How To Grow Profitably By Capturing Value

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Noted author Harry Macdivitt shares best practices on how to effectively communicate with B2B customers. Learn how to:

* Uncover the underlying needs and hot-buttons of your customers,
* Craft meaningful value messages that set your solution above the competition,
* Deliver a crisp value story that convincingly demonstrates why customers should prefer doing business with you

See real-life case studies of how innovative firms successfully compete on value.

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How To Grow Profitably By Capturing Value

  1. 1. Monthly Webinar Series – March 27, 2013 How to Grow Profitably by Capturing Value Copyright © 2013 by LeveragePoint Innovations Inc. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means — electronic, mechanical, photocopying, recording, or otherwise — without the permission of LeveragePoint Innovations Inc. This document provides an outline of a presentation and is incomplete without the accompanying oral commentary and discussion. COMPANY CONFIDENTIAL
  2. 2. Sponsored by LeveragePoint the Software Solution for Value-based Pricing2
  3. 3. Today’s PresenterHow to Grow Profitably by Capturing Value Harry Macdivitt is Director of Axia Value Solutions, Ltd, a UK-based consultancy. Co-author with Mike Wilkinson of the books Value-Based Pricing, and The Challenge of Value, and author of Pricing Pointers - Pricing Principles for Practitioners (in press), Harry trains and consults on a wide range of marketing and business areas across the world. He brings a wealth of experience in strategic marketing and management to his training – having worked in senior positions in sales, marketing, business development, and general management for the public sector, academic, manufacturing and services sectors. Harry is a Visiting Academic at Strathclyde University Business School.3
  4. 4. Agenda • Why is capturing value so important? • How do we identify and capture value? • Case study #1: Bespoke Wooden Furniture • Case study #2: Copper Wire Theft Prevention • Key Takeaways • Q&A4
  5. 5. 5Are you leavingmoney on thetable…?
  6. 6. Price 6 If you are doing this, you sure are!A single price cannotpossibly capture allthe available business Quantity Demanded
  7. 7. 7By segmenting the market we can createadditional price points to attract morecustomers and generate more revenue.We do this by differentiating our products andservices on customer value.
  8. 8. 8Price Price Segments By identifying more segments we leave 1 less on the table… 2 3 4 5 Quantity Demanded
  9. 9. 9Price The more distinct and “actionable” segments we create… … the more we increase the overall size of the market and … the less money we leave on the table Quantity Demanded
  10. 10. 10So, what is Value, and how do we identify it?
  11. 11. If a Martian asked me “What isCustomer Value?” I wouldanswer…“…anything that helps acustomer increase his profitabilitythrough reducing costs andincreasing revenues, but in amanner that gives him an overallgreat feeling of satisfaction.”This leads us straight to theValue Triad!
  12. 12. 12 The Value Triad© REVENUE GAINS (RG) Higher prices Better productivity Higher market share VALUE TO THE Removal of hassle CUSTOMER Cheaper labour Comfort Efficiency gains Confidence Part reductions Peace of mind Cheaper materialsEMOTIONAL COST REDUCTIONCONTRIBUTION (EC) (CR)Source: Value Based Pricing, H Macdivitt & M Wilkinson, McGraw Hill, 2012
  13. 13. 13The Value Triad© factors are the things thatimpact – economically and emotionally – onthe business and its managers, or upon theconsumer.The Value Triad© framework provides uswith a structured way of thinking aboutthese factors.
  14. 14. 14 Identify every atom Use the Value Triad until you of value that the have identified everything customer is seeking that matters. It is hard work but vitally important. Identify every attribute of the product that you can that contributes to Customer ValueKeep asking yourself “SoWhat?” until you have squeezedout every bit of juice you can –and you are really sure you Link them usinghave captured everything Customer Impact Analysis
  15. 15. Customer Impact Analysis© Some Real Life, Right Now examples (So What?)nAttribute Customer Impact From customer perspectiveBuilt to precise, quality controlled  Machine output meets spec No rework needed (CR,EC)standards (Hydraulic Cutting  All outputs completely consistent Eliminates anxiety about quality, and time toEquipment) dependable and reliable performance resolve (EC)Well designed, built and attractive  Comprehensive, well-built apps Proud to own (EC)product (Apple iPad)  Carefully selected components Save purchase of multiple items (RG)  Cleverly engineered Sought after product (EC)Output from manufacturing process  Avoids re-work Saves cost (CR)clean and free of oil  Eliminates scratching On-time/early delivery (RG, EC)(Global Lubrications Supplier) Highly attractive product (EC)Ergonomic design  Conform to human body shape Reduces absence rates (CR, RG)(Bespoke Office Furniture)  Avoids discomfort Enhances productivity (RG)  Minimises fatigue Enhances employee morale (EC)  Prevents Repetitive Strain Reduces lawsuits (EC, CR)Solves problems before they arise  Software program sits on network Peace of mind (EC)(Telco Network Monitoring System)  No human intervention needed Maintains “up” state for longer (RG, EC)  Regular condition reports Prevents expensive and time consuming  Regular problem resolution reports problem search (CR, EC)Antibacterial coating  Can remain in situ longer Saves replacement cost (CR)(Catheters)  Prevents wound infection Lower patient discomfort (EC, CR)  Reduces nursing time Avoids expensive antibiotics (CR) Builds confidence in healthcare provider (EC) Increased bed utilisation (RG,CR)Database of energy cost tariffs  Can match customer to best choice Saves unnecessary expenditure (CR)(Energy Consultancy)  Full cost comparisons possible Confidence in best choice (EC) Confidence in consultant (EC)
