The value equation for new digital products

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As I have been embracing some new projects, and believing in Agile, figured, it would be valuable to be able to effectively calculate the Value of it, as this can be part of a KPI. I have seen some recent discussions on the value equation for new digital products. Some of them were based on the following:

Value = (Benefits – Costs) + (Ease of Use – Complexity) + (Trust – Risk)

Whereas:

  • Benefits: The value the product provides to the user, such as improved efficiency, convenience, or new capabilities.
  • Costs: The cost to the user to obtain and use the product, including monetary costs, time, and effort.
  • Ease of Use: The simplicity and intuitive nature of the product’s interface and functionality.
  • Complexity: The difficulty of using and understanding the product, as well as any necessary training or support.
  • Trust: The level of confidence the user has in the product, including its security, reliability, and reputation.
  • Risk: The potential negative consequences of using the product, such as loss of data, privacy breaches, or security vulnerabilities.

So, how to use this equation? Let’s take an example of a new digital product, a personal finance management app.

  • Benefits: The app helps the user track their expenses, set budgets, and manage their finances more effectively.
  • Costs: The app is free to download and use, but it has in-app purchases and subscriptions.
  • Ease of Use: The app has a user-friendly interface, easy navigation and simple to understand financial reports.
  • Complexity: The app is easy to set up and use, with minimal training required.
  • Trust: The app uses bank-level security measures to protect user data and has positive reviews and reputation in the market.
  • Risk: There is minimal risk associated with using the app, as user data is securely stored and there are no reported security breaches.

Which would translate to:

Value = (Effective financial management – In-app purchases and subscriptions) + (User-friendly interface – Minimal training) + (Secure and reputable – Minimal Risk)

Therefore, the value of this app is high as it provides a lot of benefits such as effective financial management, easy to use, secure and reputable with minimal costs, complexity and risk.

If I were to replace the equation pieces with the usual items (branding, marketing, UX, onboarding and price), this would translate to (continuing the example of the personal finance management app):

  • Branding: The app has a strong brand that is easily recognizable and associated with financial management.
  • Marketing: The app is marketed effectively, with clear messaging that highlights its key features and benefits.
  • User Experience (UX): The app has a user-friendly interface and easy navigation that makes it simple to use.
  • Onboarding: The app has a smooth onboarding process that guides users through setting up and using the app effectively.
  • Price: The app is free to download, with in-app purchases and subscriptions available.

Value = (Strong brand + clear messaging + user-friendly interface + smooth onboarding) – In-app purchases and subscriptions

The value of this app is high as it has a strong brand, clear messaging, user-friendly interface, smooth onboarding and a reasonable pricing model, despite having in-app purchases and subscriptions.

As the first equation seems to be more balanced for me, I tend to use that, but I figured the second equation is what is more generally used. How do you calculate the value of a digital product?