LeveragePoint Value Management Blog

Webinar on Value-Based Pricing in Marketing and Sales Communication

Creating value in new product development is good (see our webinar on Value Based Pricing in the New Product Development Process), but it will only create value for your own company if that value can be communicated by marketing and used by sales. This is the theme of our February webinar.

You can register here.

In this 30-minute webinar, Jay Manson and Ed Arnold discuss how to communicate bottom-line value to your customers. Using the case example of a "bet the farm" software product release, they illustrate why it's essential to quantify the two or three things that allow you to beat your competition in the sale and to win the pricing negotiation.

See how this value-based pricing approach is managed using a SaaS (Software-as-a-Service) solution that can be deployed quickly to deliver business impact in less than 45 days.

The LeveragePoint platform enables everyone in your organization to collaborate and align around the economic value you deliver to your customer's bottom line -- quantifying what truly differentiates you from your competition.

LeveragePoint helps product development and pricing set value-based prices; and helps marketing and sales communicate a value story that wins the price negotiation, shortens sales cycles, and captures wider margins.

 

Case Study "Betting the Farm" in New Product Development

In our January 2011 webinar, Value-Based Pricing in the New Product DevelopmentProcess, we discussed the current state of product development among leading companies, their key challenges, and possible solutions. From our own experiences working with customers on such issues, we advocate a product developmentapproach that:

• incorporates a value-based pricing mindset;
• taps into the enterprise’s expertise across functional silos;
• validates differential value using customer input; and
• uses dynamic models to fine-tune the value proposition

CASE STUDY: CUSTOMER SERVICE SOFTWARE

One case example we used to illustrate these best practices in action involved a global enterprise that sells customer service software. Their next-generation solution represented both a major technical innovation as well as a “bet the farm” strategic decision. It was a huge window of opportunity to dominate their market. However, competitive rivals were already introducing new offerings in the market and incenting customers to upgrade from existing “green-screen” legacy systems. Nailing the value proposition from the onset was therefore absolutely crucial for this company’s success ... read more here

Webinar on Value-Based Pricing in the New Product Development Process

January 26, 2011 - Watch Now

Everyone knows that innovative products drive profitability and competitive advantage. Many companies utilize the stage gate approach to assess technical and commercial viability, yet often have difficulty in setting the right price, a critical strategic decision. Join LeveragePoint's VP of Products Ed Arnold and VP of Sales Jay Manson to see how B2B companies use LeveragePoint's value modeling solution to set and justify pricing based on real customer value.

Ed leads the development of the LeveragePoint Value Management Platform and practices what he preaches.

Jay is one of the veterans in the value-based pricing and sales space. Before joining LeveragePoint he led sales at the Strategic Pricing Group where he built the value-based pricing practice in technology.

This is a follow up to our November 2010 Webinar Avoid Discounting Using Value-Based Pricing.

See also our post on Targeted Product Development and Value Modeling.

 

Selecting a Pricing Software Solution

(a LeveragePoint White Paper)

From the white paper ...

The pricing strategy domain has matured since 1980 when the first edition of the classic, The Strategy and Tactics of Pricing was published. Today, B2B companies aspiring to improve profitability through pricing can seek expertise from one of several consultancies as well as more than a half-dozen software solutions. Or, they may decide to build in-house capability by hiring certified pricing professionals from the Professional Pricing Society.

In October, LeveragePoint hosted a webinar talk titled, “Selecting a Pricing Software Solution,” facilitated by Jay Manson and Ed Arnold. Jay is currently LeveragePoint’s Vice President of Sales and had previously held senior positions at Vendavo and the Strategic Pricing Group. Ed is currently Vice President of Products and has worked in various consultancies including the Monitor Group and Diamond.

Question: Gartner estimates the price management software market to be $180 million. That pales in comparison with the $2.1 billion procurement software market. Why is there such a huge discrepancy?

In comparison, the price management software space is still in an early phase. There are relatively fewer, smaller players and most solutions focus on just one part of the price waterfall, managing prices and discounts. It’s interesting to note that in the current recession, these software vendors’ growth has stalled. Why? Because many companies are just focused on surviving the economic downturn and the current price management solutions are expensive and difficult to implement. Our view is that the price management software space will expand significantly once there are broader solutions available. That’s the opportunity we see for LeveragePoint.“Our view is that the price management software space will expand significantly once there are broader solutions available. That’s the opportunity we see for LeveragePoint.”Q: Gartner estimates the price management software market to be $180 million. That pales in comparison with the $2.1 billion procurement software market. Why is there such a huge discrepancy?

