Do you have problems with campaigns underperforming? How about a high churn rate? Or perhaps you have problems growing your customer base?
Unfortunately, 95% of companies (SaaS and otherwise) have value gap problems, and they don't even know it.
That’s why it’s essential to learn how to prevent and treat value gap problems.
In this article, we’ll be looking at:
- What is a value gap?
- What are the symptoms of a value gap?
- How to identify a company's value gap problem.
- How do you fix the value gap?
- Research to prevent or fix a value gap.
- SaaS go-to-market strategies & the value gap.
1.What is a Value Gap?
A value gap is a discrepancy between the perceived value of a product or service and the actual value. It's when users expect one thing and experience another.
While the value gap isn't a highly complex problem, companies don't often recognize it.
While identifying the value gap can be a challenge, recognizing the symptoms tends to be much easier.
2.What Are the Symptoms of a Value Gap?
The road to identifying a company's value gap problem starts with pinpointing the symptoms.
Common symptoms are:
- Campaigns are not performing or underperforming.
- Conversion rates are low.
- Churn rate is high.
- Problems growing user base.
Or the symptoms can be a little more conflicting such as:
- Low conversion and high churn with a well-performing campaign.
- An underperforming campaign with good conversion and a low churn rate.
The value gap expresses itself in different ways. You can have both a value gap and a good product fit for a segment of the market. At times there can even be an antithesis in what's happening between the acquisition.
The biggest challenge most companies face is identifying the problem early enough to avoid burning cash on treating the symptom rather than the solution. To come up with the answer, we first need to identify the problem.
3. How to Identify a Company's Value Gap Problem
Below is The Value Gap Canvas™ that represents the overlapping of a product's expected value with the experienced value.
The left side represents the "expected value," which can be better, worse, or different. The right side represents the "experienced value," which reflects the value your product is delivering.
When the user's expectations don't match the user's experience, then the value gap is created.
To identify the problem that’s creating this, try this 2-part approach.
Step 1: Step Back and Take a Look
Try thinking on a broader, more generalized macro level of your current strategy with the following questions:
- How is my positioning?
- Does my positioning give the wrong expectations to my users?
- Is my copy clear?
If positioning is misaligned or copy is unclear, users may expect one thing and experience another. If you have strong performing campaigns but low conversion rates, look at your copy and positioning.
- Am I underestimating my product?
- Am I underselling my product?
This problem is most common with startups. When a company doesn't realize how good their products actually are compared to their competitors, or when you have a happy client base but trouble growing that base, you may not be clearly communicating how good your product is.
- Does my product deliver as advertised?
- Am I overselling my product?
If you don’t have a clear picture of your current competitive landscape, your product may not be as great as you think it is. If your company struggles with low conversion rates and churn, it could be time to take a deeper look at how well your product performs and if it’s meeting customers’ expectations.
- Is my product now being used for something other than it was initially intended?
- Should you reposition your product to adopt a new segment?
The market is constantly evolving, and your core customer base may have started using your product for something other than its original intended use. This is the time to explore if a product's true value in the market differs from how it’s currently positioned.
If your company is having problems growing its customer base, new users could be confused about its intended use for your product.
Step 2: Fresh Users Vs. Power Users
To further understand your problem, it's essential to break down the experience differences between Fresh and Power Users.
The value gap will be different for each user segment, based on their perspective of the product experience. By identifying the expectation differentiations between Fresh and Power Users, you can identify problems and solve them.
What is a Fresh User?
A Fresh User has no experience with the product or has experienced it for a short time–under 10 minutes.
What is a Power User?
A Power User is a user who has adopted and retained a product.
The exact way a Power User uses your product will vary. For instance, some companies will have Power Users that adopt different uses for a product. Others may have extreme brand loyalty, use your products for their needs, and then use online platforms to comment about your products and connect with other users.
Whether it’s a Fresh User or Power User, each will have its perspective on a product's experience.
For example, let’s look at Slack. If Slack deviated from its original purpose of connecting teams to being used for communities, can we expect a Fresh User to build a community?
They most likely joined for an accessible, straightforward, simple communication tool between teammates, an expectation that Slack can deliver.
If a Fresh User expected something completely different from Slack, or if Slack confused Fresh Users into expecting a different value proposition, it would create churn and low conversion.
4.How do you Fix the Value Gap?
Fixing the value gap is a matter of comparing data and evidence.
A powerful and easy way to collect data is by asking questions any time a potential customer or customer comes in contact with your brand–before, during, or after purchasing something from you.
Each contact is called a Customer Touchpoint.
For example, the primary customer touchpoints are:
- Website: a user visiting your site for the first time.
- Product: a user learning about your product and understanding its function.
- Purchase: seeing the value proposition and buying the product.
