When considering a purchase, consumers weigh the perceived value of a product or service against its price. Eric Almquist, a partner in Bain and Co. Inc., leader of Bain’s advanced analytics practice and a member of the firm’s global customer strategy and marketing practice, spoke in an interview about how companies can assess the value side of the equation better. He also talked about “the 30 elements of value" that are at work in the marketplace, how companies that deliver more of these elements tend to enjoy higher growth rates and how brands can woo mercurial consumers such as the millennials. Edited excerpts:

How do consumers evaluate the brands they buy?

In general, people have a perceived value for what they are buying and they trade that off against price. The word perceived is important because often times consumers don’t always know a lot about the product they are buying. Consumers can be irrational and focus only on a few things in that decision—brand, product features, attributes are an important part. Ultimately a lot of consumers rely on what their family and friends say and recommend, so the emotion of promotion is also in the mix. The issue is that most companies are generally more focused on managing the price side of that equation. They would rather address that than the value side, which is psychological, amorphous and complex. But it’s important to focus on value, as people don’t buy a product or service just based on price, there’s utility as well. Value is important because that is what they are willing to pay for. Value is not monolithic, it is composed of elements, there are many different types of values, and that’s how we got to (American psychologist) Abraham Maslow’s hierarchy of needs and the psychological nature of this. It’s complicated and a lot of businesses feel uncomfortable around psychology.

What are these 30 elements of value? How did you identify them?

We discovered them through our experience. If you talk to consumers for 35 years, as me and some of my colleagues have, you begin to notice patterns. It was the patterns that created the 30 elements. We had a lot of debate, is it “convenience" or is it “saving time" or “reducing effort". As we talk to consumers, we don’t accept what they say—if they say convenience, it can mean a whole lot of different things for different companies. For instance, if I say my bank is “convenient", it may mean that it’s down the street. If I say paying my bill online is convenient, it actually saves me time. So that’s two different kinds of convenience. So we have actually identified 30 elements of value which are at work in the marketplace today. We may have missed one or some. It may also be that new forms of value emerge over time, but we have most of it covered. All of this traces back in its original form to Maslow’s hierarchy of needs, which really is an academic construct that has to do with human motivation rather than consumption or consumers. These elements range from functional, to emotional, to life-changing elements, all the way up to elements of value that deliver social impact that might be important to some consumers. Some of those elements of value are more inwardly facing. For example, it might save people time, it might reduce their anxiety, might give them hope. Some are more outwardly facing, having to do with how consumers navigate the outside world, such as “organizing" or “connecting". It might give them a sense of belonging, and so forth. But unlike the hierarchy of needs, we’ve made this much more business-specific.

What impact do these elements of value have on the company’s growth rate and revenue?

The key thing is, the more elements of value you are delivering, the higher your growth rate and the higher your net promoter score (NPS), which is a measure of consumer advocacy Bain developed years ago. It works both in terms of growth, and how likely people are to recommend your brand or service. We found there to be a pretty powerful connection. If you are delivering on no elements of value, your growth rate is negative. If you are delivering on four or more elements of value, your average growth rate is about 13%. To give you some examples of successful companies in terms of growth and profits, Amazon, for instance, delivers on eight elements of value. Apple delivers on 11... What’s interesting is all the smartphone companies, whether it’s Apple, Samsung or LG, rate high, and the reason is that your phone has your friends, entertainment, your money, contacts, family, photographs, it has so many elements of value. Over the last few years, we have been asking people at conferences, “Would you rather lose your wallet, or would you rather lose your phone." And five years ago, people said they would rather lose their phone. Today, they would rather lose their wallet. So does any brand deliver all 30? The answer is no, simply because it would make the product very expensive. Moreover, not all values are relevant to all companies.

Your article in ‘Harvard Business Review’ says that consumers perceive digital firms as offering more value than bricks-and-mortar stores. Why is that?

Please bear in mind that our research was done in the US, so things might be a little different here in India. But digital players are not winning because their prices are low. They are actually delivering more value. Interestingly, reducing cost is not in the top five (drivers of NPS) for either Zappos or Amazon. The top driver, across all industries we studied, was quality. If you fail on quality, you just fail. But beyond that, Amazon is delivering on (values such as) “saves time", “reduces hassles", “reduces risk", among others. And “reducing cost" is not even in the top five drivers. It’s a myth. A lot of retailers would like to believe that Amazon is popular because it offers lower pricing, but the fact is that their best customers are not as concerned about low prices as they are about getting things done, quickly and easily.

In India the e-commerce segment is a crowded, highly competitive segment driven largely by price wars. What then, happens to the 30 elements of value?

It’s a moment in history. Remember that when Amazon started, it was about saving money. In the US it was about best price. Over time people realized that it was easier to order on Amazon, if you’re on Amazon Prime (a quick two-day delivery programme), it’s quick, you save money on shipping. Early on it was about saving money and then it became about better experience. And we talk about how companies can add elements of value and Amazon Prime is a great example. Because first it was about saving time and money, by providing unlimited two-day shipping for a flat $79 annual fee. Then it expanded the offering by including unlimited photo storage (reduces risk), streaming media (access and entertainment) and now introducing Echo, a voice-enabled feature, which delivers entertainment, among other features. Each new element attracted more customers. Eventually allowing the company to raise Prime’s annual fee to $99, which was a large price increase by any standard.

How can brands woo millennials, a group of consumers that is considered both mercurial and fickle?

People talk about the millennials as a segment, and I would caution you about that because the millennials are themselves segmented. So you have to be careful about generalization. Having said that, you cannot fence them off. You can have different products and price points, and so forth, to serve them. The other thing you should know is that the millennial generation is much more interested in social impact and social change. So TOMS, the shoe company in the US—they give away a pair of shoes to needy people every time you buy a pair, is very popular. And much more popular among the millennials than the baby boomers, who quite frankly care less about these things, or may have their own form of charity. Brands would do well to think about the emotional connections of the millennials and could serve that.

Where do values figure in the scheme of things as marketers increasingly turn to Big Data and analytics?

I would take the position that most companies are paying too much attention to analytics and not enough attention to values. They use data and analytics to squeeze out a little more profit and revenue from their existing value. I think there is much more money in stepping back and thinking about creating more value for the consumer. Don’t get me wrong, analysis is important. But I would put my money on value, and I’m a data analytics guy saying this. Part of the reason that analytics is so popular right now is that as economies mature it becomes harder to come up with newer products and services, so they are trying to squeeze more out of what they have. And that can only last so long. This phone (picking up his Apple iPhone) could not have come out of analytics, it came from brilliance and Steve Jobs’s vision. This would not have come from running regressions on data.

Acquiring consumer data is challenge as consumers are reluctant to share their details. How can brands overcome that?

The younger generation, millennials, don’t really care who has their data. They post everything on Facebook, don’t care who sees it and few take precautions with passwords or anti-spyware. It’s remarkable. The older generation is more paranoid and guarded. But the one thing we have learnt is that trust cannot be bought. Paying for access to data will not win the day, you have to earn that trust. Giving people the option of what data you can or cannot see. If a company wants to use or share customer data, then the best way is to proceed in a transparent manner and ask clearly. Our research shows that by simply asking for permission, they can more than double the number of consumers willing share their data.