Measuring a Product's Value

The value of a product manufactured for sale is the price that you can sell it for. If the product actually has a market (I assume that this would be determined before manufacture) then the value, or price will fluctuate when the demand is high and the production capacity is low. If there are only a few producers obtaining high prices, there is a good chance that competitors will enter the market with more capacity and gain market share by offering lower prices. If you are in a collapsing market like this and selling your products as pieces of hardware, or like commodities, prices can spiral down until the inefficient producers shut down. In this situation, is the product suddenly worth less to the original buyers? A strategy that might avoid this situation might be called differentiation, or positioning. A manufacturer can offer something more than just a chair by offering for example "The new, wonderful, and exclusive experience of sitting in the XYZ chair, designed by the famous Jo Smith". Now your competitors are just selling cheap chairs (And they know the value of their chairs), while you are selling an exclusive experience. At this point sales can increase when you raise your prices to indicate the special value of the experience and to differentiate your offering from those "chair" salesmen. The bigger the price differential, the fewer questions you get about "why are you charging so much more than them". You can respond in many ways to this and start explaining about your reliability and quality and your many happy customers, but this is called selling and what you started to do when you began this strategy was called positioning. A response in this situation might be: "If you are unable to discern the difference, then perhaps you should save your money and buy the cheaper product" (cheaper being a negative). This is not just one of my whacky theories, I have been producing and delivering the finest quality products in my small market niche for 25 years in small quantities at prices 2-3 times higher than the very large competitors. The original theories that this sort of model has evolved from were proposed by very talented researchers including B.F Skinner, Desmond Morris, and John Lilly, and others. Good luck with the chair sales, you have selected a product that has barely evolved at all in well over 4000 years.

I think you're thinking of the Kano Model.

See http://en.wikipedia.org/wiki/Kano_model for a brief explanation of what it is and how to use it, with further links.

Hope this helps,

Anna

That was it! I knew a fellow Michigander would send me in the right direction. Thanks!

Bill

spout.com

I'm glad the question was raised and that the answer was provided, too! Bill, care to share how why you raised the question; i.e. - how you are going to apply this information? I figure you have some product (a car? a chair?) where you want to maximize the benefits to your customers. I bet we could all contribute to your efforts!

I'll second MillMatt's comment.

Bill, if you're in a position to share more details of your application, I/we can possibly be more help. There are some subtleties in the application of "value" PD tools, especially for a portfolio of products differentiated over a wide market, or for a sequence of products over time that may trip you up if you just jump in.

Anna

Well, the product is a website - spout.com, a social network for film lovers. I am actually trying to figure out how to add concepts like the Kano Model into our product development cycle. I know, I know...this is the manufacturing section of CR4. I knew this would be the best resource to answer my initial question though.

Can anyone offer some insight into how to best apply these concepts? Or even pitfalls in doing so?

- Bill

Bill, to use the Kano Model in product development in general, you identify the features offered by your product and the competition (if any). You classify the features in the various quadrants of the model, using input from focus groups of real users as much as possible, and then map your product (and maybe the competitors) onto the space. The idea is usually to move your products' position on the map/model upwards and to the right by adding features or adjusting the details of your feature implementation in the direction of what pleases the customer and differentiates your prodcut from the competition.

For a social network for film lovers, I suppose some basic/expected features would include links to a large data base of film detailed descriptions, a way for users to list favorite films or genres, and a way to indicate that two users are "friends". More advanced (and desireable) features might be multiple degree-of-seperation linking (friends of friends, friends of friends of friends), or streaming video of short clips of famous scenes from the films.

Pitfalls you should always try to avoid are adding features because the programmers think they're cool, or because they're easy to do. Also, pay a LOT of attention to your user interface, and making this product easy and natural to use for people who understand little or nothing about the underlying technology.

For an example of something similar in a completely different domain, check out Bookmooch. http://www.bookmooch.com I'm a member, the designer is a friend of a friend, I *really* like it, and they don't pay anything, not even extra points, for endorsements The concept, very briefly, is that people list their "unwanted" books on the site, and others request (or mooch) them. There's a point system to track who gives and who gets books, with refinements.

If you have more specific questions about your application, Bill, please ask them either here or directly to me, and I'll do what I can to point you towards answers that will help. Or if you'd like training in applying Kano (and other tools) to your PD process for your team, I may be able to arrange that as a consulting gig. Ford trained me as a value engineer, 6 Sigma Black Belt, and Design for X trainer, then re-orged me out of a job a couple years back.

Anna