WHAT EVERY CLIENT VALUES
Eric AlmquistPartner
Bain & Company – Boston Office Powered by SunTrust
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent
Things Every Client Values:
The Elements of Value
September 2017Eric Almquist, Partner, Boston OfficeWith assistance from:
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent 3© Bain & Company, 2015
The Elements of Value
“Strategy is based on a differentiated customer value proposition. Satisfying customers is the source of sustainable value creation."
--Robert Kaplan and David Norton
But, what is a value proposition? What are the ways to satisfy customers?
What do they value?
Our research shows that there is a relatively small set of ways to satisfy customers, which we call the Elements of Value
The Elements of Value, in various combinations, create a compelling value proposition: these elements raise products and
services above commodity status
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent 4© Bain & Company, 2015
•HBR publishes B2C article
•B2B Elements of Value research
•B2C Elements of Value Research
October – December 2015 February – May 2017September 2016
Our work on B2C Elements of Value began in 2015 and continues in 2017 with B2B
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent 5© Bain & Company, 2015
The hypothesis: “Value” is not monolithic, but is built from elements, often several elements
”It’s such a great machine! The design is beautiful, it saves me time, it is simple, and the coffee lets me fantasize about being back in Italy.”
-Nespresso Owner
“There is so much variety to choose from! It provides inexpensive,quality entertainment whenever I want it.”
-Netflix Viewer
“Not only do they make high quality and trendy shoes—they allow me to give back by helping others who are in need.”
-TOMS Customer
VALUE
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Maslow’s hierarchy of needs was a start, but the theory never evolved for commercial purposes
Physiological needs:food, water, warmth, rest
Esteem needs:prestige and feeling of accomplishment
Belongingness and love needs:intimate relationships, friends
Safety needs:security, safety
Self-actualization:achieving one’s full potential,including creative activities
Self-transcendence:
altruism, charitable giving,
and social consciousness
Transcendent needs
Self-fulfillment needs
Psychological needs
Basic needs
Source: Maslow, A.H. (1969), “The farther reaches of human nature”, Journal of Transpersonal Psychology, 1(1), 1-9.
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent 7© Bain & Company, 2015
So far, we have identified 30 Elements of Value: These can lift products and services above commodity status
INWARDLY-FOCUSED VALUE OUTWARDLY-FOCUSED VALUE
EMOTIONAL ELEMENTS
How does it feel?
LIFE CHANGING ELEMENTS
How does it change my life?
SOCIAL IMPACT ELEMENTS
What value to society?
FUNCTIONAL ELEMENTS
What does it do?
Self transcendence
Provides hope Self actualization
Heirloom Affiliation & belonging
Motivation
Rewards me
Wellness
Reduces anxiety
Fun/Entertainment
Attractiveness
Design / Aesthetics
Provides access
Therapeutic value
Nostalgia Badge value
ConnectsOrganizesMakes moneySimplifies IntegratesSaves time Reduces risk
Quality VarietyReduces costAvoids hassles InformsSensory appeal
Reduces effort
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent 8© Bain & Company, 2015
Examples of companies exhibiting Elements of Value
INWARDLY-FOCUSED VALUE OUTWARDLY-FOCUSED VALUE
EMOTIONAL ELEMENTS
How does it feel?
LIFE CHANGING ELEMENTS
How does it change my life?
SOCIAL IMPACT ELEMENTS
What value to society?
FUNCTIONAL ELEMENTS
What does it do?
Self transcendence
TOMSSeventh Generation
Provides hope
GNCSolid Gold
Self actualizationHarley-Davidson
Leica
Heirloom
Patek PhilippeBentley
Affiliation & belongingSierra Club
Boston Red Sox
Motivation
Weight WatchersFitbit
Rewards me
American AirlinesStarwood
Wellness
WebMDCVS Health
Reduces anxiety
PayPalAAA
Fun/Entertainment
Busch GardensCelebrity Cruises
Attractiveness
Hugo BossVictoria's Secret
Design / Aesthetics
NikeLululemon
Provides access
Ancestry.comiTunes
Therapeutic value
L‘OccitaneDr. Scholl’s
Nostalgia
DisneyLego
Badge value
BMWPrada
Connects
FacebookVerizon
Organizes
The Container StoreTurboTax
Makes money
VanguardAmerican Funds
Simplifies
GoogleSamsung
Integrates
Microsoft OutlookApple
Saves time
E-Z PassZappos
Reduces risk
SymantecMetLife
Quality
TumiPatagonia
Variety
EtsyCarMax
Reduces cost
WalmartPrius
Avoids hassles
AmexUSAA
Informs
WikipediaConsumer Reports
Sensory appealStarbucksSephora
Reduces effort
CuisinartAmazon
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent 9© Bain & Company, 2015
Very strong value propositions deliver multiple Elements of Value. Amazon crushes functional elements
INWARDLY-FOCUSED VALUE OUTWARDLY-FOCUSED VALUE
EMOTIONAL ELEMENTS
How does it feel?
