This webinar presentation discusses quantifying value, including quantifying intangible value and value from bundled offers. The presentation is given by Ed Arnold and Roberto Rivera from LeveragePoint, a software company for value-based pricing. They discuss how to break down broad customer benefits into tangible impacts and economic value. Examples are provided of quantifying value for reliability, expertise, and bundled specialty and commodity catalyst offers for a large OEM customer. The next webinar in the series will focus on value modeling in the innovation process.
3. Today’s Presenters
Quantifying Value: Working Through the Math
Ed Arnold is Vice President of Product Management at
LeveragePoint. Previously, he held senior positions at Communispace,
Diamond Management & Technology Consultants, and OmniTech
Consulting Group. He directs product design and development and drives
the go-to-market strategy for LeveragePoint. Mr. Arnold holds an MBA in
Marketing from New York University and MA and BA degrees in Political
Science from Boston University.
Roberto Rivera is Director of Professional Services at
LeveragePoint. Previously, he was a pricing consultant at the Strategic
Pricing Group and Zilliant. At LeveragePoint, he helps our customers
understand and capture the value of their products and services. Mr.
Rivera has an MBA and Economics degrees from Clark University, where
he guest lectures future marketing professionals on the practical
application of pricing strategies and tactics.
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5. Why Quantify Value?
Shifting the Focus from Product to Customer Economic Impacts
Product Focus
Features “What do we offer?”
Application Focus
Benefit “Why should the
customer care?”
$ Value Customer Focus
“What is that worth?”
Cost Revenue
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6. Polling question
• Which of these challenges have you experienced when
quantifying value?
[Select all that apply]
– How to quantify “intangible” value
– How to quantify the value of a bundled solution
– How to compare value versus an in-house (free) alternative
– How to estimate the value of a new product or innovation
– How to defend value of a mature, commoditized product
– OTHER (please specify in chat window)
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8. Insights for Quantifying Intangible Value
• It’s important: because the “intangibles” may comprise a
significant amount of your value of your offer.
• It’s not binary, i.e., “Hard” versus “Soft” value: Actually it’s a
continuum ranging from easy-to-measure to very-expensive to
measure.
• It’s not impossible: often broad customer benefit statements
can be broken down into very tangible customer benefits
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9. Breaking Down a Broad Customer Benefit
What does your
We have a brand mean to a
strong brand! typical customer?
(why do they buy
from you?)
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10. Breaking Down a Broad Customer Benefit
It means we
have the most
reliable product Why is that
in the industry. important to the
customer?
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11. Breaking Down a Broad Customer Benefit
Because
unplanned
downtime is a How does does
How do that
How oftenyou it
big issue for impact with your
the cost
happen the
measure
them. customer’s cost
of unplanned
competitor?
of operation?
downtime?
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12. Defining the Economic Logic
Our solution Reduces cost of Hourly rate X Hours of
downtime per year X
reduces your non-productive Number of workers X %
unplanned labor Reduction
downtime Average cost per service
Reduces cost of call X Number of calls
emergency per year X % Reduction
repairs
Reduces amount Quantity of production
lost X Average per unit
of potential lost margin X % Reduction
sales
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15. Another Example
We provide How does this
superior industry benefit a typical
expertise! customer?
(why should the
customer care?)
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16. Another Example of Defining the Economic Logic
Our expertise Increases Incremental volume X
Average margin per unit
improves production
your output
efficiency and Average cost per service
Reduces
customer customer service
call X Number of calls
per year X % Reduction
service issues
Reduces Average churn rate X
Value of customer per
incidence of period X % Reduction
customer churn
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19. Insights for Bundling
• It’s natural for customers to want a discount for bundled offers. This effect
is known as “Total Expenditure price sensitivity”, i.e., the more I buy, the
bigger the volume discount I deserve.
• It’s important to understand the distinction between cost efficiencies of
volume versus the value of an integrated solution, i.e., 1+1=3.
• It’s about providing customers with viable and fair trade-offs of products
and services, e.g., not volume discount, but free delivery with certain level
order.
• It’s useful to look at bundling best practices in other industries, including
consumer. Examples of good bundlers are for software, cable TV, new car
packages.
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