  16. 16. 16Case IBespoke Wooden Furniture (UK)…
  17. 17. 17What part of FUR-NI-TUREdon’t you understand?
  18. 18. 18 Customer Impact Analysis© Bespoke Wooden Furniture (Hotels) (So What?)n So What? Attribute From hotel manager’s Customer Impact Generic perspectiveHigh quality, Last longer Don’t need to replace often Saves/avoids Capital spend (CR, EC))durable materials Resist wear and tear Don’t need to repair/fix Saves/avoids Operation cost Looks good Pride in appearance expense (CR, EC) Attractive to hotel guests (EC)Built to exacting Consistent appearance Uniformity Won’t fall apart (CR,EC)standards Dependability Reliable quality Can rely on this brand (EC) Meets industry spec Know what I am gettingErgonomic design Conform to human body Avoids discomfort Reduces complaints (EC,CR) shape Comfortable to use/sit on (EC)Aesthetic design Looks good Guests comment favourably Guests return (RG) Part of attractive décor Guests tell friends (RG, EC) Can make a feature in adverts Delivered good guest experience (EC)Use of non-VOC No “chemical” odours Able to make environmental claim Hotel perceived as environmentallymaterials in Environmentally friendly aware and concerned (EC, RG)manufacture products These all become part of our Value Proposition. We have assembled them from a detailed analysis of our product/service and how they create value for our customers (and our customers’ customers). Prioritise them and “dollarise” the RG and CR elements.
  19. 19. 19Case 2Copper Wire Theft Prevention (Africa)…
  20. 20. 20Theft of copper wire from electricity pylons is a seriouscrime in many parts of Africa.• Installations are usually remote• Often protected by armed guards – who may be murdered by thieves• Power supplied to municipalities, other utilities and factories• Lucrative black market for stolen wire• Wire theft costs $’000,000s and causes severe disruption
  21. 21. 21The mobile operator provides networkinfrastructure and software to capture all images atgood resolution and transmit them back to securityteam
  22. 22. 22 Customer Impact Analysis© IP Security Camera Service via Telco Operator (So What?)n Attribute So What? Customer Impact Electricity Utility pov Do not need to • Eliminates corruption Continuous System operation (EC, RG) No human maintain force of • No personal risk to guard No guard to injure/murder (EC) guard security guards on site • No salary/cost payments needed Eliminates salary/employment costs (CR) Minimises or eliminates • No service down-time Saves cost of reinstatement of service service interruption • Avoids need to engineer supply (CR) Supply troubleshooting or intervention Saves cost of new copper ($3.45/lb) continuity (CR) Avoids hazardous visits by staff (CR, EC) Data collected by • Creates electronic record Deters theft (EC) Reliable visual satellite and fed back • Visual evidence of attempted Easier/cheaper to prosecute (CR, EC) record to NOC theft • Solid evidence in prosecutions System alerts security • Video streamed via satellite to Happens automatically so creates or police NOC and then recorded on hard peace of mind (EC) Wireless alert disk. Permanent record (EC, CR) No human engagement (EC, CR)These can all be prioritised in line with our understanding of a customer’s needs.They allow us to create good questions to ask the customer in sales discussionThe answer the customer’s “So What?” and give us an audit trail to explain inwhatever detail we need to.
  23. 23. 23 A single price and a single product leaves money on the table; Create different price points by offering a wider range of products aimed at segments who look for different (and differential) value; Maximise the Customer Value you need to deliver using Value Triad© Analysis; Stop the customer asking “So What?” by asking it first yourself; Assess the beneficial customer impacts using Customer Impact Analysis – and prioritise these.
  24. 24. Upcoming Events Quantifying and Using Value in the Professional Pricing Society Age of Healthcare Reform Spring Conference Thurs April 18th at 1pm EDT May 1st – May 3rd Chris Provines, CEO of Value Vantage The Palace Hotel, San Francisco24
  25. 25. Professional Pricing Society Spring Conference • Ed Arnold will be presenting, “Anyone Can Build a Value Model: Let Me Show You How” • You will learn: – Key concepts and steps for building an economic value model – How to use value models to make strategic decisions and craft marketing messages – How to use value models to create customer-facing value propositions to support sales in capturing value • Friday, May 3rd at 1pm PDT25
  26. 26. Thanks for Watching! Harry Macdivitt hm@axiavalue.com M: 0044 781 298 1651 sales@leveragepoint.com www.leveragepoint.com (617) 945-707526

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