LIFE CHANGING ELEMENTS
How does it change my life?
SOCIAL IMPACT ELEMENTS
What value to society?
FUNCTIONAL ELEMENTS
What does it do?
Self transcendence
Provides hope Self actualization
Heirloom Affiliation & belonging
Motivation
Rewards me
Wellness
Reduces anxiety
Fun/Entertainment
Attractiveness
Design / Aesthetics
Provides access
Therapeutic value
Nostalgia Badge value
ConnectsOrganizesMakes moneySimplifies IntegratesSaves time Reduces risk
Quality VarietyReduces costAvoids hassles InformsSensory appeal
Reduces effort
Source: Bain Elements of Value survey, Oct. 2015, N=8,014 tested 12 industries and 47 companiesSource: Bain Elements of Value survey, Oct. 2015, N=8,014 tested 12 industries and 47 companies
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent 10© Bain & Company, 2015
Companies can strengthen their value propositions—and differentiate—by adding new Elements of Value
• Red Bull sponsors extreme sports competitions and communities (e.g., skiing, mountain biking, car racing) that connect action sports enthusiasts from around the world
• In May 2015, Vanguard added a low-fee advice proposition to core investment services to better informits clients
• In 2007, Domino’s introduced industry-leading, easy and engaging mobile ordering and order tracking to reduce effort when ordering pizza
Note: Vanguard’s “low fee advice proposition” launched not long before Elements of Value survey, and effects are not reflected in the current studySource: Company websites, lit. search
• AMEX introduced novel programs to provide its cardholders with access to exclusive venues and events
• Since 2007, Google has expanded Google Maps to give users access to street views, restaurant menus/ reviews, business hours, and more
• In 2014, Nordstrom acquired Trunk Club, a personal shopping subscription service that simplifies the process of selecting stylish, well-fitted apparel
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent 11© Bain & Company, 2015
In Oct. 2015, we surveyed >8,000 current customers of 47 U.S. companies on value
BrandsCategory Tested Companies
Apparel
Athletic wear
Discount retailers
Online shopping
Grocery (excl. discount retailers)
Food and beverage
Smartphone providers
Mobile phone service providers
TV service/bundle
Consumer banking
Brokerage
Automotive insurance
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent 12© Bain & Company, 2015
Some categories have lower overall value scores, but there is variance within all categories
0
10
20
30
40
50%Total high value space (Percentage of scores ≥ 8)
App
leSam
sung LG
Sch
wab
Fide
lity
Van
guar
dAm
azon
eBay
USAA (
Aut
o)Sta
te F
arm
Libe
rty
Mut
ual
Prog
ress
ive
Lulu
lem
onN
ike
Adi
das
TOM
SZap
pos
Mac
y's
Nor
dstr
omJC
Penn
eyU
SAA (
Ban
k)W
ells
Far
goCha
seCap
ital O
neBan
k of
Am
eric
aCiti
Am
azon
Cos
tco
Targ
etW
alm
art
T-M
obile
Ver
izon
(Cel
l)Spr
int
AT&
T (C
ell)
Kro
ger
Trad
er J
oe's
Who
le F
oods
Saf
eway
/Alb
erts
on's
Net
flix
Direc
TVAT&
T (T
V)
Com
cast
Sta
rbuc
ksD
unki
n' D
onut
sChi
potle
McD
onal
d's
Bur
ger
Kin
g
ApparelAthletic GroceryDiscount retailer Food & bev.
