When considering a purchase, consumers weigh the perceived value of a product or service against its price. How can companies evaluate the value side of the equation better? Eric Almquist, a partner in Bain's Customer Strategy & Marketing practice, discusses 30 elements of value that are at work in the marketplace and how companies that deliver more of these elements have higher growth and more customer advocacy.
Read the transcript below.
ERIC ALMQUIST: When consumers evaluate a product or service, they are typically weighing the perceived value of that product or service vs. the asking price. Managers are actually much more comfortable with the price side of that equation than they are with the value side of that equation. And the reason is that value is psychological, amorphous and complex.
To help we have actually identified 30 elements of value which are at work in the marketplace today. These elements range from functional, to emotional, to life-changing elements, all the way up to elements of value that deliver social impact that might be important to consumers. Some of those elements of value are more inwardly facing. For example, it might save people time, it might reduce their anxiety, might give them hope.
Some are more outwardly facing, having to do with how consumers navigate the outside world. It might connect them to other people. It might give them a sense of belonging, and so forth. All of this traces back in its original form to Abraham Maslow's hierarchy of needs. But unlike the hierarchy of needs, we've made this much more business-specific. There's much more business content.
We've invested heavily in researching this topic. We've done over 10,000 interviews on 50-plus companies here in the US, looking at how consumers view those companies on the elements. And a couple of patterns are emerging. One is, more elements are better. If you can deliver more elements of value, you will have higher growth, and higher advocacy, as measured through NPS.
And secondly, we're seeing that digital players are doing better than their brick-and-mortar counterparts, because they are delivering more elements of value, particularly the functional ones. Amazon is crushing eight of the elements of value, almost all of which are functional, for example.
We see companies using this in a couple ways. First of all, they're trying to close gaps with competitors. There are elements of value where they may not be doing that well, and they want to close those gaps to competitors. But even more importantly, they are trying to develop new elements of value to deliver through either their existing products and services, or, even better, through new products and services with multiple elements of value.
Read more in the Harvard Business Review: The Elements of Value
Webinar: The Elements of Value—Measuring What Consumers Really Want