What is Product Value and How Can You Increase it?
What exactly is product value? What can product managers do to measure and increase it?
These are some of the questions we’re answering in the article!
Ready? Let’s dive in!
- Product value is how well your app helps customers achieve their goals compared to competitors.
- The value proposition is the summary of the positioning strategy. It highlights the benefits of the product and its advantages for the prospective customer.
- Higher value translates into more customers, higher retention, and stronger brand loyalty.
- Absolute value describes how well the product satisfies user needs, while relative value depends on how it compares to competitors.
- Real value is objective while perceived value depends on how the customer views the product.
- Monetary value could be the profit it can make for the user whereas social value is related to how the product allows users to build connections with others.
- Habitual use increases perceived value. When users are used to the product and can use it effectively, its relative value grows.
- Product value depends on external factors and it’s difficult to measure. You can estimate it with Product-Market Fit (PMF) and Net Promoter Score (NPS surveys), by collecting qualitative feedback and tracking product usage.
- To improve product value resist the urge to just add features. To delight customers, first, understand their problems and then work out the best way to solve them.
- Minimum product onboarding is a cost-effective way to remove friction and decrease time to value.
- Incremental innovation is the most reliable way to increase value. Implement small changes frequently and test their effectiveness before innovating further.
- Check if you’re targeting the right customers. If not, refine your positioning strategy.
- Interested in how Userpilot can increase the value of your product? Book the demo!
What is product value?
Product value is the benefits users get for using a product. It is how good the product is at addressing customer pain points.
From the business point of view, it’s the benefits the product brings to the company. For example, these could be revenue, prestige, or increased competitiveness.
In each case, the perception of value depends on the cost of obtaining or building it.
What is the product value proposition?
A product value proposition sums up the positioning strategy of the product.
In short, it describes all the product benefits with its most important features that solve the problems of a particular group of customers.
What’s important, the product value proposition highlights how the product is different from competitors trying to solve similar user challenges.
Product value vs product value proposition
How is product value different from product value proposition?
In short, product value is a very general concept and it describes the product benefits.
The product value proposition is a part of the business strategy. It highlights the benefits of the product in a specific context of the target market. For example, it focuses on how the product is better than that of the rivals.
Product value proposition vs product value statement
If you run a Google search on ‘product value statement’ you’ll get results featuring ‘product value proposition’ instead.
That’s because these two are pretty much the same and are often used interchangeably.
Why is product value important?
In a nutshell, products that are better at satisfying user needs than their competitors are more valuable.
All of these are key to product growth.
Types of product value
There are different ways of classifying value depending on the perspective. Some of the most common ones include:
- Absolute value
- Relative value
- Real value
- Perceived value
- Monetary value
- Social value
Let’s look at them in more detail.
Absolute value vs relative value
Absolute value is how good the product is at satisfying user needs. It also depends on how important it is for the customer to solve the problem.
Relative value, on the other hand, depends on competitors. To determine this kind of value, we look at the alternative solutions available in the market and how they compare to our product.
Real value vs customer perceived value
The real value is objective. It is simply the benefits that the product delivers.
In contrast, perceived value is subjective. It is how valuable the product is in the eyes of the customer.
The perception could be either higher or lower.
If your marketing and sales teams are not great at communicating the true value of the product, it may result in lower perceived value.
On the other hand, if they present the product as better than it actually is, the perceived value will be higher. However, this results in a value gap and breeds disappointment.
Monetary value vs social value
Monetary value is very tangible. It can be easily expressed in terms of money.
In simple terms, it is how much the product is worth to the customer or the business. It answers the question of how much the customer is ready to pay or how much revenue it generates for the company.
In contrast, social value is intangible. It is about how much the product allows the customer to connect with others.
Owning or using certain products allows customers to belong to certain social groups. Generally, the higher the price, the more exclusive the group.
That’s why sometimes all you need to do to increase the social value of a product is to adjust the pricing strategy.
How habits impact the value of a product
Habits and value are very closely linked. The longer we use the product, the higher our perception of its value.
The Fogg model explains it very well.
The better we are at using a product, the more we use it when we have a problem it can solve. And the more we use it, the more skilled we get and the easier it is to complete our jobs.
A new product may have better features but switching would mean learning a new tool. And learning requires effort, so very often we just don’t bother.
Switching to a new product means also uncertainty and that’s very uncomfortable too.
So even if the real value of the new product is higher, our perceived value of it is lower just because we are not used to it.
How do you measure product value?
To measure product value, you first need to do market research and check out what other solutions serve the same purpose as your product.
