitting other factors. This seems like an easy way out, as “raising prices directly increases profits”. That being said, price management involves many different tactics, as the authors emphasise.
A few years ago, Byron Sharp pointed out the propensity of brands to focus on lowering prices through a never-ending chain of promotions, a harmful strategy in his view, as it leads to margin loss.
However, there are many more things on Heaven and Earth than price, to be accounted for behind this notion of product or service value.
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)?
To that end, Bains’s consultants and authors propose a useful infographic. A clearer, dynamic version can be found on their own website.
We can summarise the different components of value as follows:
Through this wee example, we better understand what the perceived value of a product or service is. We can also relate it to the transformative value described by Joe Pine, he who coined the phrase ‘customer experience’, in our video interview.
Elements of perceived customer value vary according to the product or service or the industry concerned. Buying a financial product has an impact not just on you but on your whole family. When you pass over, someone will inherit your savings, hopefully.
This impact is far greater than that of buying a folding bike. Even though I’m sure your faithful Brompton will be handed to someone else in the family, eventually.
And now, the ball’s in your court. All that’s left to do is to use this canvas to build a proper strategy for your products and services. One that is based on perceived customer value rather than sand.
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