The concept of “value” can mean a lot of different things depending on who you’re talking to. The world of consumer products is no different. Sometime it’s easy to equate value with how much something costs, but this is an oversimplification of the many factors that play into the purchase decision of consumers. When developing a new product or updating an existing one it’s critical to understand what those factors are and what sort of trade offs you’re willing to make in order to ensure you end up with something that customers will consider a good value.

Let’s illustrate the concept with a simple bell curve (Figure 1). Imagine the horizontal axis represents all the attributes of a product - quality, design, price, to name a few. On the vertical you have value. You are trying to make sure your product is in that meaty center of the curve. Too far to the left, and you have a cheap, poor quality, badly designed product. Too far to the right and you’ve likely put too much into your product - additional features that consumers don’t really care about, or perhaps you’ve over-engineered the thing to the point it’s priced itself out of consideration.

So how do you know if you’re in that sweet spot? This is where Design to Value (DTV) can be of use.

What is

Design to Value?

Originally popularized by McKinsey as a value-engineering tool to increase margin and lower product costs, DTV is a fact-based methodology that focuses on three key aspects of a product: competitive insights, consumer insights, and supplier Insights. Typically it’s utilized when a company is looking to decrease COGS and increase margins on a particular product. The approach is pretty straightforward: determine what product attributes your consumers care most about and understand how your product compares to competition. Take these insights and ideate possible solutions to optimize the value proposition.

When combined with a design-thinking approach that emphasizes consumer experience and empathy, DTV can be a powerful tool for any product developer that needs to balance costing pressure with the needs of the consumer.

For example, I worked on a storage system a few years back for Target. We knew guests loved the size and simplicity of our product but our prices were significantly higher compared to key competition. When we deconstructed competitive samples we found our product was highly over-engineered, adding unnecessary cost and forcing us to set our retail price much higher than competitors. Using our DTV insights we redesigned our system to be much simpler while maintaining the same size, aesthetic and functionality of the previous product. Costs were reduced, retails came down and guests responded enthusiastically, resulting in a significant expansion of the product line.

So what are some of the indicators that it might be time for you to consider a DTV approach? Here are a few of the tell tale signs that your product might benefit from Design to Value:

1. USERS AREN’t NOTICING THE FEATURES YOU THOUGHT THEY WOULD

You just launched a new product after having spent a lot of time researching the market and figuring out what consumers want. Your design is jam-packed with amazing features and the pricing looks really great. Overall a great value, right? Unfortunately, soon after launch you begin to notice users submitting reviews that are very positive but only seem to mention a few of the key features of the product. Additional user research confirms that your customers are really buying it for 2 key features. The others are getting lost in the noise. So what’s the problem?

What we have here is a classic case of prioritizing features over benefits, leading to a product that likely costs more than it needs to and as a result is not offering the optimum value to your customer (Figure 2). Features are great but if they don’t provide an actual benefit to the consumer they end up contributing additional cost without added value. Design to Value can help prioritize which product attributes are most critical to include to help ensure your product hits the value sweet spot.

2. Your REVIEWS ARE TERRIBLE

Quality issues are product killers. They affect not only the success of a single product but also can damage an entire brand as customers become more hesitant to buy other products in the future. Nobody (at least in my experience) goes out of their way to knowingly make a bad product, but the road of good product intentions is often littered with 1 star Amazon reviews. Some studies have shown that it takes over 40 positive experiences with a product or brand to erase a single negative one.

There are a lot of causes when it comes to bad quality. Supplier issues and poor QA procedures can happen. Products get rushed through development to hit a retailer’s set date. But sometimes a bad product is a bad product from the beginning (Figure 3).

DTV can be helpful to understand what quality level is necessary to hit for your target customer. Competitive insights here are critical to help provide a baseline of quality levels for similar products in the market.

3. YOUR PRICES ARE TOO HIGH

This is an easy one to spot but it’s not always easy to fix. If you’re a manufacturer selling to a retailer you are somewhat at the mercy of the retailer and how they choose to set their prices. Profit margins obviously play a role in the final retail price but when a specific markup percentage is prioritized over other factors such as quality and design it becomes more likely that you will end up with a product that is priced higher than consumers are willing to pay for it (or on the flip side, a stripped down product that offers little or no key benefits to customers. In this case see #2).

DTV combined with a consumer-first approach is critical to ensure key product attributes aren’t sacrificed to cost-cutting. Trade offs will occur when costing pressure gets tight but Design to Value insights provide a fact-based process in which cost-engineering decisions can be evaluated relative to consumer and competitive insights.

4. It’s been a while since you’ve studied the competition

What differentiates you from competition? Ideally you can answer this quickly while citing specific product differences between your product and your key competitors. But when was the last time you actually took a hard look at your competitors’ products? A key aspect of Design to Value involves competitive insights. I don’t mean simply strolling through the aisle and noting price and some packaging copy. I’m talking about getting your hands on a wide range of competitive products and conducting rigorous tear downs to understand everything from materials and dimensions to manufacturing techniques and design features. This is a critical step in DTV to be able to generate ideas for optimizing your value equation.

In my previous example at Target, we purchased at least 5 competitive products and spent a solid week stripping them down and analyzing every metric we thought might be relevant. Through that process we discovered key design features that helped save millions of dollars without drastically altering the DNA of the product. A few millimeters of thickness here or a different material choice there can have a huge impact.

5. Your product is indistinguishable from others on the market

At one time your product was new, innovative and first to market. As time went by others mimicked you and the market became flooded with competitors’ products eerily similar to yours. Take it as a compliment. Once this happens, though, you’re going to need a strategy to be able to continue to differentiate your product from competitors. Even if your product has always been viewed as a commodity it doesn’t change the need for your customers to choose you over the competition. Design to Value product tear downs combined with consumer research can highlight the areas, however subtle they may be, where you can carve out your product’s reason for being.

I’m reminded of a past project where a certain garment rack at Target was consistently suffering from bad reviews but every option we reviewed from our vendor partners was seemingly identical as this was a product category that was viewed as an opening price-point commodity. Simply switching suppliers would likely fail to fix the problem. Instead, we upgraded a key component, switching from plastic to metal, in order to address the most common failure mode. The end result didn’t look much different but the function was significantly better, providing a key value upgrade in commodity-driven category.

What are your Design to Value Needs?

With a wide range of experience implementing DTV solutions for consumer products, Section22 can help you understand how to optimize your product value. For more information on Design to Value or to discuss how DTV might be applied to your product, contact Section22 for more information.

5 SIGNS YOUR PRODUCT MIGHT NEED DESIGN-TO-VALUE