Read more about Selecting a Pricing Software Solution

Read more about the LeveragePoint solution for value-based product development, marketing, pricing and sales.

Everybody has a Value Problem

(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

Understanding Value is the Root of Innovation - A Theme for the Mass TLC Innovation 2010 unConference

The Mass TLC Innovation 2010 unConference will be this Thursday, October 14, 2010. This event is one of the high-points of the year in the Boston area. It brings together the top visionaries, commentators, entrepreneurs and their supporting groups for a day of rapidly evolving conversations. If you are in the Boston area and can get a ticket try to go.

Last year, our VP Product Ed Arnold proposed a session "Do You Have a Pricing Problem?" This was a popular session, so popular in fact that it was held twice, once in the morning and once in the afternoon. We even wrote a blog post on this back in October 2009: Frame Value From Your Customer's Perspective.

This year we will be proposing another session. Our current thinking is to ask  "How to tell if your offer is really providing value?". This is is a critical question for any innovation. There are a lot of good ideas around, and little time, so one only wants to pursue the ones that provide not just value but differentiated value. We look forward to seeing you at the unConference, look us up!

The Twitter hashtag for the event is said to be #MassTLC.

More on the unConference

Four generations of entrepreneurs will gather on October 14, 2010 with the focus on early stage entrepreneurship and driving innovation. Unlike the planned sessions and passive audiences of typical conferences, MassTLC’s Innovation 2010 is an unConference where the agenda is formed organically by all attendees the day of the event. No podiums. No stages. Just small interactive sessions taking a deep dive into issues that drive innovation and the success of your company. A professional facilitator helps make it happen. A pre-party will be held the evening of Wednesday, October 13th at Microsoft NERD in Cambridge.

Register: http://web.me.com/masstlcwebmaster/MassTLC_2010/Welcome.html

 

 

READ THIS if you plan to sell hardware to AT&T

The other morning I had an opportunity to listen to John Donovan, Chief Technology of AT&T who was presenting at a Mass Technology Leadership Council event, "The Future of Mobile" at Microsoft NERD here in Cambridge.

A key theme was the explosive growth of mobile traffic growth, which is fueled largely video (e.g, "24 hours of YouTube video uploaded every minute"). Donovan expects growth to continue at an event faster rate, so much that AT&T is planning to make major upgrades to its network backbone. Which is to say that AT&T will be spending billions on network-related hardware. Admittedly, this is not breaking news to most sales professionals in the business. But what maybe useful is what Donovan revealed about AT&T's procurement process during the Q&A session which followed the presentation.

Donovan stated that their purchase decisions would be based on Total Cost of Ownership (TCO) with one key value driver being energy consumption. In other words, hardware that did not meet certain standards would not make the cut.

Which prompts me to ask this question: Suppose you are among those vendors competing for a share of AT&T's wallet in this space. Can you show the value of your solutions differentiated advantage, in energy consumption or for all other sources of differentiation?  Do you really know how much discount is necessary to win AT&T business?

LeveragePoint for Value Management is the only sales solution for sales, marketing and customers to collaborate around value. LeveragePoint is a SaaS-based solution that's easy to use and can be implemented quickly for low cost. Please contact us to learn more.

Ed Arnold
VP, Products

The Marketer's Dilemma

Where should a marketer put his or her effort? Top-line revenue or bottom-line profit? How can you do both? Michael Krauss of Market Strategy Group wrote an excellent column in this month's Marketing News that nicely summarizes Tom Nagle's keynote at the Professional Pricing Society Conference in May. Download pdf of article here.

The gist of the answer is to balance top-line growth with bottom-line cost cutting in ways that drive revenues up while bringing costs down. As examples, Dr. Nagle cited a number of well known success stories such as Walmart and Southwest Airlines and shared in detail a lesser known, but fascinating case study of Quad/Graphics. It's the story of a charismatic owner named Harry Quadracci who established a set of rules that balanced operational efficiencies with customer needs. Customers didn't get everything they wanted whenever they wanted it. They got lower prices in return for handing scheduling control, paper choice and other variables over to Quad/Graphics. These rules reduced costs for the printer and for certain customer segments, who were not as time sensitive, did not impact business outcomes. Quad/Graphics also helped its customers streamline their own production in ways that reduced costs on both sides. This built tremendous customer loyalty, and helped Quad/Graphics grow into a billion dollar printing empire. 

