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What is Product Value?
Product value describes the benefits a customer gets from using your product. It’s a subjective concept that varies from person to person and depends on their specific needs, preferences, and expectations. In simple terms, it’s what makes your product desirable and worth purchasing.
To fully understand product value, you have to know the difference between comparative and absolute value and the difference between real and perceived value.
- Comparative value is how well your product meets customer needs compared to its direct competitors.
- Absolute value refers to how effectively it solves a customer’s problem or satisfies their needs, regardless of competition.
- Perceived value is the customer’s subjective assessment of your product’s worth, based on their perception of its features and benefits and your branding, marketing, and reputation.
- Real value is the objective worth of your product, taking into account factors like production cost, materials, and functionality.
You’ll have to consider each measurement when positioning and differentiating your product. If your product’s absolute value is high, but its comparative value is low, you’re in a competitive market with similar products that offer a better value proposition. If your product’s comparative value is high, you’re in a unique position with few direct competitors.
Although exact product value varies from one customer to the next, certain product benefits and use cases generally increase the value of your product for most customers. There’s no way to make everyone value your product the same, so your goal as a business should be to offer the value that satisfies the majority of your target market at a price they can agree is fair.
- Product-market fit
- Product value proposition
- Product value statement
Importance of Product Value in Customer Acquisition and Retention
You can’t market or sell something you haven’t built. Product strategy comes first.
This foundational principle underscores the significance of product value in both new customer acquisition and long-term customer retention.
To attract new customers, you need to have a product that offers superior value compared to your competitors. Through effective marketing and sales strategies, you can communicate the value of your product to potential customers and convince them to choose it over alternative options.
This is where understanding your target audience and their needs becomes crucial. The more you know about your customers, the better you can tailor your product to meet their specific demands and provide value they can’t find elsewhere.
Once you’ve acquired a customer, you need to continuously deliver the same value. Satisfied customers who see the expected benefits from your product are more likely to stay loyal and become advocates, leading to increased retention rates. On the contrary, a product that fails to deliver value or is overshadowed by competitors risks losing customers and causing damage to your brand reputation.
Defining Product Value
How exactly you’ll define your product’s value will depend on…
- what it is
- what it’s competing with
- how others feel about it
- whether you’re using a B2B or B2C model
Here’s a general breakdown of how to define different aspects of product value:
Monetary value is the price of your product relative to what customers are willing to pay for it. A few factors impact this:
- Price sensitivity of your target market
- What customers are currently paying for similar products
- How easily they can access those alternatives
In most cases, monetary value is the primary factor in a customer’s decision-making process. If the price outweighs its benefits, they’re less likely to make a purchase.
Monetary value is also the ultimate equalizer. If someone can’t afford your product or is simply unwilling to pay the price, no amount of other value propositions will convince them to buy.
Functional value pertains to your product’s core features and capabilities that directly address a customer’s pain points. This type of value is important because it determines whether your product is actually useful and delivers on its promises.
Here are some factors that contribute to functional value:
- Features and capabilities
- User interface
- Ease of use
- Integration capabilities
- Aesthetics and design
Functional value is usually a combination of multiple factors, and it can differ from customer to customer. Industry, demographics, and personal preferences all play a role in how someone perceives the functional value of your product.
Social value is the perceived sense of belonging or social status that comes with owning and using a particular product. This type of value may not seem as significant, but it plays a crucial role in customer behavior.
Here’s how social value can influence your customers:
- Brand reputation and image
- Social proof (e.g., reviews, testimonials)
- Emotional connection to the brand
- Association with influencers or trendsetters
For some customers, social value can be the deciding factor in choosing your product over a competitor’s. When potential customers know your product can help them connect with others or improve their social status, they’re more likely to see the value in it.
In addition to how being associated with a product impacts them, prospective customers make purchase decisions because they want to feel a certain way. Psychological value refers to the emotional benefits a product can provide.
For the most part, people want to feel one of the following:
Psychological value is often an extension of social value. When a product makes someone feel good or helps them overcome negative emotions, it can drive their decision to purchase.
In the case of B2B products, companies approach psychological value a bit differently. It’s up to the sales rep or account manager to communicate with their prospects in a way that makes them feel like they can trust and rely on the product to achieve their goals.
