The ability to analyze and visualize your data is a key step towards achieving pricing success. Through a series of posts, I will dive into some of the most powerful pricing charts and analysis helping many B2B organizations make better pricing decisions.If you believe that price should be largely based on customer value then you must be able to measure it. To measure customer value you go through the process of identifying the unique features of your offering vs. a competing offering and translating those features into customer benefits and then into customer economic value. Once you quantify value the next step is to visualize it in order to make more informed pricing and go-to-market decisions.
The visualization above shows us the dollarized differentiation of a solution relative to a selected competitive alternative. It is common for B2B solutions to impact multiple areas of a customer’s business, therefore value is often broken up into distinct value drivers. From a visualization perspective, the chart enables us to see how much each value driver contributes to the total value of the solution. From here managers can identify what value drivers really matter to customers, revisit value assumptions or begin the process of evaluating how to capture some of this value.
Analysis + Strategy = Better Pricing Decisions
Now that you can visualize value, let’s think through how much of the value of you can capture through your price. To keep things simple, there are 3 different pricing strategies to choose from: penetration, neutral or skim. With a neutral strategy, you would likely seek to capture from 10% – 50% of your differential value. With a penetration pricing strategy, you would likely price your offering at or below the price of the competition thus giving customers a significant economic incentive to adopt your solution. Finally, with skim pricing, you would seek to capture 70% or more of the value you deliver. Obviously, decisions on how much value to capture will be influenced by a range of competitive and market factors but at least now you will be able to visualize your pricing options and goals.
The Power of Pricing
Pricing is a powerful strategic weapon and getting it right is critical to the success of any business. With the right value analysis capabilities, powerful visualization tools and strong strategic thinking, your organization will be prepared to take on your next pricing challenge.
Use this value-charts-template to visualize your differentiation. Calculate value in a spreadsheet and enter the results in our analysis template to see your value data come to life:
Useful Resources: 10 Steps to Quantifying Value