November 21, 2013
One of the toughest questions is how to make a product more valuable to the customers. The goal is simple; the more valuable the product is in the eyes of the customer, the more the customer will pay. Product development creates real value since it’s development that puts the bells and whistles into every product. So what’s needed is a development process that is integrated with marketing. Why? Because customers don’t pay for real value, they pay for perceived value and its marketing that’s crafts perceived value.
Old-style Product Differentiaton Process
In a nutshell, development adds the bells and whistles and marketing takes them and creates the perceived value for the customer. The problem is this is a usually a serial process. If the development team hasn’t added true product differentiation that the customer is willing to pay for, marketing is going to have difficulty generating demand and sales won’t be able to convert customers. Even if marketing was involved in the early stages to define the product, the market can change dramatically over the course of the development time, and development can completely miss the mark by the time the product is ready for market.
Simple 5 Steps to Define a More Desirable Product
This process is based upon designing a product to sell at a anticipated price instead of designing a product to see what happens – an experiment of sorts.
Step 1. Customers will always compare your product or service to others in the marketplace. Even if you have a new product, they will compare it to how they are doing it now. Determine the top three contending products.
Step 2. Identify the features in these products. Now here’s the hard part. Try to determine the value of every feature; how much is the current customer willing to pay for that particular feature. The product’s price is the sum total of all the features. Next, determine the priority of the features from the customer’s perspective.
Let’s take a simple example. Consider a home, how much do buyers value every room and every aspect of a room. It seems to me that people place a higher value on the rooms that they spend the most amount of time in. That’s the kitchen, family room, home office, and their bedroom. Home buyers don’t value guest bedrooms, kids’ bedrooms, or formal areas that they only use during holidays as much.
Another example is a tablet computer such as an iPad. An iPad is much less capable then a system unit. Tablets thrive because more than 95% of personal computer users only used their computers to search the Internet, read email, and connect on social networks. The average user didn’t care about whether their personal computer could develop software – so how much more would the average user been willing to pay for this capability – nothing.
Step 3: Now that you know that value of every feature in a competing product, determine how the features of your upcoming product compares. Are your features better or worse than theirs? Now, you have a relative price the customer will be willing to pay for that feature.
Step 4: Integrate this procedure into the development of a new product or creation of a new service. Every time someone suggests adding a new feature, ask how much the customers are willing to pay for it. At the end of the development cycle, sales has to turn those features into revenue. This forces both development and marketing to be thinking about how much value each feature creates for the customer. This process should be done several times over the course of a development activity in order to ensure the most desirable product possible.
Step 5: Think about how to convey the product differentiation in a simple way that is easy for customers to compare to the other contenders. When it comes to marketing and showcasing a product’s outstanding points, a common mistake is to confuse the customer. Proven wisdom says, “a confused customer never buys unless they must”. The customer has to be able to understand how feature compares across products. If they can’t and they must buy then they base their decision on price – and do you really want to compete on price or capabilities of your product/service?
Here’s an example. I was recently doing a competitive analysis on protective eyewear for sports. There are only two types of lens material used. Yet every manufacturer tries to use extra adjectives, extensions, technical descriptions or different brand names to convey this information. No two makers describe the lens material in their eyewear the same way, yet they are the same, purchased from the same material manufacturers. This leaves the customer confused and more than likely, the customer simply disregards this feature in their selection criteria.