However, the ultimate test of your product value is in how well it meets the needs of the users.
Use a product-market fit (PMF) survey
The Product-Market Fit survey is one way to measure how valuable your product is to your customers.
Unlike in other surveys, however, you don’t ask your customers how satisfied they are. Instead, you ask them how disappointed they would be if the product suddenly became unavailable.
If enough people choose the ‘very disappointed’ option, it means you’ve achieved the product-market fit. This shows the product solves the problems of your users and that enough customers are ready to pay for the product.
How much is enough? Aim for at least 40%.
Measure net promoter score (NPS)
The Net Promoter Score (NPS) is another metric you can use to determine the product value.
NPS surveys measure the overall customer sentiment towards the product so it helps you estimate the perceived value of the product.
How do you measure NPS?
First, pick a tool like Userpilot to create an in-app survey. In the survey, ask your customers how likely they are to recommend the product to their friends.
Next, launch it, collect the data and use the formula to calculate the score.
What is a good NPS score? This depends on the industry you are in. For software and apps, the benchmark is in the 41-43 range.
Collect customer feedback and act on it
Collecting customer feedback is important for two reasons.
First of all, it allows you to measure how successful your product is at satisfying user needs.
It also allows you to understand why your customers feel like this about your product and how you can improve it.
That’s why try to collect qualitative feedback whenever you can.
Adding follow-up questions to your NPS surveys is one way to do it.
In addition to actively seeking user feedback, give them a chance to submit feedback whenever they wish to.
Such passive feedback can be often more insightful because users give it when they feel strongly about something.
Of course, you need to act on the feedback. Unfortunately, lots of businesses fail to close the feedback loop. This means losing twice.
First, they miss the opportunity to improve the true value of the product.
More importantly, they miss the chance to improve the perceived value of the product. Listening to customers and sorting out their pain points is the easiest way to affect how they view your value and increase customer loyalty.
Track product analytics to understand adoption
Tracking product usage is another way to measure value.
In contrast to feedback, watching and recording how your users engage with the product gives you an objective picture.
What should you be looking at to measure value?
Adoption is generally seen as an indication of your product’s value. If users regularly choose it as a solution to their problems, it is a clear sign that you are offering a good value.
Modern analytics tools give you a chance to customize what and how you track. With Userpilot you can track feature engagement but also create custom events that could be any of the user interactions of your choice.
What’s more, you can customize what and how you see in the Features & Events dashboard. The dashboard allows you to filter your events and feature tags’ usage by segments, time period, and even company.
How to increase the product’s value
Teams often fall into the feature fallacy trap and try to increase value by adding new features. I mean any features, the more, the better.
However, this results in a bloated product and often decreases its value.
How can you avoid it?
Focus on adding functionality that improves the user experience
When you add features, first make sure they solve actual problems. Only then they will improve the customer experience and increase the product’s value.
While user feedback is useful to identify problems, it may not be the best way to identify solutions. After all, your users don’t have the expertise your teams have. So encouraging feature requests is a good idea but accommodating them all – not always.
Instead, take time to understand the customer challenges and think of innovative ways of solving them better than your competitors.
For example, focus on features that allow them to get their jobs done faster and easier. Time is money, and the more of it you can save for your customers, the more value you will bring.
Improve product onboarding and remove friction
A good onboarding strategy shortens the time users need to experience product value.
Why is this important?
In a nutshell, the shorter the time to value, the better the user experience is. That translates into better overall customer satisfaction and increases the perceived value.
Start by designing a minimum viable onboarding strategy.
Embrace incremental innovation and build a competitive advantage
While all start-up founders would like to ‘move fast and break things’, it’s the incremental innovation that allows you to grow your product’s value.
Small but frequent improvements are easier and cheaper to build and release than the huge change that you need to disrupt the sector. And by the time you implement that huge change, it may not be relevant anymore.
What’s more, incremental changes allow you to respond to user feedback and test the solutions in shorter cycles. Not only does it add value, but builds customer trust.
Positioning matters: target the right audience
Maximizing product value is sometimes just a matter of finding the right audience for it.
If your value proposition is aimed at the wrong target audience, your product will always be seen as of lesser value.
If you think that might be the case, review your positioning strategy. Instead of trying to fit a square peg in a round hole, look for target customers that will really benefit from your product.
Finding the product-customer fit may be all you need to increase your product value.
Product value comes from satisfying the real needs of the right customers better than your competitors.
If you are curious about how Userpilot can help you measure and increase the value of your product, book a demo now!