What are your values?

Drill-or-holeIt is more than 50 years now since Peter Drucker wrote: ”The customer rarely buys what the company thinks it is selling him”, but I still meet companies that need to be reminded of this fact. Customers don’t buy products; they buy solutions to their problems. It is not the product in itself, but the value it represents that is important to the customer. As marketing guru Ted Levitt put it, “People don’t want quarter-inch drills – they want quarter-inch holes”. If you look at the world through a product lens, you might misunderstand what business you are in.

Product value can be measured in different ways and some people use up to 8 dimensions, but I usually settle for the 3 value types described by Mohanbir Sawhney (2003): functional, economic and emotional value.

Functional value represents the product’s features and functions. This is often what we think of first when it comes to a product’s value, but customers never make their choice only based on functionality. They also have to take into account the economic value of the product, i.e. what the benefits are in terms of time and money invested, and the emotional value, i.e. the psychological benefits they get from buying, using and owning the product.

Features and function have traditionally been the focus for product development and marketing, but in recent years we have seen a shift toward more emotional values. The fast pace of development have made many features rapidly regress from unique selling points to mere hygiene factors and many companies have realized that emotional values are harder to copy and more sustainable.MacBook Pro

Take, as an example, the value proposition of Apple’s MacBook Pro. What Apple highlights are functional values like the high-resolution retina display, performance, battery time and its audio & video capabilities. These are all nice features, but there are other lap-tops out there with similar specs. What really set it apart from the competition are the emotional values, like its design or the experience of buying it and unpacking it. You also get to be part of that cool, urban, creative Mac user clique, instead of being a boring old “PC” person. And, if you look at note-book sales and stock value, there are people out there that seem to be willing to pay for that emotional value.

Knowing your value proposition, and what kind of value you offer, is an important input to your innovation strategy. By knowing what type of value you want to create, you can align your capabilities and focus your innovation work on the right areas.

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