Value - The Most Important Thing?

Value for user (as opposed to value of a user) is arguably the most important property of your product or service. It's at the bottom of product/market fit, growth, user satisfaction, retention, engagement, sales... Few things help products succeed more than injecting them with lots and lots of user value. Getting value right enables you to do a lot of other things wrong - the product can be buggy (think Windows 3.0), user experience can suck (Facebook’s first mobile app iterations), marketing budget may be zero (Google search in its early days), and yet people will find your product, use it and love it. Oh, and yes, you can charge more for a high-value product than you can for a low-value one. On the flip side if you can’t demonstrate high value early and clearly, no one will stick around to try your product a second time.

While we intuitively understand value, it's surprisingly hard to find a definition that economists, marketeers and designers agree on. I’ll use a very non-formal definition:

Value is the property we assign to a thing — a product, a service, a person, an experience, that indicates how important, worthwhile or beneficial we think it is for us.

Also this:

Perceived values and perceived costs are the main tools we use to prioritize and choose between the many things that are vying for our limited resources.

How We Assign Value

Value isn't an objective property we can easily measure or quantify. We perceive value almost intuitively, but there can be multiple factors at play (note: this is loosely adapted from Holbrook, the leading researcher into value):

• Personal values and preferences — we assign value based on our values, preferences, beliefs and social norms. For example an audiophile may consider a $10,000 state-of-the-art hifi system good value, while her twin sister that has the same demographics and upbringing but not the audio sensibilities, may find a $100 portable bluetooth speaker over the top.
• Costs — Since our ape ancestor that went after the low-hanging fruit, we are all about maximizing bang-for-the-buck. Nothing is truly free — we can pay with money or with other scarce resources — time, effort, attention, mental load, physical or logical space, bandwidth, battery life… Cost can take many forms — if your product is missing a few features that the user has come to expect, that’s a cost. If it’s a bit harder to use or it makes the user think, that’s a cost too. Users sum up the costs, but it’s a weighted sum — some things are more important than others. John T. Gourville pointed out, that product teams tend to underestimate the cost and overestimate the value of the new product, while users do the opposite.
• Alternatives — before buying an electric car I’ll consider traditional gasoline/diesel car. As I compare the two options I will not do a full feature-by-feature analysis, but rather focus on to a few salient points that matter to me: the electric car is better for the environment and more economical, but the gasoline car uses tried-and-tested technology and does not give me charge anxiety. Again my preferences and values will determine how I weigh those.
• Context— the environment and circumstances of the user can play an important role in value assignment. A bicycle is more likely to be considered high-value in Amsterdam in Anchorage. Part of user context is social norms. If I work in a company where suits are expected I will value a pair of jeans less.
• Fast thinking — when we evaluate something we rarely do a deliberate, thoughtful and thorough analysis. In typical human fashion we revert to fast, shallow thinking — narrow-framing the question, or replacing it with a simpler question like which option feels better. The takeaway is that even if you genuinely deliver tremendous value, you need to make this easily understandable with little or no need for deep, slow thinking.
• Past experiences - Perceived value changes over the lifetime of using a product. First evaluation may occur even before using the product, purely based on public info and hearsay -- users may come primed with an expectation of value (high or low), even a value fantasy. First use brings a more realistic, if still shallow, value perception. This is the critical moment in which most users, given the chance, will opt out, just because doing nothing is the easier option. High value is the thing that keeps users/customer stick around. Those who do will shape a more informed perception of value with continuous use. As the we become more proficient and invested, value often grows, sometimes to the point that we become dependent on the product. But if the need goes away or a superior alternative shows up, value may drop sharply. After stopping to use the product we take away a lasting value perception that is somewhat biased by subjective memory.

Three types of value

Value has three key components. The composite of the three gives total value, but as always it’s weighted by users’ personal biases. As you read this imagine a 3-dimensional axis and think how your product stacks up on each axis.