Tangible vs. Intangible Value
Once you’ve explored the above areas, you’ll want to categorize the tangible and intangible value of your product.
- Tangible value refers to the quantifiable benefits, such as cost savings or increased efficiency.
- Intangible value is more subjective and can include factors like customer experience, brand image, and emotional appeal.
When customers evaluate your product against others, they’ll consider how important its monetary value is compared to its functional, social, and psychological value. Since money is ultimately coming out of their pockets to purchase from you, you need to make sure your product delivers value in these areas and justifies the price point.
Product Value Proposition
After organizing your product’s value elements, you can create a clear and compelling value proposition that effectively communicates the benefits to potential customers.
To do this, you have to consider:
- Your ideal customer profile (ICP)
- Their specific needs and pain points
- How your product solves those pain points
- What makes your product unique
Map out your brand, product, and customer attributes to create a value proposition that speaks directly to the people who would benefit the most from buying your product (and have the purchasing power to do so).
Ways to Increase Product Value
Shift Value Proposition to Reflect Customer Needs
The issue might not be the product itself, just the messaging. This is often the case when companies are still trying to find their product-market fit — they know who the product helps, they just don’t know what’s the most important value to share with them.
It’s your job to communicate value to customers who, otherwise, know absolutely nothing about your product. If your product value is lacking because you can’t communicate its value properly, you’ll know because your sales conversions will be low.
To shift your value proposition:
- Talk to your customers. Conduct customer interviews to get their feedback on what they find most valuable about your product.
- Identify patterns. Look for common themes in your customer feedback and group them into categories, such as monetary, functional, social, and psychological value.
- Prioritize the most important values. Based on feedback and what you know about your target market, determine which value proposition will resonate best with them.
You don’t need to reinvent the wheel, here. It’s literally as simple as taking the keywords and pain points your customers say over and over again and putting your solution front and center with your proposition.
Change Your Target Market
If you have a decent conversion rate and your sales motion is running smoothly, you know the issue isn’t communicating the value. If your retention rate is low and most customers drop off shortly after onboarding, your product might not be solving the right problem for the market you’re targeting.
Here are some common scenarios where this could apply:
- Your ICP is too broad, and your marketing messaging needs to get more specific.
- You’re targeting too many buyer personas at once.
- You’re going after a market segment that needs a different type of solution or level of support.
In these cases, consider the customers who have stayed with your product.
- What do they have in common?
- What use cases do they share?
- What specific features are they most excited about?
Answering these questions will help you narrow down your customer segments and zero in on the customer attributes that should actually be the basis of your targeting.
Conduct a Competitive Analysis
You are not your competitors, but comparing your product to theirs will help you understand where in the market you fit in. Certain customers will be a better for for a competitor, and the goal of communicating product value should be to weed out as much of those with your messaging and product features as possible.
- Compare features and functionalities. Look at what your competitors offer in terms of tangible value, such as specific features or capabilities.
- Compare messaging. Look at your competitors’ messaging on their landing pages, email campaigns, paid ads, and social media. Consider what makes your product different.
- Analyze the customer experience. Consider how easy it is for customers to interact with your product compared to competitors, including onboarding, training, and customer support.
- Understand your product differentiation. Map out your entire competitive market and visually display how closely related each competitor is to you and what they’re competing with you for.
If you’re already having success with conversions and retention, your next step is to go back to product development.
When building out your product, there are a few different routes you could take:
- Partner integrations. Partnering with other apps helps you offer more features to customers without building additional infrastructure. It also helps you and the partner secure additional customers (i.e., from each other).
- Build customizability into the product. To attract enterprise customers, you can start offering bespoke development/customization services that offer a higher level of control over how the product works.
- Optimize for mobile. Depending on your target audience and use case, this may or longer be relevant to you, but it’s worth considering investing in a separate app or optimizing your web platform for ease of use on smartphones.
- Cover complimentary business functions. For example, a SaaS platform for business banking might build financial modeling, payroll, or accounting software into their product next.
