Customer Value Modeling
Customer Value Based Pricing, when feasible can translate into vastly improved value capture, margin and ultimately competitive advantage…
So why is it still the exception rather than the rule ? Why do so few companies implement it?
We believe that 2 main reasons explain it:
1. Measuring Value is Difficult : it often includes “qualitative / psychological’ elements, it can vary a lot between customers… Today most companies cannot quantify the Customer Value of their products & services and when they do, it is often only for a very small part of their offer.
2. Operationalizing Value based approaches is difficult: Nobody is interested in Value in general, only in the value to them… and it has to be shown to me clearly, meaning that the salesman that I am talking to must be able to show it and explain it to me. So, to produce results, such approaches require that Customer Value be calculated for each target or segment and that the sales force can demonstrate if to the buyer.
These represent important challenges for companies ...
To effectively support companies engaging on that journey, PriValEdge has developed a number of ‘state of the art’ tools and approaches that:
- Support ‘Value perception’ / or ‘Economic Value to Customer’ measurement / modeling for individual customers or target segments
- Can be used by the sales force to evaluate Value to Customer and support Value based Selling
Such tools are essential to operationalized Customer Value Based selling.
One of the key tools used is: Economic Value to Customer
What it is:
- Objective evaluation of economic value to client of our offering versus next best competitive alternative.
- Developed by target segment and or for individual clients.
- Can be adapted to supply an interactive sales support tool
What it does:
Analyses and visualizes the Value of our offering
Actions it may lead to:
- Development of targeted offers (focusing on attributes that create value for clients)
- Can provide a very effective support tool for Sales force
- Targeted communication & marketing
- In period of High pricing turbulence (such as now), typically results in bottom line improvement of up to 4 % through better ability to communicate value to clients
- If used in the context pf a new product launch (or revamp), it often results in bottom line improvement of 10% or more through value based pricing
The Customer Value Modeling by PriValEdge
The Customer Value Modeling developed by PriValEdge provide a powerful and flexible, yet easy to use tool to analyze and quantify the Economic value (yours & that of your competitors) to a customer (or a customer segment)
It starts from a clear identification of the ‘Value hierarchy’ of the customer and the identification of the (5 to 10) Value levers most significant in creating Value
For each lever a strong value logic is developed and transformed into a parametric Value model that can quantify the Value Advantage and adapt the calculation to the key characteristics of the client that influence value.
This the approach enables a specific estimation relevant to the target considered, reflecting its circumstances and its economic logic
The various levers thus evaluated are then combined in an ‘Economic Value Waterfall’ to provide an overall perspective of the Economic Value to Customer of our offer (relative to the next best offers) and provide an invaluable support to Value Based Selling.
Central to the effectiveness of the Customer Value Modeling tool is also its ease of use which enables the sales force to
- Quickly adapt it to reflect the specificities of each of their client
- Use it live to support Value Based selling / Proof of Value to their customers