Psychologist Abraham Maslow's famed hierarchy of needs has tantalized marketing executives over the years. In explaining the psychological longings of human beings, it seems an obvious guide for marketing efforts. But translating his five-level pyramid into action has been difficult.
Three executives from management consulting company Bain & Co. have echoed Maslow with a pyramid that defines four levels of value: functional, emotional, life-changing and social impact. It includes 30 specific elements a product or service might have such as quality, saves time, avoids hassles, reduces anxiety, rewards me, provides hope, self-actualization, and self-transcendence. They also have numbers indicating the theory works: The elements of value, properly used, can drive customer loyalty and revenue growth.
"It was hard to put Maslow to use in business. We have given people a vocabulary for using it," Eric Almquist says in an interview about his work with colleagues John Senior and Nicolas Bloch.
The 14 functional elements at the base of the pyramid help consumers to be more efficient and effective in getting things done. Saving time, for example, is a classic – companies that focus on that can win our love. The Container Store and Intuit's TurboTax help us to organize our lives, another functional element. Although the lowest category on the pyramid, functional elements can be powerful. Amazon achieves high scores on eight functional elements, powering its success.
Next up the pyramid are elements touching consumers emotionally. PayPal reduces anxiety, a key element. Airline and hotels satisfy the "rewards me" value item. BMW and other luxury brands benefit from the prestige – "badge value" in this formulation – associated with them.
Five life-changing avenues are cited as you move up one more level in the pyramid: provides hope, affiliation/belonging, motivation, heirloom, and self-actualization. Solid Gold offers natural, holistic pet food that gives you hope your pet will live a healthy, long life. Heirloom plays a role in financial services, where inheritance is important. Harley-Davidson offers self-actualization to many of those who proudly drive one and attend its rider events.
The original Maslow formulation placed self-actualization at the top before he added a higher need, self-transcendence, and this hierarchy follows that prescription, with the top level, social impact, only including one element, self-transcendence. Toms Shoes, which has a "One for one" slogan, offers a pair of shoes or some equivalent benefit to people in need for each pair you purchase. Seventh Generation, with its green cleaning products, also lets you help the world as you purchase what you need.
Some elements matter more than others. Across all industries the consultants studied, quality has the greatest impact. Mr. Almquist says quality is the minimum needed these days to reach consumers – nothing can compensate for a significant shortfall on this dimension. Beyond that, the most important varied by industry. In food and beverages, for example, sensory appeal ran a close second. In consumer banking, providing access and heirloom was critical.
The more the merrier: The research showed that companies performing well on multiple elements of value had more loyal customers than competitors and their revenues grew at a faster rate. Companies with no elements of value that customers widely valued saw revenues drop by 2 per cent a year. Companies with four of more elements of value that customers cited highly had a growth rate of 13 per cent. Those companies had recent revenue growth four times greater than that of companies with only one high score.
The elements of value seemed to explain the growth of online retailers such as Amazon, Zappos and eBay.
"Well-designed online businesses make many consumer interactions easier and more convenient. Mainly digital companies thus excel on saves time and avoids hassles. Zappos, for example, scored twice as high as traditional apparel competitors did on those two elements and several others. Overall, it achieved high scores on eight elements – way ahead of traditional retailer," the consultants write in Harvard Business Review.
But Mr. Almquist stresses traditional retailers can fight back with factors such as badge value, sensory appeal and attractiveness, as customers actually see and touch items.
To use the ideas, you might start by comparing your company to competitors on the 30 elements and seeing where the gaps lie. Apply the Bain technique of asking consumers to rate you on a scale of zero to 10 and determine on which elements more than 50 per cent of respondents score you at eight or higher. Then look at what other elements you could emphasize.
"Business is all about delivering value to customers. The more you can deliver, the better," concludes Mr. Almquist.
Harvey Schachter is a Kingston, Ont.-based writer specializing in management issues. He writes Monday Morning Manager and management book reviews for the print edition of Report on Business and an online column, Power Points. E-mail Harvey Schachter
Harvey Schachter