Product Value: Understanding What It Is And How to Achieve It
Product value is hard to define. Is it determined by profits and costs, or is it about user benefits and outcomes? And once we’ve agreed on what it means, how do we actually deliver it?
In this post, we’ll explore how product value is determined, positioned, and priced.
Definition of product value
Product value is the qualitative benefit that a user gets from a particular product in satisfying needs, solving problems, and achieving goals.
Value is not necessarily a monetary amount, nor can it always be quantitatively measured. That’s because much of product value is based on the perception of the customer. It’s sentiment and feeling as much as it is tangible rewards like saving time and money.
The product manager’s role in product value
The product manager’s job is to create beneficial outcomes. So, is that business outcomes or user outcomes?
Ultimately it’s business outcomes. But these should be closely aligned with the user outcomes! When your users are happy, the business moves toward its goals. On the other hand, if there’s no alignment between user and business, people won’t buy your product or they’ll churn. And the company will stagnate and suffer.
That’s why competition is healthy, because it ensures that you continue to create the best outcomes and the most product value for your users.
Product managers play a central role in determining what a product’s value is to the user and how to execute that value on an ongoing, iterative basis.
How product value is determined
The value of a product can be evaluated in so many ways. It can start with classic product management questions such as: What does the user need? What are they trying to do?
But finding the answers is tricky. The user’s needs and goals can run the gamut from core survival to superficial. Plus, people are generally bad at articulating why they use something. They’re not even aware of the value it has for them! So it takes some keen psychological understanding to determine what your users actually want from your product.
Of course there’s the obvious economic benefits, such as earning money or saving money. But users’ needs could be more basic or intrinsic than that; maybe they’re trying to get fed or just a bit more sleep. Perhaps there are self-actualization needs at play; maybe they want to feel awesome – or to be perceived as awesome by others!
The bottom line is that people have complex needs. So there’s a variety of ways your product can provide value.
In the realm of B2B software, all types of products can satisfy needs such as:
- Saving money
- Saving time
- Reducing pain and friction (in workflows or communication)
- Doing one’s job better (more efficiently, transparently, stylishly, etc.)
- Looking awesome among teammates and in front of the boss
These needs, whether spoken or unspoken, determine the product’s value for the user.
What’s a product value proposition?
A product value proposition is the key product messaging that summarizes what your product provides, the need it addresses, and how someone will benefit from using it.
This is a huge part of a startup’s early stages, when finding product-market fit and finalizing a go-to-market strategy. As the product matures, individual features or use cases can have their own value propositions as well.
Successful propositions aren’t created in a vacuum, though. They are a result of well-researched, skillful product positioning.
Product positioning is a key (yet overlooked) part of product management. Your product could solve all your users’ problems, but if you don’t communicate in such a way that they understand the solutions, then it’s just not going to function.
Users don’t dig out the value on their own, you have to surface it for them.
That’s what positioning is. It’s about figuring out how your users think and then framing your product in the same way. Take Slack for instance. Nobody wanted a new workplace messaging tool, which is Slack’s essential function. But when Slack positioned itself as “the end of email,” everyone hopped on board. Because everyone hates email, and suddenly this messaging tool was a savior.
Begin with customer research
Only from speaking with users and potential users will you actually learn how they think. Talk to the people who bought your product and those who bought a competitor; the people who love your product and who don’t. Figure out what they like and don’t like – about your product but also about how they themselves work. What were they looking for? What are they still missing?
When positioning is done well, users relate to the product instantly because it reflects their need back to them. A great product with poor positioning simply will not thrive.
If you want to learn more, start with April Dunford, the preeminent person on product positioning. She wrote Obviously Awesome, one of our top recommended books for product managers.
How to deliver product value
Delivering value requires two things. You need to:
- Make sure your product solves needs.
- Make sure your users know about it.
Granted, I’m oversimplifying here! Here are brief explanations of each point with some resources for further reading.
To make sure your product solves needs, you must run an effective roadmap. This ensures your product actually does the things your customers need it to do! If you’re continuously discovering new problems and solutions for your users, then your product’s value will continuously evolve, staying relevant and even critical to their success.
To make sure your users know about it, you must run an effective release plan. This ensures your product and its new features are successfully positioned and communicated to current and potential customers. If your users don’t know about the value you provide (or don’t know how to access it), then that “value” is just an abstract, unrealized concept rather than an active driver of your business. See more in the product positioning section below.
Important note: These are two distinct processes! They should operate separately. Learn about the difference between product roadmaps and release plans.
Product value and pricing
Finally a quick word about product value in a monetary sense: pricing. More often than not, how you price your product will have less to do with user needs and amazing outcomes than with the competition in your market. It’s less about “What is this worth?” and more about “What can we charge?”
That’s why pricing strategy is an entirely different conversation.