• Functional value — Functional value refers to the utility the product gives us in completing specific tasks. This is the most easy to understand type of value — whether you need to get from point A to point B, find specific info online or furnish an apartment, there are products and services out there that will help you get the job done, and they are tested on engineering-like metrics: functionality, efficiency, durability, robustness… Us techies tend to focus on functional value, but it’s by no mean the only or even the most important type.
• Social value — We are social animals and care deeply (even if not always consciously) about our place in the social ladder and what others think of us. Products and services can certainly have socially-oriented benefits (and drawbacks) - for example help us project an image, cultivate connections, acquire status and gain acceptance. We're not always fully aware of social value, but it plays a major role in many of our product choices. For example, a $12,000 Rolex makes no sense from a purely functional value perspective given that a $30 digital watch is far more accurate, reliable and functional (functional traits). The Rolex, however, is loaded with social value simply because it makes the wearer look good - both in the literal sense - more elegant, attractive, and stylish, but also in helping project a certain image — wealth, sense of style, life preferences, which in turn makes the owner look like he/she belong in the upper echelons of society. The $30 digital watch will send all the wrong signals for those same reasons and thus detract social value. Buyers of luxury watches seem to find the $11,970 premium worthwhile. The takeaway is that making our users look good is a major win, yet we almost never think of our products in these terms. 
• Emotional (Self) value — not all of our non-functional needs are about other people. We have intrinsic needs that are generally, though not always, about making us feel good. Firstly there’s fun. If it was up to us we’d spend a lot more time playing Candy Crush Saga, lying on the beach, reading a good thriller or watching TV. There’s no real functional value in these activities, and while they may carry social value, the main purpose is to gratify ourselves, not others. There are massive industries built around this type of value — gaming, media, entertainment, travel, but any product that manages to inject fun into its workings stands to gain value. Other important emotional needs include: a sense of self worth and meaning, personal growth, beauty, spirituality and many others. Going back to the watch example, I definitely may derive selfish pleasure from its beauty and mechanical elegance, irrespective of what others think. The watch also sends me the same implicit signals that it sends to my social circle, enhancing my sense of self worth and reassuring me that I’m doing well. Not all emotional needs are just about us. People definitely see value in helping the greater good: protecting the environment, helping those who are less fortunate and other causes. All things being equal, a product that is environmentally friendly, was not tested on animals or is helping children at risk is of higher value than one that doesn’t (and it gives the team developing a higher sense of meaning and value as well).

Building for value

There’s a lot to say about how to use value when building products and services, but that’s probably a topic for another blog post. Here are some thoughts in no particular order.

• Learn early what values and costs users find in your product and how they stack up. These can be quite surprising and unintuitive. The best way to do this in the early stages of the product is through direct user research and min-viable product iterations. You should then steer your product in the direction of higher value and lower cost.
• Find a way to measure perceived value through the lifecycle of of your product and do it continuously. You can get a sense of value indirectly through metrics like retention, satisfaction and price sensitivity, or directly using surveys, interviews, A/B experiments and so on.
• Understand how value perception changes over time. What people like on day 1, on day 7, day 14 and on day 90. This may have interesting implications for your product, for example you may wish to promote some features or capabilities in later stages of use.
• Find what perceived values and costs users find in competitor products. This will give you an idea what will get people to switch.
• Be cognizant of Social and Self values. We’re not thinking of those nearly enough yet they can easily make or break your product.
• Consider reminding users what value they’re getting in subtle ways. For example some travel sites graphically show that they are scanning and sorting through all available offers to find the very best deal. Research shows that this made users appreciate the service more.
• The most crucial moment to demonstrate high value is at first encounter, but show, don’t tell.
• Don’t suck more value than you give. We dislike people that are needy and are constantly asking for things. Products and services are no different. Be patient and ask them to do things for you later, after you gave them lots of value.

(Earlier version published on Medium)

Itamar Gilad (itamargilad.com) is a product consultant helping tech companies build products that deliver and capture tremendous value. He specializes in product strategy, product market fit, growth and innovation. Previously he was lead product manager at Google, Microsoft and a number of startups.