- Customer Service: billing or support to optimize a product's use for a user's problem.
- Marketing/Media Information: any sort of relevant news, promotions, etc.
- Events: to help bring more value to the user with your product.
- Social Media: to help a user evaluate companies.
- Referrals/Reviews: customer feedback on strengths and weaknesses of the product.
- Cancellation/Leaving: understanding where the product or service failed.
Touchpoints help identify problems and provide an opportunity to research the experiences between your users.
Once you've collected the data, you can fix the value gap by comparing the feedback between Power Users and Fresh Users. This will clarify the value proposition that each user segment needs to perceive to be happy with your product.
For example, if you speak with 20 Power Users and they expect oranges, and you speak with 20 Fresh Users, and they expect lamb, that's a big problem.
By gathering evidence through interviews, qualification questions, or cancellation of service questionnaires, you will have a better understanding of the expectations and experiences of users.
The evidence through data will help build a strategy to bridge your gap.
What if the differences are subtle?
Most industries have products that are less distinct than lambs and oranges. In reality, the differences are usually subtle, and the explanation of why your product is different can be unclear.
If your value proposition isn’t a priority for users, you're either:
- Failing to explain what differentiates your product from competitors.
- You may have targeted the wrong demographic.
- The product may not be as good as you think.
It's important to understand the unique way your product helps a user that other products do not.
While evaluating user feedback, keep in mind you can’t follow the critiques of every single user. Look for common complaints or suggestions to help improve the user experience.
5. Research to Prevent or Fix a Value Gap
About 95% of businesses suffering from poor acquisition rates or high churn have a value gap problem. The companies that seem to avoid the value gap problem tend to lean on quality research.
But how do you know if you are conducting quality research?
Every research tactic has its time, place, and role. Ideally, you don't want to stick to just one. It shouldn't be all surveys, all interviews, or all data analysis. It should be both qualitative and quantitative.
A business should first focus and consider what they don't know. As soon as a company can identify what's missing, it can focus on strategy.
Before outsourcing research, take advantage of all the existing digital and physical touchpoints. Learning from these touchpoints will save both money and energy. For example, the research will help inform whether you should do demos, constellation interviews, or take the time to speak directly to customers.
With digital touchpoints, you can set up a buyer qualification page that the user fills out at purchase. The qualification page should ask basic questions such as:
- How do you identify?
- How do you expect our product to help you?
- What is your role in the business?
The idea is to better understand the user so you can anticipate their expectations while they use your product.
When a client cancels your product, this presents an opportunity for a completely different data set. You can ask another round of questions, such as:
- Why did you decide to leave?
- How could our product meet your needs better?
- How can we improve our service?
Using digital touchpoints to gather data as users come and go will provide a clearer picture of the user's journey.
A better idea of a user's journey can help businesses notice gaps, correct them, and better align themselves with the expectations of future users. It can also provide a starting point for outsourced research teams.
Conduct User Interviews
A great way to get quality research is to perform interviews.
Here are some questions to start with:
For expected value:
- "What are you expecting from...?"
- "How are you doing...so far?"
- "What's good about the current way of doing...?"
- "What's frustrating / bad about the way of doing...?"
- "What will the impact of doing......to your work/life/day/week?"
For experienced value:
- "What are you thoughts about...so far?"
- "What's the impact of...to your work/life/day/week?"
- "How were you doing...before...?"
- "What was good about [past alternative] in doing...?"
- "What was the reason you switched to...?"
Analyzing feedback through interviews is one of the most potent ways to extrapolate critical information.
While reading through them, do the following:
- Underline the most significant observations.
- Underline the assumptions.
- Cluster the insights under big categories.
- Filter out biases from the best of the Fresh Users.
- Filter out alternative use cases your Power Users have developed.
- Figure out the discrepancies between what Fresh Users said compared to what Power Users said.
As you review your research, go-to-market strategies and ways to bridge the value gap should start to emerge.
6. SaaS go-to-market Strategy & the Value Gap
SaaS is one of the most effective strategies on the market today; however, it's not a silver bullet, and it puts a lot of pressure on your product.
Many SaaS companies with value gap problems have products that need hand-holding. SaaS products should be strong enough to stand on their own, with no user intervention required.
Before becoming product-led, make sure you've slain basic, scalable tactics such as positioning and user experience.
When you are product-led, the importance of data and qualitative evidence becomes paramount. For success, double down on evidence and research.
SaaS customer support directly feeds into customer success because businesses need customer support teams that are both product-sophisticated and understand the user's needs.
By becoming a little more curious about your users, your business can benefit a lot.
Overall, conduct a thorough value gap analysis for any SaaS go-to-market strategy.
Before throwing more money at underperforming campaigns, step back and see if your business is displaying any symptoms and then work from there to resolve them.