Discoveries

Volume 9, 
#1, 
January, 2011

Tags: 

Customer Value From 30,000 Feet
How tasty pizza and smelly diesel figure into your work as a product developer

by 

Sheila Mello

We talk a lot about "creating value for the customer" when designing and developing products. It occurred to me recently that we don't often step back and ask what makes a product or service valuable in the first place? Although the scope of this question is enormous and much falls outside of the area of R&D, the answers have interesting implications for product developers.

First, this is one of those situations in which, no matter what you believe about "objective reality," the only reality that matters is the reality perceived by the customer. Your pizza might be the tastiest or your diesel car the quietest and cleanest, but if potential customers recall only the "cardboard" taste of Domino's pizza before its bold makeover or the noisy, smelly diesel cars of the 1970s, you'll have a hard time persuading people to part with their money.

While a customer's perceptions are highly influenced by the development of the brand, developers are not off the hook. After all, even if a company's marketing department does nothing to shape the brand, a brand will emerge based on customer experiences with the product. To be successful in the long run, a product must be able to deliver on the promises of the brand perception. The Domino's pizza relaunch, detailed in the December 2010 issue of PDMA's Visions magazine, is a case in point. The company focused on changing its pizza recipe so the reality of eating pizza would match the brand promise of being delicious.

Second, when you begin to break down what goes into a customer's perception of value, you realize its incredible complexity. A great step-by-step exposition of this appears on the site classyllama.com. Again, much of this falls under the umbrella of marketing and sales, but the research that informs the process can bring insights to product development as well. One idea of note, echoed in a research paper about mobile advertising, is that customers give something up in order to gain value. In some cases it's money; in other cases it's time or convenience. There is a value equation that represents the difference between benefits accruing and investment made. If the benefits outweigh the investment, value results. If not, you have negative value--or worthlessness.

Another consideration is the difference between value and need. Can something fulfill a need without being perceived as valuable? The answer is yes, as we have learned from Kano analysis. "Satisfiers" are those attributes to which a customer responds "I'd expect it to be that way" when you ask about the attribute's presence and respond "It must not be that way" to the attribute's absence. The expectation that the attribute will be there implies that the customer perceives no additional value to having it. (Some examples include cup holders in cars, strong cellular signals for mobile phones, and fluoride in toothpaste.)

Three factors that influence how a customer perceives value are:

  1. Scarcity: An age-old characteristic that motivates entire economies and markets--the less there is of something, the more people are willing to pay/do/sacrifice to get it.
  2. Degree of certainty: There is value to eliminating uncertainty. Some of this value relates directly to the product (will it function as promised?) and some extends beyond the product to the customer's perception of the company even the industry from which the product comes. People will pay for peace of mind.
  3. Fulfillment of a want/need: This is the key for product developers; it's why research on customer needs must underlie all value-based product creation.

The complexity of the perception of value explains why it is virtually impossible to unearth what a customer values by simply asking straight out. Few customers have the insight or could take the time to unravel the entire mental and emotional process they go through when evaluating a product or service. That's why methods like one-on-one in-depth interviews, direct observation, ethnographic research, and other techniques that allow a development team to absorb and understand the environment in which the customer operates are so valuable--yes, valuable--to the people creating and selling products and services. With this data in hand, you can begin to tease apart the individual threads that weave together to create a perception in the customer's mind, and eventually understand how your product can influence those perceptions.

What's your experience with the bigger picture of customer value? E-mail to let us know.

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