How Does Defining Value Fit into a Product Strategy?

Successfully introducing a new product is not just a matter of adding advanced features or technically impressive designs; it requires a deep understanding of the value that the product provides to its end-user. According to experts such as Joseph A. Gourville, companies that can articulate a clear and compelling value proposition are more likely to flourish in an increasingly competitive market.

The key to product success, as noted by Gourville, lies in aligning the company with the needs and desires of the buyer or user. Value is ultimately defined and perceived by the customer and not by the company itself.

The High Failure Rate of New Products

The high failure rate of new products is a sobering reality for many businesses. According to various studies, new products in different industries generally fail at a rate of between 40% to 90%, with no significant improvement over the past 25 years. For instance, in the U.S. packaged goods industry, companies introduce around 30,000 new products annually, with 70 to 90% of them being discontinued within 12 months.

Surprisingly, many of the innovative products that create new categories or revolutionize existing ones also struggle to gain traction. A notable study found that 47% of first movers in new product categories eventually pulled out, indicating that approximately half the companies pioneering new categories later exited those markets.

Christensen's Perspective on Innovation

To better understand the challenges in product innovation, consider Christensen's definition of innovation: 'innovation is a change in the process by which an organization transforms labor, capital, materials, or information into products and services of greater value.' This definition underscores the importance of innovation not just in terms of the product itself, but in how it creates value for customers.

Thus, without early and iterative validation of how the product creates, delivers, and captures value in the marketplace, it is difficult to claim a viable product strategy. The traditional approach of developing a technically awesome and feature-rich product with minimal customer input often leads to failure.

A Customer-Centric Approach to Product Strategy

Great product managers understand the importance of starting with prospective customers and working backward. This customer-centric approach ensures that the product has a clear value proposition and aligns with the needs and expectations of the target audience. By focusing on the value proposition, companies can build a validated business model that is geared towards success in the market.

To implement a customer-centric approach, businesses can follow these key steps:

Identify the customer's pain points: Conduct market research and gather customer feedback to understand the challenges and needs that potential buyers face. Define the value: Clearly articulate how the product addresses these pain points and what unique value it brings to the customer. Validate the business model: Test the assumptions around how the product will create, deliver, and capture value through iterative prototyping and customer testing. Continuous feedback loop: Maintain a continuous feedback loop with customers to ensure the product remains relevant and valuable.

By focusing on these customer-centric considerations, companies can increase the likelihood of product success and build a sustainable competitive advantage in the market.

Conclusion

In today's market, defining a clear value proposition is crucial for the success of a new product. Companies that can align their products with customer needs and preferences through a customer-centric approach will be better positioned for long-term success. Emphasizing value creation, validation of business models, and continuous customer engagement are key strategies for overcoming the high failure rate of new products and fostering innovation.