On-line
Broker-age
Auto insurance Banking
TV service/ bundle
Smart-phone
Mobile service
Industry average 38% 31% 31% 29% 28% 28% 27% 24% 23% 21% 17% 15%
std. dev. 3% 0% 0% 8% 2% 3% 4% 7% 2% 3% 5% 2%
Industryaverages
Overall average 25%
Note: High value space is the percentage of scores ≥ 8 across elements in each companySource: Bain Elements of Value survey, Oct. 2015, N=8,014 tested 12 industries and 47 companies
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent 13© Bain & Company, 2015
Companies that excel on multiple elements crush it on NPS and revenue growth
COMPANIES THAT DO WELL ON MULTIPLE ELEMENTS TEND TO HAVE HIGHER NPS… …AS WELL AS HIGHER REVENUE GROWTH
-5
0
5
10
15%
0
-1.9
1
2.7
2
5.9
3
8.7
4+
12.9
Average revenue CAGR
('12-'14)
0
20
40
60%
0
3
1
17
2
33
3
42
4+
58
NPS
Number of elements which consumers rate as strongly describing the company
Number of elements which consumers rate as strongly describing the company
Note: ‘High value elements’ are elements where >50% of respondents gave a score ≥ 8Source: Bain Elements of Value survey, Oct. 2015, N=8,014, tested 12 industries and 47 companies; Annual reports; Bloomberg; One Source
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent 14© Bain & Company, 2015
Across categories, digital competitors are delivering much more perceived value than traditional players
0
20
40
60
80%
Element high value
space (% scores ≥ 8)
Save
s tim
e
Avoid
s Has
sles
Redu
ces e
ffort
Prov
ides a
cces
s
Simpli
fies
0
20
40
60
80%
Element high value
space (% scores ≥ 8)
Avoid
s Has
sles
Prov
ides a
cces
s
Redu
ces a
nxiet
y
Inform
s
Redu
ces r
isk0
10
20
30
40
50%
Element high value
space (% scores ≥ 8)
Makes
mon
ey
Self tra
nsce
nden
ce
Nostalgi
a
Conn
ects
Affili
ation
& be
longin
g
0
20
40
60%
Element high value
space (% scores ≥ 8)
Redu
ces c
ost
Ther
apy
Nostalgi
a
Sens
ory a
ppea
l
Affili
ation
& belo
nging
Zappos Apparel avg. Amazon Discount retailer avg. eBay Discount
retailer avg. Netflix TV service provider avg.
Note: Apparel avg.. includes Macy’s, Nordstrom; Discount retailer avg.. includes Walmart, Target, and Costco; TV service provider avg.. includes Comcast, AT&T, and DirecTV. Top 5 elements with the largest % difference in high value space. High value space is the percentage of scores ≥ 8 across elements in each companySource: Bain Elements of Value survey, Oct. 2015, N=8,014, tested 12 industries and 47 companies
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent 15© Bain & Company, 2015
0
20
40
60
80%
Element high value space (Percentage
of scores ≥ 8)
Save
s tim
e
Avoid
s has
sles
Redu
ces c
ost
Prov
ides a
cces
s
Redu
ces e
ffort
Simpli
fies
0
25
50%
Element high value space (Percentage of
scores ≥ 8)
Badg
e valu
e
Attra
ctive
ness
Sens
ory a
ppea
l
Well
ness
Self tra
nsce
nden
ce
Affili
ation
& be
longin
g
Online-only retailers win on functional elements; omnichannel websites win on emotional elements
ONLINE-ONLY RETAILERS HAVE HIGH FUNCTIONAL VALUE
OMNICHANNEL WEBSITES HAVE HIGH EMOTIONAL VALUE
Traditional (Online)
Online-onlyTraditional (Online)
Online-only
Note: Element high value space of brands in Retail (Macy’s, Nordstrom, JCPenney, Zappos, TOMs, Nike, Adidas, Lululemon Walmart, CostCo, Target, Amazon, eBay). Excludes customers who shopped both Online and In Store. Online-only are Zappos, Amazon, and eBay. Traditional (Online) includes the online sales of Macy’s, Nordstrom, JCPenney, TOMs, Nike, Adidas, Lululemon, Walmart, Costco, Target.Source: Bain Elements of Value survey, Oct. 2015, N=8,014, tested 12 industries and 47 companies
Functional elements Emotional elements
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent 16© Bain & Company, 2015
The Hunt for Value: Using the Elements of Value to improve business performance
IMPROVE PERFORMANCE CHANGE THE GAME1 2
Deliver more value on elements that drive NPS within your category
Add new Elements of Value to your category
Benchmark on the Elements of Value versus key competitors
Identify and capitalize on relative strengths to widen leads within the category on elements that matter
Attack market leader on its core Elements of Value—and close the gaps
Explore consumer needs and compromises using the Elements
Identify “white space” in the category where you may be able to drive value and differentiate
Innovate to break through in emotional elements to drive NPS and differentiate further
For value leaders like Amazon, this is a continuous process: Prime and Flex are great examples of new Elements of Value
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent 17© Bain & Company, 2015
The Elements of Value framework is relevant for many business applications
• Develop ideas about where to improve products/services and how to target different customer segmentsValue proposition
development
Innovation
Competitive differentiation
Consumer Journey
Brand strategy
• Provide a guide to interpretation of what might be important to customers and how that varies among different customer segments (highly complementary to NPS programs)
• Focus of BothBrainstorming sessions and other innovation applications
• Help clients understand where they are differentiated and how they are doing on their core elements of differentiation vs. their competitors
• Provide direction on content (e.g., could our brand be extended to deliver “access”?) since brand laddering is generally devoid of “value” content
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B2B is very different from B2C and requires adjustments to the Elements of Value
B2B buying is done by people in a business context, using a variety of formal and informal processes
TABLE STAKES
Basic ‘table stakes’ in B2B are often higher than in B2C
B2B buyers are often spending large amounts of money and purchases impact many others—risks abound
FEAR OF FAILURE
B2B markets leave less room for error and force competitors to perform at a minimum threshold
B2B purchases are often complex on many dimensions – product, service, supply chain, support, integration
PURCHASE COMPLEXITY
Customer experiences are more complex and enduring and therefore harder to deliver consistently
Buying decisions encompass multiple stakeholders who each have personal and corporate-level considerations
DECISION COMPLEXITY
Sellers must appeal to the right decision makers at both levels in selling and serving
DIFFERENTIATOR CONTEXT IMPLICATION
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Multiple stakeholders within an enterprise have competing interests and complicate B2B situations
B2B DECISION MAKING IS COMPLEX – ROLES AND AUTHORITY ARE OFTEN FLUID, UNCLEAR, AND “POLITICAL”
“I want a visionary product!”
