More than 30,000 consumer products are launched every year, and 95% of these fail.
When launching a product, there are various things you need to think about, and one of those is product value. If you price your product too low you’ll be missing out on potential profits. If you price it too high, you won’t generate as many sales as you could.
For a rundown on how to determine product value, keep reading.
What Is Product Value?
Product value is how much a product is worth to a customer, and is ultimately determined by what people think they’ll get out of it. There’s a range of factors you can look at to determine product pricing based on how well something meets a customer’s needs.
When marketing and advertising a product, you can use the product value to explain to customers why they should buy it. Valuing products is often easier for businesses that have been operating for a while. This is because they usually have older products that they can base the value of new goods on.
A new company usually has to do more work to accurately value a product. It’s important to do this early on so that you can develop an effective business plan and lay out a budget.
Product value will change as your company grows. Having a good understanding of how this happens will help ensure your marketing team can respond to maintain the highest possible profits. Service pricing works in a similar way. It will depend on how well a service meets the needs of your customers.
Absolute vs Comparative Value
The absolute value of a product is determined by how well it meets the needs of a customer on its own. Comparative value is based on how well it meets their needs in comparison to competing products.
In an oversaturated market, the comparative value is generally lower than the absolute value. The comparative value may be higher if your product is distinctly superior to its competitors, or if you have a very loyal customer base.
How to Define Product Value
Exactly how you determine product value will vary depending on the type of product it is, and whether it’s something you sell to customers or other businesses. There’s a process you can follow to help with product valuation.
1. Define Features or Objective Values
You need to give a precise description of all of the features of your product that give it value. There’s a range of categories that this can apply to:
- Specific functions – the main functions of your product
- Experiential value – things that will make using it an enjoyable experience
- Aesthetic value – things that make it more appealing, or how it will improve something else
- Enduring value – characteristics that give it value in the long run such as durability
- Cultural value – features that give it physical or social value based on things like the customer’s beliefs, where they live, or activities they do
- Regulated value – how it provides value in terms of regulations, standards, or industry tests
- Company value – benefits your company provides such as warranties, customer service, or integration with other products
Depending on the product itself, some of these may not apply, and other forms of value may be more relevant. You need to think about the exact ways in which your product provides value to the user. The same is the case when it comes to service valuation.
2. Specify Your Customer’s Needs
You need to highlight what the needs of your customers are, and how your product can meet them. This will often include things that are only possible if they own your product. Alternatively, it could be things that your product makes faster, easier, or can automate.
You can include customer wants here too, or put them on another list if you want to keep them separate. Take into account factors like who your target market is, where they are, and the demographics they fall into.
3. Detail How Your Product Meets Their Needs
Once you’ve defined the needs of your customer, you need to explain how your product meets them. It’s a good idea to match product features to specific needs, and explain why your product meets these needs better than your competitors.
You don’t need to complicate things here, just be simple and clear. When marketing your product, you can use this material to highlight the benefits it provides. This is good for presenting your product to investors, as well as advertising it to customers.
4. Quantify the Value
To best determine your product price, you need to first work out how much money or time it can save users. This doesn’t apply to all products – with software, for example, you should calculate the benefit it provides to a customer or a business based on various performance indicators.
Doing this will help you determine the product value, and can help with some other aspects of your product. This includes things like advertisements, marketing material, or sales presentations.
Increasing Product Value
Increasing the value of a product will lead to more sales and larger profits. There are several ways you can do this:
- Incorporate additional functions that customers want to see
- Alter your discount strategy to better align with customer expectations
- Shift your target market to increase lead generation
- Make changes to your marketing strategy to gain new interest and influence customer perceptions
You can make changes whenever it suits your company so that your products or services will provide more value to the customer.
Once You Know Your Product Value
When you have an idea of your product value, you can move on to things like market research, lead generation, and product promotion. Cadence Marketing can help with all of these, and other solutions to help you generate sales. If you have any questions about our services, click here to contact us today.