In a word, the key ingredient to success is: collaboration.  Collaboration between the internal operations and the external customer-facing parts of the business. Clearly, Harry Quadracci broke down the silos inside his own company. At the same time, he created a collaboration platform with his customers.

Today, LeveragePoint helps B2B companies communicate across the silos of product development, pricing, marketing, and sales with its LeveragePoint for Value Management collaboration platform. Using this platform, companies can create compelling value propositions and arm sales people with the best data and tools to negotiate with customers.

Ed Arnold
[email protected]

W.R. Grace Product Launch Success Story: Understanding & Communicating Value Can Accelerate Commercialization of Innovation

Creating a new product in a new category can be a wildly successful endeavor. Google’s introduction of Adwords to the relatively new world of search marketing in 2000 is a good example of how a unique product offering propelled a company into one of the greatest money making machines in history. It took years and many false starts before Google came up with its brilliant implementation of the pay-per-click auction model.    (The evolution of Google and Adwords is nicely chronicled in John Battelle’s “The Search”.)  

Executive leadership and marketing ranks in many organizations realize innovation can lead to profitable sustainable growth, but they are equally aware that many innovations fail or take a long time to find a market.  How can companies accelerate the process of deciding which business opportunities to pursue, what offerings represent the greatest value creation for their customers and the greatest return on their investment for their resources?  Maybe more importantly, how can different parts of an organization (executive, product development, marketing and sales) agree on what the value of their product or offering is, and communicate it consistently?  

Laurie Andriate, Vice President and General Manager of Grace Davision Materials &  Packaging Technologies – Americas, was tasked with driving a company performance mandate to accelerate growth through new products.  Bondera is an innovative tiling system that allows homeowners to tackle complex tile jobs. A major big-box retailer was excited by this offering.  “What we lacked was a consistent, structured framework for developing marketing plans across all lines of business. Understanding value from the customer’s perspective was probably the single greatest failure mode with innovation at Grace.”

Andriate explained, “We used LeveragePoint to investigate the value of time savings, the ability to complete a tile job in one day and not having to hire a contractor.  LeveragePoint provided a way for us to archive the thinking around this type of value creation so that, as we iterated through this we were able to go out in the marketplace and test the hypothesis, and then refine the calculation further.”  LeveragePoint’s value management collaboration platform enabled Grace to develop more compelling value communications in less time than traditional approaches. Grace did a test launch with 34 stores. Even with thin resources, they quickly moved from a few stores to their nationwide network, in large part due to greater efficiency in their marketing processes. (Read full case study)

Genuine innovation – that aha moment – is what creates real value. But that’s just the beginning. To extract profitable sustainable growth from innovative ideas requires institutional infrastructure, communication and discipline.

Michael English

Marketing Manager

More thoughts from Chicago

It's Saturday morning and heading home after a whirlwind week at the Spring PPS Conference. Thursday evening's reception was heavily attended and Friday's morning/early aft sessions were well attended too.  Here are a few nuggets I came away with:

• Joanne Smith of DuPont gave an excellent presentation Thursday afternoon detailing the journey that DuPont made over the past eight years - making the shift from volume to profit. The theme of "be willing to lose share" was a pratical case study of Tom Nagle's talk earlier that day. DuPont was able to record 22 straight quarters of price increases (until the last 2 recession quarters). Bottom line: DuPont lost $2B in earnings because of loss volume, but GAINED $19B in earnings because of effective pricing! The best argument for value-based pricing I've ever heard.
• Early yestreday morning Ted Hartnell of Decision Ready gave an interesting presentation on a topic near and dear to my heart - the microbrew industry. Usng the product life cycle as a backdrop he illustrated various types of differentiation and it's impact on value pricing. Later we discussed this further at the hotel bar - thanks for the beer, Ted!
• Rafe VanDenBerg from Zilliant gave an excellent talk on scientific methods for segmenting based on customer purchasing behavior. Key insight: willingness to pay can vary not only by customer but on a transaction by transaction level. Example: the demand for cold medicine increased dramatically when the customer is suffering the symptoms of a cold. At LeveragePoint, we refer to these as buying triggers. Makes a whole lot of sense and often overlooked.

No doubt, I missed many other great insights since I didn't attend several presentations but hoping others can fill the gaps here.

Ed Arnold 
VP Products
LeveragePoint