(photo by La Capoise Galerie)
At the MTLC Innovation Unconference last week, I proposed the topic: "Does your product provide VALUE? (and how to find out)." This was a variation of sessions I've done in the past. Once again I was impressed at the level of interest. About a dozen individuals sought out a distant conference room during the first session at the World Trade Center to discuss this topic. As before, the hour quickly flew by -- we could have easily spent another hour or two. I felt badly that I didn't really deliver on my promise of sharing some best practices (see below). First a few observations:
- Everybody has a Value Problem. Value appears to be a universal business problem within the technology space that MTLC members play in. Our session had a diversity of businesses such as: a healthcare enterprise software provider, a direct mail solution provider and a very unique (trust me) game-based micromarketing platform. A mix of both early stage and existing businesses.
- Communicating Value is a Challenge. A theme that emerged in our group's brief discussion was complications in communicating value. For example:
- How do you monetize so-called "soft benefits" that seem valuable, but don't directly fall to the bottom line?
- What do you do when the value you create for users isn't visible for the buyer?
- How should you translate positive feedback from early adopters into their willingess to pay?
- How can you use value to uncover new product or customer opportunities?
Undoubtedly there were more value challenges among the group. I invite any of you to comment to this blog post so we may continue this discussion. Now (as promised) here a few best practices we know about value-based pricing and sales.
- Think specific context. The best way to know the value of your product/service is for you to pretend you are a specific customer comparing your product against an alternative solution.
Key point 1: think specific customer - NOT all customers.
Key point 2: there is ALWAYS an alternative. Value is a relative concept (A is more valuable than B). An alternative often isn't a direct competitior - in fact most new technology don't have them, instead competing with legacy or manual solutions. So if legacy is the reference point, then focus on that. - Get granular. Getting specific about customer and competitor makes it much easier to quantify economic value - provided you focus on all the ways your product/services impacts the customer's organization.
Key point 1: ALL of the ways. Impacts maybe subtle and indirect. For example, reducing material costs has a direct impact (saving money on buying materials) but also indirect economic costs such as less money tied up in material inventory, less labor in handling material, less adminstrative time in ordering/paying for material, etc. In high volume customer operations, such seemingly trivial impacts may add up to big bucks. - It's OK to estimate soft benefits. There's a misconception that only hard benefits (i.e., immediately verifiable) are acceptable in an economic value estimate. Not true. Keep in mind that measuring economic impacts need not have the same scientific rigor as engineering specifications. Let's take email as an example. Did anyone require a hard dollar business impact study of email versus U.S. Mail and/or fax machines back in the 1990's? Are the direct hard cost savings in stamps, envelopes or fax paper the best estimate of the "real" value of email productivity? Of course not. Mind you, this doesn't grant license for making outlandish claims. Nonetheless if you can make a reasonable argument about improving sales performance, you don't need to stick a voltage meter into a salesperson to prove it.
- Remember ultimately, it's a sales conversation. Purchasing decisions, even highly fact-based b2b ones are subjective and subject to persuasion. Sales people are highly skilled at making the best possible business case. LeveragePoint's perspective is that having a strong value communication case helps this process.
People were active on Twitter during the event and you can follow the stream using the hashtag #MassTLC.
Ed Arnold
VP Products
LeveragePoint
