Using TERMS for Value Innovation

  • Cirque du Soleil introduced elements of theatre, marketed to adults, and increased prices to revolutionise circus entertainment
  • Ooovie abandoned the video rental store entirely to offer DVD rentals through vending machines
  • Virgin Atlantic revolutionised trans atlantic flights by removing first class entirely
  • Hyundai offered to buy back its cars if the buyer lost his or her job

These are all great examples of blue ocean strategy, disrupting existing competitive strategies by introducing new points of value and changing the way in which buyers evaluate product value. Authored by Kim and Mauborgne, Blue Ocean Strategy explains how value innovation can be used to disrupt your market space. What it doesn’t do is tell you how to pick the points of differentiation that customers value the most.

imagine you are the owner of an inner city car park. You’ve checked the local market and set your prices to match, and you have a couple of students dressed up in bird suits on the street corner to attract new customers for your ‘early bird’ deals. People seem prepared to pay the high cost of parking to avoid public transport … for now. But you are not sure for how long. What should you do next?

Well, we can either try to build a planned strategy (boring), or try to disrupt or transform the market with some creative thinking (cool). As with much of creative thinking, we have the choice of being accidental or deliberate. We can either jump in and start writing down all the key product attributes our customers value, or we can employ a tool to go about our search more systematically. Given that consumer demand in soon to be disrupted markets is essentially unknowable (see Henry Ford), it makes sense to start thinking about these potential points of differentiation a bit more creatively.

TERMS is one such technique for systematically considering a range of potential features and their value to customers. The acronym stands for Time, Emotion, Risk, Money and Situation; and is used to systematically consider all aspects of customer perceived value. Let’s give it a go using our example for inner city parking.

Time

This can include usage time (start, end, duration, time until next use), purchase time (time to queue up, fill out an order, and availability if sold in a shop), delivery time (lead time, delivery time, return time), durability, warranty periods, etc.

For our car park we might consider the time of day that people need to get in and out, whether or not they need repeat parking over a day, the potential for a total time permit if used over multiple car parks in a day (you could partner with others to allow people to park and drive across a wider area on a single ticket), the time to drive around looking for a spot, even the flexibility of allowing people to run over by a few minutes without being penalised.

Less direct considerations of time could include the potential to notify customers when their time is nearly up, the ability to earn points each time they park, even the ability to travel back in time for special occasions (1 hour off on your birthday, or 1 hour bonus for referring your friends)

Emotion

Emotion is talked about a lot in terms of the core product, but what about our emotional responses to the actual and augmented product? Empathising with your customer to imagine how it feels to purchase and use the product might lead you to consider cognitive dissonance (was this a good decision?), achievement, self-esteem, confidence, sex appeal, fashion, image, social status, and more.

For our car park we might consider the need for security (the car will be safe, and it will be safe to walk back to late at night), the confidence that this is the best value car park in town, the status of parking on the high roller floor, the sex appeal of parking attendants or the self-esteem of being able to actually park the car easily and not have to do a 17 point turn just to get around the stupid pillars…

Risk

Risk comes in many forms including the risk that the product will actually work, or be delivered as promised, ethical risk, health risk, the cost of failure if it does fail, warranties and other fallbacks in the event of failure, even the social risk of how others will feel about our use of the product.

For our car park we might consider the risk of not getting in and out quick enough to make it to work on time, the risk of running over time, the risk of damage to the car or yourself, the risk of not needing the car park anymore after signing up for a 1 year membership, liability for hitting someone elses car, health risks from all the fumes, even the social risk of not using public transport if working someplace that values the environment

Money

Financial costs include the actual cost of the product and of acquiring it, any related taxes or usage charges, the way in which money is distributed (who gets it and are they getting too much), perceived cost, value for money, ongoing maintenance costs, affordability and relative cost, and ways in which payments can be made

In our car park we might have the price rates, punitive charges (if you hit someone), the cost of related products and services like getting the car detailed whilst you are away, transaction methods (credit card, cash, frequent flyer points, future payments, regular payments, IOUs, etc), pricing systems (fixed price, auction price, price on demand e.g. cost goes up as car park fills etc), distribution of wealth e.g. profit Vs operator license fees Vs tax and so on.

Situation

This is all about how we use the product, under what circumstances, who with and why as well as any related environmental factors affecting the product. Key factors might include geographic location, ubiquity (e.g. multipe locations), alternatives, car park design standards (how wide the spaces have to be), safety regulation, price limits, etc

For our car park this could include the number of people per car, type of vehicle, building design, multiple locations, virtual car parks (to allow for street parking governed by the same system), multi-visit passes, etc

For each of these factors it pays to explore a wide variety of potential value points, thinking from the customer’s perspective and allowing creative use of the terms to generate new ways of creating value.

Example Use

Here’s an example of how this technique could be used in a group.

  1. State the problem and draw a big 5 point star around it. Label each point Time, Emotion, Risk, Money and Situation.
  2. Divide the group into teams. ALlocate each team to a point, and give them 5 minutes to write out as many points of value as they can on a flip chart
  3. The groups rotate and move to another point on the star, adding to the listed ideas for another 5 minutes
  4. Continue until everyone is back at their original point.

If you have the numbers (5 groups of 4) you could run this as a world cafe, with each of the teams dispersing at each turn. Either way, you should have a pretty decent list of customer value drivers at the end, and the start of a great creative thinking journey.

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