Adding customer value by subtraction
June 2, 2009 1 Comment
As product managers, we are trained to look for ways to add value to customers such that they are willing to buy our products. Now, what does adding value actually mean?
Adding value, does not necessarily mean that customers have to necessarily see an uptick in their revenues after they buy your product. For example, your ad product may allow the customer to place their ads to the right audience and at the right places and sell more of their products thereby generating greater revenue. Your product may help them to increase the attach rate of their subscription renewals. Nothing wrong with any of this.
But there is a whole slew of propositions that generate value without increasing revenues, but instead improve the bottomline by reducing the expenses – what I call addition by subtraction.
For example, does your product help the customer
1) Do more digital iterations that helps them optimize their material costs before building any physical prototypes? (for example, 3D CAD software)
2) Prevent loss of customers and associated brand destruction if credit card data gets stolen (for example, credit card encryption software)
3) Manage double the service events with same or reduce number of staff? (oops, this may mean job loss, but business productivity goes up)
4) Reduce inventory and storage costs by better forecasting of demand (for example, just in time manufacturing)
5) Reduce costs by allowing them to buy in bulk at fixed cost (for example, fuel price hedging)
6) Reduce operational costs by eliminating the number of steps involved in completing an operation
and the list could go on .
To get an accurate view of the impact your product may have on the customer, you need to understand where your product fits in the value chain of the customer’s business and then look at all the upstream and downstream benefits brought by your product.
So does your product add value by subtraction?