For Starters #36: Your Product's Atomic Unit of Value
Measure what you do as you do it
“Hey Garrick, I wanted to thank you for today’s conversation. You have an amazing ability to ask reflective questions that end up yielding good strategy.” - Grayson, CEO, HopRobotics.com
You’re welcome.
If like Grayson, you’d like some help getting clear on pricing, product strategy, and value propositions. Book a call.
The Atomic Unit of Value is a concept I’m noodling on to answer the question: “how do we know if our products are successful?”
I’m thinking of the Atomic Unit of Value as the tactical complement to the more strategic 1-sentence pitch.
The Atomic Unit of Value is the smallest thing indicating a product’s unique value proposition has been successfully experienced by a customer. The Atomic Unit of Value presumes all prerequisites to experience the value have been met. The proverbial horse has been led to the proverbial water. Every business has an Atomic Unit of Value, and like the 1-sentence pitch, few are able to articulate it succinctly. Lots of places wrap it into some other metric they’ve trained their stakeholders to understand. For example ‘Active Users’ presumes some definition of ‘active’ beyond just logging into a specific software platform, that underlying definition is what I’m referring to a the Atomic Unit of Value.
Prerequisites for the Atomic Unit of Value:
the product needs to exist
customers need ready access to the product (e.g. authentication)
customers have incentive to use it
customers actually use the core functionality of the product
the outcome of this use is the Atomic Unit of Value
Some examples:
Slack’s atomic unit of value is ‘Responses’ - whether comments or reactions.
For a Response to exist, a message needs to be created, this means at least one person authenticated, and the message was read, meaning a second person authenticated, and to prove they read it - they created a Response. All the prerequisites to fulfill Slack’s value proposition have been met.
Hop Robotics’s atomic unit of value is ‘pints poured’.
🤖🍺🍺🍺🍺🍺🍺🍺🍺
Note, I didn’t say Pints ‘sold’, just poured. The venue hosting the HopRobot could give the beer away for free or charge stadium prices for it, and while both of those would influence the total number of pints poured, that’s not value. We’re presuming the administration of age-checks and payment have already occurred, just as we’re assuming authentication occurred in the Slack example above. Yes, the prerequisites can absolutely be a barrier to experiencing the value, and investments can be made to improve them as well.
This is a good place to state, ‘units sold’ isn’t an Atomic Unit of Value because purchased doesn’t inherently mean used. Think of gym memberships, many are purchased, fewer are utilized.
So, what about gym memberships? Is their atomic unit of value is the ‘check-in’?
Again, ‘check-in’ is an administrative measure not a usage measure.
A better usage measure would be ‘interactions’ whether the interaction is a class, sessions with a trainer, or even just a brief stint with the free weights.
Success is in the Velocity
Once the Atomic Unit of Value is defined, growth, success, and product market fit are measured in how that number changes relative to some other number. Time is a great one. See also MAU (Monthly Active User) and DAU (Daily Active User). Going back to the examples above, Slack’s velocity could Response / Day.
Or we could say that Slack is a collaboration platform so having some sense of Responses / Account / Day is a truer (and more atomic) articulation of the value Slack generates on a daily basis.
This velocity provides a reference point for if all the other leading indicators; marketing, sales, product, etc, etc are functioning as expected.
What does this mean for pricing?
For Starters, ”Price is a signal wrapped up in an incentive”, and because we want to incentivize the creation of the Atomic Unit of Value, we don’t want to charge for it directly that would discourage value creation.
The packaging and pricing create the environment for the value to be created, again leading the proverbial horse and proverbial water.
Can you imagine if Slack charged for Responses…no one would ever.
So, they charge for the frame.
The frame is all non-core things complementing and encouraging usage in across contexts and segments - integrations, workflows, retention, different authentication methods.
In fact, Slack’s core product, the Atomic Unit of Value, can be used for free. It’s all the other stuff - this framing - that has the escalating price tag.
While you may not want to go as far as making the core features $0, precisely defining your Atomic Unit of Value can only clarify what to charge for.
In my work with emerging B2B companies, it’s often not clear how measure the product’s adoption after the sale, which also means it’s difficult to know how to improve. Putting a velocity and target against the Atomic Unit of Value is key here.
What’s your product’s Atomic Unit of Value?
Elsewhere:
The introduction of LLMs into so many B2B SaaS products has sparked a long overdue trend to shift from charging for seats and charging for value creation.
“Folks are increasingly selling units of work completed rather than selling access to the software (seat licenses) or consumption of the software (usage).”
If you’re struggling with any of these pricing principles, grab 30min on my calendar: