2. Understanding Changing User Satisfaction Over Time
In today’s competitive marketplace, user expectations are constantly evolving, influenced by industry standards, competition, and technological advancements. To successfully retain and satisfy customers, companies must not only keep up with but also anticipate these shifting expectations. This document explores how user satisfaction changes over time, the risks of commoditization, and the need for innovative differentiation.
1. User Satisfaction and the Challenge of Meeting Evolving Expectations
How User Expectations Become Industry Standards
Consider a hotel experience. Guests expect certain basic amenities, like shampoo, soap, and towels, regardless of the hotel’s quality. Originally, providing these items might have set a hotel apart, but today, they are simply baseline expectations. This standardization likely emerged as hotels looked to each other for service benchmarks, leading to industry-wide norms.
The Problem with Following Competitors
While it’s natural to monitor competitors, there’s a risk of limiting innovation by simply mirroring others. This tendency can lead to commoditization, where products become indistinguishable from each other, and the only competitive factors are price and location. Differentiation, therefore, requires going beyond competitors to provide distinct, valuable experiences.
2. The Kano Model: Understanding User Needs Over Time
The Kano Model provides a framework for understanding how user expectations evolve, categorizing features into the following:
- Basic Needs: Features that users expect by default. Missing these can lead to dissatisfaction but including them does not necessarily increase satisfaction.
- Performance Needs: Features where the better they perform, the higher the user satisfaction.
- Excitement Needs: Features that delight users but are not expected. Initially, they create a “wow” effect, but over time they may become expected, shifting to performance or even basic needs.
Case Study: Ride-Hailing Apps and the Kano Model
When Easy Taxi first launched, the ability to hail a cab via an app was revolutionary. Early adopters were thrilled with this innovation, marking it as an “excitement” feature. As competitors like Uber entered the market, users began to expect digital cab-hailing as a baseline service. Uber further enhanced the experience with cashless payments and in-car amenities like water bottles, shifting user expectations higher. Over time, even cashless payments became a basic expectation in ride-hailing, showing how quickly innovations can move through the Kano Model.
3. The Process of Commoditization in Digital and Physical Products
The Shift from Excitement to Basic Needs
In many industries, what starts as an exciting innovation eventually becomes an expected standard. Consider digital banks like Nubank. When Nubank introduced a no-fee credit card with an easy-to-use app, it was highly differentiated from traditional banks. But as digital banking grew, similar features were adopted across competitors, making them industry standards. This led to a commoditization effect, where basic features became ubiquitous, and banks had to find new ways to stand out.
The Risk of Copying Competitors’ Features
Blindly copying competitors can lead to unintended consequences. In one instance at Viva Real, a new feature tested in an A/B experiment proved ineffective. Shortly afterward, a competitor launched a similar feature, likely without understanding its drawbacks. Copying features without validation can result in products that fail to meet user needs or improve satisfaction.
4. Avoiding the Commoditization Trap
Differentiation Beyond Features
Differentiating a product requires a focus on unique value propositions rather than just feature parity with competitors. For instance, Tesla initially differentiated itself through electric and autonomous vehicles. But as other manufacturers develop similar technology, Tesla will need to continue innovating beyond features, possibly by enhancing its brand, service network, or ecosystem to remain distinctive.
Understanding the Role of Product Marketing and Brand Positioning
A strong differentiation strategy goes beyond adding more features. It involves creating a unique brand identity that resonates with users. Take Apple as an example. Apple consistently provides a high-quality user experience across its product line, making its brand a critical differentiator. The perceived uniqueness and quality of Apple’s ecosystem keep users engaged, even as competitors close the feature gap.
5. Common Pitfalls in Commoditized Markets
Example: Password Managers
In the password management market, players like Bitwarden, LastPass, and 1Password have nearly identical messaging around security and convenience. This lack of differentiation can make it difficult for users to choose between products, and it places increased pressure on price and discounts to gain users. Each brand misses the opportunity to stand out by leaning too heavily on similar positioning.
Example: Food Delivery Platforms
Platforms like iFood, Rappi, and Cornershop by Uber all offer nearly identical services—food and grocery delivery. To the average user, their differences are minimal, leading these companies into frequent discount battles to maintain customer interest. This “race to the bottom” can be avoided with clearer differentiation through unique offerings, superior customer service, or exclusive partnerships.
6. Strategies for Sustainable Differentiation
Focusing on the “Next Big Thing”
Apple’s approach under Steve Jobs provides a model for sustainable differentiation. Jobs focused on strengthening Apple’s existing products while exploring groundbreaking innovations, such as the iPod and later the iPhone, creating entirely new markets. Product leaders must balance current improvements with bold moves that can redefine the market.
Moving Beyond Features to Brand Values
As Michael Porter emphasizes, strategy is about creating a “unique and valuable position involving a different set of activities.” Differentiation must therefore go beyond features to create a brand identity that reflects unique values, such as reliability, convenience, or social responsibility. Strong product marketing can make these values visible and meaningful to users, keeping the brand distinct even in a crowded market.
Conclusion: The Key to Long-Term Differentiation
User satisfaction evolves as industry standards shift and competitors adapt to changing expectations. To succeed, companies must go beyond copying competitors’ features, striving instead to create memorable, valuable experiences. Key steps include:
- Recognizing Changing User Expectations: Track user needs as they evolve and adapt product offerings to anticipate rising standards.
- Leveraging the Kano Model: Identify which features offer a temporary “wow” factor and which will soon become basic expectations.
- Brand and Experience Focus: Build differentiation through brand values, customer service, and user experience.
- Exploring Big Innovations: Balance current product improvements with investments in innovative projects that could redefine the market.
By proactively shaping user expectations and maintaining a strong brand identity, companies can create a competitive edge that withstands the inevitable commoditization in maturing industries.