Value Pyramid

Probably the most important question to address during Product Discovery is whether customers would actually value a product, i.e. eventually buy it and decide to use it. It is important to understand the foundations of that.

Value is in the Eyes of the Customer

As mentioned already when introducing The Four Key Risks in product development, it is on the customer alone to decide whether or not they will buy and use a product or service. Of course, specifically for consumers, marketing, and advertising can help to generate a certain level of demand. But, in the end, there has to be an unmet need for customers. And while the supplier of a new product or service can work on solving problems around usability, feasibility, and viability — the customer value is beyond their control.
Lack of Value
Lack of Value

As a somewhat funny example, imagine the drinking needs of your beloved pet. Back in 1994, the producer of Thirsty Dog! and Thirsty Cat! thought it is a great idea to offer flavored water in bottles. Well, needless to say, only very few people were willing to spend their money on it rather than taking water from the tap. Clearly lacks value.

Maslow's Hierarchy of Needs

Dating back to 1943, Maslow’s hierarchy of needs helps to understand the needs of human beings and to organize them hierarchically indicating that the lower needs must be met before an individual can aim for higher-level needs.

While this framework is generally applicable in psychology, it is still too abstract to help understand the value of new products.

Maslow's Motivation Model
Source: Wikipedia

The Value Pyramid (for B2C)

In 2016, Bain & Company published an article in the Harvard Business Review decomposing the needs of consumers when selecting a product. By way of 30 specific “elements of value” they describe specific product attributes behind consumer value statements thereby digging deeper and also making the actual product attribute a bit more tangible.
The Elements of Value Pyramid
Source: The Elements of Value | HBR

For example, when someone says her bank is “convenient,” its value derives from some combination of the functional elements saves time, avoids hassle, simplifies, and reduces effort.

As with Maslow’s hierarchy of needs, these values are also arranged in a hierarchy — assuming, for example, some a product needs to be functional and just do the job before emotions and having fun come into play.

The Value Pyramid Adapted for B2B

As discussed when we Focus on B2B, there are significant differences between B2C and B2B when it comes to Product Management. To address some of them, Bain & Company, in 2018, published an update of their framework now adapting it to the B2B world.
Again organized in a hierarchy, the values have been adjusted for the needs of buyers, decision-makers, and gatekeepers in a business context. For example, meeting specifications and being compliant are essential values that, however, are becoming more and more commodities. Hence, higher-level values, such as enhancing reputation or reducing anxiety are becoming ever more important. Note that purpose is on top of the pyramid, as discussed in Purpose & Vision.
The Elements of Value Pyramid
Source: The B2B Elements of Value | HBR

Further Reading

The B2B Elements of Value

How to measure—and deliver—what business customers want.

Eric Almquist, Jamie Cleghorn, and Lori Sherer | HBR