Introduction
When you, as a customer, evaluate a certain product, you subconsciously compare the value that particular product provides with the asking price of the product in the market. However, the decision making process isn’t as straightforward as it sounds.
The word “Value” is very subjective in nature. There could be a number of reasons that define a product’s value to a particular customer. It’s not something that cannot be quantified. To bridge this gap, called value, between a customer’s choice to buy the product and the product itself, a number of researchers have invested a good amount of money and time to study the factors that contribute to the decision making process.
This study has resulted in the model that is widely used by a lot of companies to better understand their customers. The technical name given to the model is the Elements of Value Pyramid.
The Elements of Value Pyramid is built around the simple understanding that the amount and nature of value in a particular product or service always lies in the eye of the beholder. It can help companies better understand what exact value about their product makes it so valuable to a certain segment of customers. It could be something that garners a social presence, something that saves time, something that reduces anxiety or even something that could be used as a form of entertainment.
Categories of ‘Values’
There are 30 identified “values” that have been used to make this pyramid after a lot of research. They fall under 4 categories – functional, emotional, life-changing and social impact.
In their research, they don’t accept on its face a consumer’s statement that a certain product attribute is important; instead they explore what underlies that statement. For example, when someone says her bank is “convenient,” its value derives from some combination of the functional elements saves time, avoids hassle, simplifies, and reduces effort.The elements of value approach extends Maslow’s Hierarchy of needs.
Functional
Includes values such as “reduces risk, avoids hassles, reduces effort, revenue generator, quality”. This particular aspect, as the name suggests, focuses more on the functionality of the product/service that the company is trying to sell.
What benefits does this product/service entail to the average customer? A new solution that’s an improvement to the previous models of the product in the market usually offer these values. Higher speeds of the internet at home, better encryption standards for your personal chats, a faster compression application or even something as simple as providing a new desktop icon feature to access the application faster.
The benefits provided by all of these features can be QUANTIFIED. Shorter run time, better memory management, quicker access to the application etc. all help in contributing to the functional values provided by the product/service.
Emotional
Includes values such as “Reduces anxiety, entertainment, nostalgia, therapeutic value”.
This particular section of the pyramid cannot be quantified as such, unlike it’s functional counterpart. This pertains mainly to the “emotions” that a customer experiences that influence their decision making process when they stand face to face with the product.
A number of people tend to hold on to old principles, old values and similarly old memories and thoughts. The look and feel of a product, the aesthetics and design that went into making the product what it is today and even the factor of nostalgia has proven to play a significant role in the decision making process of the customer.
Some people look to buy a certain product merely because it entertains them, a recent survey among the teenagers of today showed that a number of them would be willing to buy a fidget spinner, decades from now, because of the nostalgia and entertainment factor that it provides to them. The emotions that run through any customer’s head, plays a very important role in deciding whether a product/service will be successful in the market.
Life Changing
Includes values such as “Affiliation, Hope, Self Actualization”.
This boils down to an even deeper aspect of a person’s subconscious. More often than not, a product/service sold by a company can be used as a means for someone to explore new things which helps them in ways only understood by them. It becomes a means of motivation for them to pursue something they’ve always wanted to.
Spotify’s initiative to provide an online presence for anyone in the world who wants to get their podcast out to help others out, can be interpreted as a means of self actualization and motivation provided by Spotify that allows the customer to pursue something they’ve always wanted to.
This usually hits the hardest, because there’s very few driving factors that are as effective as self motivation and actualization.
Social Impact
Includes Self Transcendence. The idea that there is a hierarchy of needs has deep roots in psychology (Maslow’s hierarchy of needs).
The higher you go up the pyramid, the more value you’ll find in the elements. So the top-most element (self-transcendence) is the most powerful.
However, don’t be too fixated on those top tiers! It is all about making the world a better place. This factor pertains to those companies which are looking to make changes and movements in the world in the hope of helping others. Companies who donate their profits and services to others for their use usually focus on this factor.
Conclusion
In conclusion, here’s a few points to keep in mind when analysing the values your company offers to its customers.
The more values, the better. A good company focuses on values from all 4 sections of the pyramid. While it’s good to have one particular area where you wish to excel, it’s also advisable to inculcate other factors from the pyramid. The more elements a company delivers, the higher it’s loyalty and revenues soar.
It’s always best to focus your effort into bringing about only those relevant values. A certain pattern of elements for one successful company need not be the recipe for success for another company, especially if they’re focusing on different customer segments.
Always keep a solid base for your functional elements of value. At the end of the day, these are factors which have been mathematically proven to make the lives of the customers easier and better. Only once you have your functionalities in place, it’s advisable to focus on other sectors of the pyramid.
Lastly, make sure you never slack off in your efforts to maintain the quality of your product/service. This is easily one of the toughest tasks that companies have had to do, for a long time now. A number of companies are renowned for decades merely because of their ability to maintain the quality of their products/services.
It’s the basic understanding in philosophy and psychology that the more elements you provide to your customers, the more loyalty you can garner from your customers and thus, help grow your company to the heights you envisioned it’d grow to.
-An article by Ayush Saran, 3rd Year Electrical and Electronics Department.
