What is value?

Value is often considered “how much someone will pay.” This is structured atop a neoclassical view of economics: there’s an equilibrium between the cost of a product and the amount someone is willing to pay for it, and consumers go out of their way to maximize around and with that equilibrium.

But cost is a poor barometer for value for a few reasons. First, it suggests that product value is static and knowable ahead of time. It assumes that at the point we pay for something, we can predict how we’ll feel about our product experiences in the future. But that’s almost never true, and it’s particularly false with digital products because our interactions with them extend over time. Our “first use” experience contributes a very different amount of value than our experience after months of use. In the context of data-driven products, there’s almost no value at first, because it’s an empty storefront without your content.

Cost is also a poor assessment for value because it suggests that customers are rational and introspective beings, making conscious tradeoffs across a large set of alternative product choices – that if the price isn’t right, we don’t buy. But we just need to go to the grocery store when we’re hungry to see this assumption fall apart – we’ll buy whatever is in front of us, for whatever price, because it all looks so good. Value is relative based on circumstances and contexts.

Another perspective on value focuses on quantity of features and capabilities. This view suggests that the more a product does, the more value it has. Car make, model, and trim packages exemplify this perspective. Upgrading from the $18,000 Ford Focus S to the $21,000 Ford Focus SEL gives a customer turn signal indicators in the mirrors, fog lamps, an illuminated visor vanity mirror, power windows in the back, cruise control, ambient lighting, and so-on. Upgrading from the SEL to the $40,000 RS gives the customer blue stitching on the steering wheel, a removable rear package tray, a unique leather-wrapped shift knob, and aluminum pedals. A feature-based approach to value implies that all of those extras in the second model are worth $3000 in value, the extras in the third are worth another $19,000, and the customer can choose to have each bit of incremental value or not.

We can see this model consistently in SAAS applications, where customers can choose between a Good, Better, and Best pricing model. The archetypical columns with checkboxes shows that as you increase spending, you “get more stuff.”

As this idea was championed by management consultants, efforts to measure value on a feature level became more and more analytical. Consider how it’s been subsequently described: “Maintaining customer satisfaction is the key to retaining customers and improving profitability. To satisfy customers, most firms use a multi-attribute approach for isolating the determinants of overall satisfaction”. That is, firms first identify various attributes that comprise a product or service, and then try to understand how performance on each attribute impacts overall satisfaction. To ascertain how attribute-level performance impacts overall satisfaction, firms collect data from a single cross-section of consumers and then use regression analysis to determine attribute weights. (pdf)

This overly analytical approach is reminiscent of Robin Williams in Dead Poets Society, as his students begin to learn that the value of a poem can be identified by plotting perfection and importance on a scale, and then calculating the area of the plot to determine a poem’s greatness. As Robin Williams’ character Keating describes, “Excrement… We’re not laying pipe. We’re talking about poetry… Now, I want you to rip out that page.”

Like calculating the worth of a poem, a feature approach to product-value means breaking down a product into pieces, and judging the pieces individually. But we don’t experience products in pieces, and we don’t engage with a product, service, or company in discrete slices of functionality: I don’t “use” the blue steering wheel stitching on the Focus RS in isolation from “using” the car itself.

Another view of value focuses on the idea of “what problem someone needs to solve.” This perspective identifies that value is related to the things people can do that they couldn’t do before. The now-common lean startup approach to product management emphasizes product/market fit, connecting a person who has a need with a product that fills the need, and iterating on the product capabilities until it perfectly matches. This is about a connection between what problem the product solves, and what problems a person has.

Clay Christianson’s Jobs To Be Done framework echoes this focus on problem solving; as he describes, “Successful innovations help consumers to solve problems—to make the progress they need to, while addressing any anxieties or inertia that might be holding them back…” (www) There’s quite a debate in the “Jobs To Be Done Community” about the relationships between task jobs and emotional jobs, but in both cases, the focus is on what a person wants – what they want to do, or what they want to feel. (www)

Author Peter Drucker identified “satisfaction” as the missing piece of the value story. In 1993, he described that “The final question needed in order to come to grips with business purpose and business mission is: ‘What is value to the customer?’ It may be the most important question. Yet it is the one least often asked. One reason is that managers are quite sure that they know the answer. Value is what they, in their business, define as quality. But this is almost always the wrong definition. The customer never buys a product. By definition the customer buys the satisfaction of a want. He buys value.” Designers have learned to observe and design to focus on the emotions of these experiences, and in a model focused on emotion, a key value component is satisfaction. This is a latent response to an experience, latent because we often don’t know what it will take to provide satisfaction, and we often can’t identify when we’ve received it.

As design becomes more inextricably tied to the success of the experiences people have, we need a more refined and nuanced view of what it means for someone to find benefit in those experiences. Life is not a series of problems to be solved, features to use, or rational purchasing decisions. Drucker is closest to defining a designerly goal for a product when he describes satisfaction, because satisfaction is an emotion. When we buy products, we think about how they’ll make us look different or better than other people. We think about how they’ll give our family moments of growth. We think about how they’ll craft a certain type of lifestyle. And, even if we aren’t aware of it, we buy things because the things we buy will shape the way we think about ourselves.

Many people that make consumer products and service don’t want to be a part of identity building, particularly when it feels “gross” – that people are buying the things we make to showoff, or to indicate wealth, or to create class distinctions based on purchasing ability. But these aspirations are real. When we look at purchasing from the lens of satisfaction and emotion rather than problem solving, we land squarely in the space of culture. To our car example: people often buy 28″ Lexani car wheels, for $2,450 apiece, because it means something about their affluence, and it means something to them about how they are perceived. People often buy Subaru because they feel it reflects their gender identity (www). People often buy a Fiat because they feel it reflects their perspective on the environment. These are real and expensive presentations of value, and they have nothing to do with utility or jobs that need to be done. They are status symbols, and are legitimate forms of self-expression, enabled by design.

Design value is a new idea, and we’re still learning what it means. It’s all of these things described here: it’s cost, features, functions, problem solving, and self-expression. Without a framework for creating value in the context of these parameters, we’re shooting in the dark. It’s time for a multi-faceted strategy of strategy: a way to understand value from a multitude of perspectives, and to offer products and services that support emotions, not just utility, across the value chain.

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