“This needs to work with our IT stack.”
“This needs to cost less than $XM.”
“I need this to be easy to learn and use.”
CEO IT DIRECTOR PROCUREMENT END USER
Additional business stakeholders can further complicate the decision-making process as the offering may need to serve very different business requirements, beyond the useful tension around price, quality, interoperability, aspirations, etc.
“I need this to address our market in Asia.”
BUSINESS MANAGERS
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The 36 Elements of Value: these lift B2B propositions above commodity status
EASE OF DOING BUSINESS VALUE
INDIVIDUAL VALUE
INSPIRATIONAL VALUE
TABLE STAKES
PRODUCTIVITYSaves time
Reduces effortAvoids hassles
InformsProvides transparency
RELATIONSHIPResponsiveExpertiseCommittedStableCultural fit
PURPOSEVisionary
Provides hopeSocially responsible
ACCESSAvailableVarietyConfigurable
OPERATIONALOrganizesSimplifiesConnects
Integrates
ECONOMICImproves top line
Reduces cost
PERFORMANCEProduct qualityScalesInnovative
PERSONALDesign &
aestheticsGrowth &
developmentReduces anxiety
Fun & perks
CAREER
ExpandsnetworkEnhancesmarketabilityReputationalassurance
CompliesMeets specifications EthicalAcceptable price
FUNCTIONALVALUE
STRATEGICReduces risk
ReachFlexible
Component quality
© Bain & Company 2017
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent 21© Bain & Company, 2015
The more elements you deliver on, the higher your NPS and repeat revenue (“relationship stickiness”)
0
10
20
30
40
50%
NPS
0
6
1-5
21
6+
34
2 4 4
Number of high value elements
Company
countNote: High value elements are those in which >65% of respondents rated the company ≥ 8; “high likelihood” refers to respondents giving a 5 to vendor for likelihood of repeat purchase (scale of 1 to 5)Source: Bain Elements of Value B2B IT infrastructure survey, March 2017, N=1,050
0
10
20
30
40
50%
Percent of respondents indicating
high likelihood of repeat purchase
0
21
1-5
36
6+
43
2 4 4Company
count
Number of high value elements
NPS INCREASES SHARPLY WITH HIGH-VALUE ELEMENT COUNT
INCREASE IN REPEAT REVENUE IS ALSO APPARENT
IT infrastructure
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0
10
20
30
40
50%
40 50 60 70 80%
R² = 0.83
There is high correlation between B2B element performance and overall NPS
Note: Percent of high value ratings refers to the percentage of ratings ≥ 8Source: Bain Elements of Value B2B IT infrastructure survey, March 2017, N=1,050
PERCENT OF HIGH VALUE RATINGS
NP
S
IT infrastructure
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent 23© Bain & Company, 2015
Case study: Microsoft Azure performs well on 20 Elements of Value
EASE OF DOING BUSINESS VALUE
INDIVIDUAL VALUE
INSPIRATIONAL VALUE
TABLE STAKES
PRODUCTIVITYSaves time
Reduces effortAvoids hassles
InformsProvides transparency
RELATIONSHIPResponsiveExpertiseCommittedStableCultural fit
PURPOSEVisionary
Provides hopeSocially responsible
ACCESSAvailableVarietyConfigurable
OPERATIONALOrganizesSimplifiesConnects
Integrates
ECONOMICImproves top line
Reduces cost
PERFORMANCEProduct qualityScalesInnovative
PERSONALDesign &
aestheticsGrowth &
developmentReduces anxiety
Fun & perks
CAREER
ExpandsnetworkEnhancesmarketabilityReputationalassurance
CompliesMeets specifications EthicalAcceptable price
FUNCTIONALVALUE
STRATEGICReduces risk
ReachFlexible
Component quality
2017 Core block
2017 Core element
Expertise
AvailableVariety
Product quality
Innovative
Stable
Saves timeReduces effort
Configurable
Scales
Avoids hasslesInforms
Provides hope
Reduces anxiety
Responsive
Cultural fit
ConnectsIntegrates
Reduces riskReach