- Create microservices. If you don’t want to build on your current product, you can offer each additional function as a microservice. For example, not all DealHub customers need CPQ and billing software. But we added billing as a separate product to cater to a wider market (those who need CPQ/billing and those who just need billing).
Before adding a specific function, get your product managers together with your sales, marketing, and exec team to discuss the reasons behind a potential addition to your product.
Change Pricing Strategy
Price optimization is an inexact science, and there’s no one-size-fits-all solution. However, there are a few options you could try to increase your product value:
- Bundle products/features for higher AOV. The more of your products they use, the simpler their overall workflow will be (since it’s in the same UI). Plus, that’s one less function they’re paying a competitor for.
- Dynamic pricing. Use a sliding scale to offer different prices based on usage and volume. Use AI to optimize this and automate your sales team’s workload.
- Tiered pricing. Similar to bundling, offering different levels of service or functionality at different price points can help you appeal to a wider range of customers, who might not get the most value out of one price tier.
Improve the Customer Experience
To amplify product value, you have to combine functionality with an exceptional customer experience. That’s what fosters a positive association with your brand, reinforcing the product’s value every step of the way.
First, map out the customer journey and identify points of friction. A few places to look include:
- The sales process
- Customer onboarding and training
- Product usability
- Customer support interactions
- Subscription renewal
- Marketing communications
Improving any of these areas can enhance the overall customer experience and increase perceived value. Additionally, consider implementing a customer feedback system to gather insights, suggestions, and feature requests from your customers. This not only shows that you value their input but also helps identify areas for improvement in your product and messaging.
Increase Brand Loyalty
Emotional connections with your brand drive long-term positive customer perception. With that comes loyalty.
- Create a community around your product.
- Host webinars.
- Build a referral program
- Arrange member events
- Set up co-marketing and co-selling initiatives with partners
- Deliver top-notch customer service
In addition to the above, gauge customer advocacy levels using surveys, social media monitoring, and your net promoter score (NPS). This will help you understand how your customers perceive your brand and product value. And with that understanding, you can continue to improve and cultivate customer loyalty.
The Relationship Between Product Value and Price
Pricing strategy is vital. But it’s the value, not the price, that ultimately tips the scale. When customers weigh the cost against the benefits, a product that delivers superior value at a reasonable price is more likely to win their business. It’s about finding that sweet spot where the price reflects the product’s worth in solving customer challenges and enhancing business operations.
Remember, product value is dynamic and subjective. It can (and should) evolve as your business grows and adapts to changing market demands. Continuously assess and enhance your product value using the strategies outlined in this article, and you’ll see a positive impact on customer perception, retention, and revenue.
How to Increase Market Share with Product Value
In the B2B SaaS world, you wouldn’t necessarily want to create a limited-time offer for your product too often. Since you’re making most of your money from recurring revenue, retention is the most important metric. You won’t retain as many customers once they realize your product is actually a lot more expensive.
Your goal instead should be to create urgency in the sales cycle — getting contracts signed, reminding prospects of the financial cost of waiting any longer, anything required to move deals across the finish line. The average B2B sales cycle lasts 104 days. The longer it takes, the less chance you have of closing.
Share Social Proof
Social proof comes in many forms:
- Case studies
- Customer referrals
- Endorsements from influencers and industry experts
Consider using a customer advocacy platform to centralize your customer success stories and leverage them in the sales and marketing processes.
Use Solution Selling
A solution selling approach like MEDDIC or the SPICED framework helps you focus on your prospect’s needs before promoting your product. As you uncover a prospect’s challenges or goals, demonstrate how your product can solve their pain points.
Once it’s time to deliver a sales demo, you’ll share the exact benefits that will take them where they want to go. This will help them see the value in your product earlier on and set your sales team up to handle objections more effectively.
People Also Ask
What is the difference between product price and product value?
Product price is the cost that a customer pays to purchase a product. Product value is the perceived worth or benefit that a customer receives from using the product. While price is a fixed amount, value varies depending on individual perception and needs.
What is the real value of a product?
The real value of a product is its objective worth, taking into consideration factors such as quality, functionality, value-add, and cost. Marketing, branding, and biases influence perceived value, but the real value is determined by how well a product completes specific business functions and adds value to the customer’s operations.