Consumer: “What’s in it for me?”
The consumer’s battle between a product’s value and price
Dogs are a loyal companion to many. They will often perform a task on command and love their owner unconditionally. On the contrary, the average consumer behaves completely different when it comes their relationship with technology products. In fact, it takes a tonne more work and skill to acquire customers and get them regularly using your product.
Many of us are aware today that the “build it and they will come” is in fact not true. But yet we still get easily caught up in the idea that we are excited to execute. Why wouldn’t we be? It is our idea after all. We tell ourselves that “this time it will be different, I know it”. Our bias and hope blindsides us in a pursuit where overconfidence takes over as we build a grand product that will be the next to go viral and receive multi-millions of dollars in funding.
Unfortunately, the plain truth is that we will have to move mountains before we start generating revenue and are profitable.
Scratching the surface
“How does this help me? Is the price worth it?”
Consumers are no different to you or I. Like us, they are always asking “How does this help me? Is the price worth it?” when presented with a new product. They simply want to know what you will do for them and how much it will cost. This is where the consumer applies their mental balancing scale of price vs. value.
Let’s take a look at some questions, which may have also crossed your mind, when deciding if you’re interested in trying and/or buying a new product:
- Does the product offering make my life easier?
- If so, how much will it cost me to do so? Is that worth it for me?
- How quickly can I get started with this new product?
- Will I be able to benefit right away from using the new product?
We refer to the above questions as hurdles since the product must overcome each one before moving onto the subsequent stages within their journey. At each stage, the consumer continually re-evaluates.
But this is only scratching the surface. When developing technology products, we need to dig deep and get our hands dirty. In other words, we quickly need to get into the details to ensure we understand the problem that we’re hoping to solve and verify that it is a problem worth solving.
Devil’s in the details
It is human nature to be overly positive and optimistic about our potential success or current situation.
“Optimism is highly valued socially and in the market…” — Kahneman
Since optimism is highly valued socially and in the market (eg. financial advisory), people are rewarded for their optimistic perspectives more than those who tell the truth or are realistic. Although it makes many feel good, this is counterproductive as it only makes it harder for us to dig deep.
When we don’t dig deep enough, we often find out too late. We see the symptoms of this when the consumer lacks motivation to continue using the product or when we have a lack of understanding of why consumers abandoned our product. This is usually due to the value of the product not being significantly greater than the price paid by the consumer or we did not acknowledge the difference in benefits (eg. impulse benefit which “scratches an itch” vs. core benefit which “solves a deep problem”). Also, finding this out after we’ve delivered the product is very expensive. But there are ways to identify these issues much earlier. After all, once we start building, this is when things become the most expensive to change. This is not because writing code is expensive but rather because the entire product development team is already well into the journey and time and effort has been invested by the entire team.
As they say, the devil is in the details. We need to really drill down into the details from the beginning in order to thoroughly understand the problem and to articulate the benefits that will delight and “wow” our consumer. A benefit must meet at least one of the following:
Will you make them feel better?
Will you provide a gain that they did not previously have?
Will you remove some pain in their life?
Following the above, without getting into too much detail, we need to:
- Define the serviceable obtainable market
- Associate a price to the benefits
- Work out which benefits are worth solving, and as a result, work out the order which we should tackle the worthwhile benefits
Diving into the detail cannot be achieved alone. It requires multiple roles, and hence different teams, to work their magic on developing a successful technology product. But the work doesn’t stop there, they need to continually be in tuned with the market, the consumer and their competitors to remain successful. With time, people and expectations change and evolve, so must your product.
True vs. superficial benefit
The good news is that it is possible to shorten the product development cycle to learn sooner without having to get into development. The bad news is that it isn’t a simple “1+1=2” equation. But don’t let that stop you. Reward never comes without a challenge.
There are already some principles and tools to guide you which you may already be familiar with like Agile and The Lean Startup by Eric Ries. Articles like Entrepreneurs, don’t build too soon builds upon existing principles (in this case, The Lean Startup) and share their perspective on how to “correctly build ‘Minimum Viable Products’ (MVPs) so that you can maximize learning”. Ultimately, they all aim at getting our product to a place where it can earn then maximise on revenue. Whilst the existing tools and principles are really great, I think there is still room for improvement. We need “tools” that eliminate subjectivity and ambiguity in our own decision-making as product experts. This means being fearless and comfortable with numbers. So how do we bring that revenue, from paying customers, in the door?
