The Elements of Value By ERIC ALMQUIST, JOHN SENIOR, and NICOLAS BLOCH (Harvard Business Review, September 2016) Presentation by Gita Niraula

Value A fair return or equivalent in goods, services or money for something Something intrinsically desirable Value commands the price. Value is psychological, amorphous and complex.

Delivering Value Determine the right combination among the attributes to boost the value Researchers have identified “30 elements of value” which are further classified as: 1.Functional 2.Emotional 3.Life changing 4.Social impact

Breaking the Value Pyramid

Comparison of Value based pyramid with Maslow’s Hierarchy of Needs Social Impact Life Changing Value Emotional Value Functional Value

Growing Revenue Research over 10,000 customers on 50 companies in U.S. rating every element on 0-10 scale, measured through Net Promoter Scale(NPS) Companies that performed well on multiple elements of value would have more loyal customers than the rest. Companies that performed well on multiple areas of value would grow revenue at a faster rate than those that didn’t.

Patterns of Value Some elements do matter more than others: Quality affects customer advocacy more than others After quality customer prefer other elements as per the product E.g.: Grocery (quality, variety, sensory appeal, etc.) Smart Phone (quality, reduces effort, variety, etc.) Consumers perceive digital firms as offering more value: Online businesses (digital firms) excel on “saves time” and “avoid hassles” E.g.: Netflix outperformed traditional TV service providers with scores three times as high on reduces cost, therapeutic value, and nostalgia

Cont. Brick-and-mortar businesses can still win on certain elements: Companies scoring high on emotional elements tend to have higher NPS (net promoter score), on average, than companies that focus only on functional elements E.g.: consumers who get help from employees in stores give much higher ratings to those retailer (emotional elements) Which Elements Are Most Important? What customers value in products varies by industry. Here are the top five elements influencing loyalty for 10 types of businesses.

Apparel Retail TV Service Providers Discount Retail Consumer Banking Food And Beverages Smart phones Credit Cards Auto Insurance GroceryBrokerage Quality Variety Provides Access Sensory Appeal Reduces Effort Rewards me Reduces Anxiety VarietyMakes Money Avoids Hassles Reduces Cost HeirloomVariety HeirloomReduces Cost Sensory Appeal Heirloom Design Saves Time Avoids Hassles DesignOrganizesAvoids Hassles Provides Access Reduces Cost Variety Saves Time FunRewards Me Reduces Anxiety Therapeutic Value ConnectsProvides Access VarietyRewards Me Provides Access

Putting the elements to Work Companies can improve on the elements that form their core value, which will set them apart from the competition and meet their customers’ needs better. They can judiciously add elements to expand their value proposition. For e.g.: Vanguard Acronis One financial services company recognized that if it could attract more consumers to its retail banking business, it might be able to cross-sell insurance, investment advice, and other products.

But how could the financial services company do that? Structured Listening Ideation Sessions Customer-centric design of prototype concepts Rigorous choice modeling

Getting Started New Product Development Pricing Customer Segmentation

Conclusion  30 elements of value have been identified that meet 4 kinds of needs- functional, emotional, life changing, and social impact.  When these elements are optimally combined, it increases customer loyalty and revenue growth.  The elements of value work best when a company’s leaders recognize their ability to spark growth and make value a priority.  Companies should establish a discipline around improving value in 3 areas: new product development, pricing, and customer segmentation.