Ways to Add Value to a Product
Question: "What does it mean to add value?"
The value formula used in the Blackblot PMTK Methodology™ is:
Value = Benefits - Costs
- Benefits are product features that are desirable to the customer.
- Costs are expenses incurred by the customer from buying and using the product (TCO).
- Value is worth derived by the customer from owning and using the product.
This value formula is intuitive, not mathematical, and sometimes erroneously called cost/benefit ratio, a financial term representing the financial return for each dollar invested.
Value is the difference between the product's benefits and the economic sacrifice made to experience those product benefits.
Value is the difference between the product features you get and how much you paid for those features.
Different product delivery strategies will foster various manipulations of the value formula to add value to the product.
For example, at a sales-driven company, the salespeople will attempt to add value by lowering the product's official list price or giving excessive discounts.
At a technology-driven company, the engineers will try to add value by inflating the product's feature set (adding more benefits). This phenomenon is also referred to as a Feature Factory.
At a market-driven company, the product manager defines customers' desired value, and then the product's feature set is built accordingly.
For more information, see the Value-Marketing Model chapter in the Blackblot PMTK Book: Second Edition.