We need to recognise that consumers also go through a decision-making process when choosing which technology products to use. This relates back to the mental balancing scale (of price and value) that we touched on earlier. Our product development process needs to factor in the consumer decision-making in three key ways:
- A model that propels qualitative validation from the consumer back into the product development so benefits can be realised.
- A rational basis which explains the what the consumer desires and does not desire in relation of our product.
- An understanding for how our human bias influences the consumer and hinders progress.
With these factors in mind, let’s take a look at the three key consumer hurdles with the true versus superficial benefits in mind.
The Trial Hurdle
As you can see from the trial hurdle equation above, both the cost to trial the product and the effort perceived by the consumer must be less than or equal to the perceived cost that the consumer would associate to their current pain. Therefore, getting into the details of the consumer’s true desires as well as what they do not desire is necessary in order to obtain a comprehensive understanding in the eyes of the consumer.
The Acquisition Hurdle
I often hear businesses using conversion (eg. the action of a customer signing up) as a gauge to how appealing their product is to the consumer. However, this is misleading because signing up to use a product doesn’t necessarily equate to success on the business or consumer part. For example, from the business perspective, will you make money from that sign up? And from the consumer perspective, has the product delivered the benefits and value it promised upon signup? There’s a good chance the answer is “no” for both. At this point, the truth starts becoming a reality as to whether your product provides true or superficial benefits. In this hurdle, the consumer is looking for the chance of uncomfortable change to arise being less than the chance of the overall value gained being better than the combination of cost and their effort.
The Subscription Hurdle
“Fake it until you make it” quickly comes to an end at this stage if your product does not actually deliver a true benefit to the consumer but instead only provides a superficial benefit. Looking at it simply, it is obvious in whether or not your consumer chooses to continue with your product’s paid subscription or not. But in order to increase our product’s paid subscriptions, we need a deeper understanding. Let’s take a look at the Subscription Hurdle formula through the lense of an example:
Hana is a visual designer. She subscribed to a design software tool that cost $100 per month. Over the next two years, there were some minor updates to the software which she personally believed were useless. Another year later, the design software tool decided to increase their monthly subscription from $100 to $160 per month. Even though this was the first price increase in three years, she did not feel the product was worth the additional $720 per year. Whilst she had become very comfortable with the tool, there had also been a few other new design software tools that were gaining traction and were 60% of the cost. At this point, Hana decided to switch to another tool and hence cancelled her subscription with the $160 per month tool.
In the example above, the product did not overcome the subscription hurdle since the left side of the equation was less than the right side in her case.
In addition to these formulas which can help us measure why consumers are not overcoming hurdles in the pipeline, long term studies on how people make decisions, based on the uncertainty of switching costs, have shown that this is heavily intertwined with the size of the benefit. This is related to all three formulas above since we know consumers only attempt to make a change if they think they will be better off. Studies have also shown that the priming effect and anchoring effect can influence the consumer’s decision and perception of your product’s benefits. But at the end of the day, influence only gets you so far. If the team doesn’t recognise the difference between true and superficial benefits, trouble will soon follow.
Never-ending juggling act
You can bet money that consumers will never stop asking themselves “What’s in it for me?” when they see and/or use your product. So how does a team developing technology products keep their finger on the pulse with the consumer’s reality — their needs, desires and pains?
The short answer is that you need a way to keep a tether to the customer’s reality and find ways to close the gap. The longer answer is that you need to build and maintain a validated qualitative operating model that continually monitors how well your product resolves your consumers pain or provides them some gain. Additionally, we need models which can quantify and measure our performance on the consumer realising and materialising the benefit(s) we promised to deliver.
With the millions of technology products for consumers to choose from today, it’s pretty obvious your product will fall out of the race quickly leaving your team unhappy. Make no mistake, this isn’t an easy job. Hence, distinguishing the true versus superficial consumer benefits requires a symphony of skills, in particular skills that fall under one of the five key roles of a team developing technology based products.
So again, what’s in it for your consumer? You must be prepared to answer it confidently, not just by talking, but more importantly when the consumers use your product.
Learned something? Please click the 👏, if you found this post useful–it would mean a lot to me!
Learned something? Click the 👏 to say “thanks!” and help others find this article.
Hold down the clap button if you found this post useful — it would mean a lot to me!
If you have any questions, contact us at firstname.lastname@example.org.
Follow the Critically Deciding publication to be the first in on more to come:)
Recommended next read: The Perfect Dumpling Quest