Consumer Value: Know What Your Customers Really Want
Learning what consumers truly value is a real challenge for every company. As the competition in the market gets tougher, the standards of consumers also get higher.
Consumer value can be seen from the perspective of the customer and the business. From the customer perspective, this refers to the value of a product or a service that the customer is willing to pay for what they get in return, regardless of the price. From a business perspective, consumer value refers to the consumer’s worth to the company if that person makes a purchase higher than the cost of making the product.
Understanding the “elements of value” can help companies to address what consumers of modern society want.
The Elements of Value
What are the “elements of value"?
To better understand why consumers buy and what they really want, researchers from Bain & Company developed two different Value Pyramids – one for the business (B2B) and one for consumers (B2C).
Let’s focus on the B2C (Business-to-Consumer) Value Pyramid. This type of Value Pyramid identifies the 30 Elements of Value for consumers and is grouped into four categories: functional, emotional, life-changing and social-impact elements.
- Functional elements – at the base of the pyramid are the elements that demonstrate what a product can do for the consumer. The functional level consists of 14 elements which include ‘saves time’, ‘makes money’, ‘simplifies’, ‘reduces risks’, ‘efforts’, and costs as well as ‘quality’ and ‘informs’.
- Emotional elements – the next level shows the product’s emotional effect on the consumer. On this level are 10 elements which include ‘reduces anxiety’, ‘rewards me’, ‘nostalgia’, ‘wellness, ‘fun/entertainment’ and ‘provides access’.
- Life-changing elements – the third level exhibits elements on how a product or service change’s consumer’s life. The level has only five elements and these are ‘provides hope’, ‘self-actualization’, ‘motivation’, ‘heirloom’, and ‘affiliation/belonging’.
- Social-impact elements – the top level of the pyramid has one element called self-transcendence, which indicates how a product or service brings value to society.
Infographic source: Harvard Business Review
Researchers indicated that the 30 Elements of Value is an extension to Maslow’s Hierarchy of Needs. Abraham Maslow was an American psychologist who theorised that people have five categories of needs.
From the bottom of the pyramid to the top, the needs are: physiological, safety, love and belonging, esteem and self-actualization. According to Maslow, we can only achieve self-actualization once we meet the needs at the lower level of the pyramid.
Resembling Maslow’s Hierarchy of Needs, The Value of Pyramid also requires meeting at least some elements at the lower level in order for a company to be successful in delivering the elements on the top level.
As explained by Jamie Cleghorn, one of the co-authors of the research, “The elements of value at the base are the more common objective criteria we’re all familiar with. It is the higher-level, subjective elements that companies often fail to pay enough attention to.”
The Elements of Value is critical for the company’s business performance and customer satisfaction. When Bain & Company and Research Now (an online sampling company) conducted a survey for over 10,000 U.S. consumers about their perceptions of roughly 50 U.S.-based companies, they found that companies that got a high score on four or more value elements had more loyal customers and better revenue growth than companies with just one high score.
Researchers identified the top five elements that consumers value from 10 industries. Here, we pick three industries as a sample:
- Apparel retail:
- Avoids hassles
- Saves time
- Consumer Banking:
- Provides access
- Avoids hassles
- Reduces anxiety
- Reduces effort
As you can observe, quality is the most important element for consumers. Researchers stated that after quality, the next critical elements depend on the type of industry.
What Can Your Company Do?
To apply the elements of value to your business, here are some smart actions to take:
- Improve on the elements that form your company’s core value to help you gain competitive advantage and address your customers’ needs better.
- Thoughtfully add elements to expand your value proposition without overhauling your product or services.
- Identify which elements are the most important for your industry and how you can build up those relative to your competitors.
- Understand your customers’ priorities, frustrations, and reasons why they find a service or product inconvenient.
- Use elements to boost or open a new company offering. Once you have identified which elements boost your product’s value, prioritise and focus on the elements you have chosen.
Photo by Felix on rawpixel.com
The elements can help managers creatively add value to their brands, products, and services and thereby gain an edge with consumers—the true arbiters of value. — Jesús Gil Hernández
To increase customer experience and satisfaction, marketers should focus on creating consumer value. This can lead to the improvement of customer loyalty, price, and market share as well as reduction of errors and efficient products/services.
At Life Intelligence Group, we use advanced strategies to help your business grow, and one of these is using Agile methodology to boost your consumer value. Interested to learn more? Visit us today at: https://www.lifeintelligencegroup.com/