Value Add, Value Pricing, Value Proposition 10.4.10


Published on

October Coaching SIG presentation by Bill Handschin

  • Be the first to comment

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

Value Add, Value Pricing, Value Proposition 10.4.10

  1. 1. © TMC 2010 All Rights Reserved 1 Value-Add, Value Pricing, Value Proposition ASTD-TCC Coaching SIG October 4, 2010 Bill Handschin, Ph.D., L.P. Talent Management Consulting, Inc.
  2. 2. © TMC 2010 All Rights Reserved 2 Agenda Introduction Strategy Value Value-Add Value Chain Value Proposition Value Pricing Summary References
  3. 3. © TMC 2010 All Rights Reserved 3 Introduction Pricing is part of how we go to market, and hence part of strategy. These are terms that your clients are familiar with. We will talk about both strategy and marketing during this hour. This is just a very cursory introduction to the key concepts and language of our clients. I welcome the input of anyone who has strategic or marketing background during this discussion.
  4. 4. © TMC 2010 All Rights Reserved 4 Strategy Three Basic Strategies Broad (Industry-wide) Differentiation Product uniqueness - Apple Low Cost Low cost position - Wal-Mart Narrow (Market Segment) Focus Either low cost or differentiation
  5. 5. © TMC 2010 All Rights Reserved 5 Value The extent to which a good or service is perceived by its customer to meet his or her needs or wants, measured by the customer’s willingness to pay for it. It depends more on the customer’s perception of the worth of the product than on its intrinsic value.
  6. 6. © TMC 2010 All Rights Reserved 6 Value How do we create the perception of value when we talk to our customers? Remember this!
  7. 7. © TMC 2010 All Rights Reserved 7 Value-Add Difference between the total sales revenue of an industry and the total cost of components, materials, and services purchased from other firms within a reporting period (usually one year). Gross revenue. Creation of a competitive advantage by bundling, combining, or packaging features and benefits that result in greater customer acceptance.
  8. 8. © TMC 2010 All Rights Reserved 8 Value-Add Corn $4.07/bushel = $0.07/lb. Corn Flakes $2.22/lb. Wheat $7.25/bushel = $0.12/lb. Shredded Wheat $3.94/lb.
  9. 9. © TMC 2010 All Rights Reserved 9 Value Chain Interlinked value-adding activities that convert inputs into outputs which, in turn, add to the bottom line and help create competitive advantage. A value chain typically consists of inbound distribution or logistics, manufacturing operations, outbound distribution or logistics, marketing and selling, and after-sales service.
  10. 10. © TMC 2010 All Rights Reserved 10 Value Chain The value chain categorizes the generic value- adding activities of an organization. The "primary activities" include: inbound logistics, operations (production), outbound logistics, marketing and sales (demand), and services (maintenance). The "support activities" include: administrative infrastructure management, human resource management, technology (R&D), and procurement. The costs and value drivers are identified for each value activity.
  11. 11. © TMC 2010 All Rights Reserved 11 Value Chain After Dinesh Pratap Singh's visualization for Porter's Value Chain, retrieved from
  12. 12. © TMC 2010 All Rights Reserved 12 Value-Chain After Value Chain Partnerships for a Sustainable Agriculture, retrieved from
  13. 13. © TMC 2010 All Rights Reserved 13 Value Chain Analysis Examination of the value chain of an enterprise to ascertain how much and at which stage value is added to its goods and/or services, and how it can be increased to enhance the product differentiation (competitive advantage). This has yielded new Business Process Models.
  14. 14. © TMC 2010 All Rights Reserved 14 Value Chain Exercise Form groups of three people. Construct a sketch of the value-chain of one of your client organizations. Help each other out!
  15. 15. © TMC 2010 All Rights Reserved 15 Value Proposition The mix of goods and services, and price and payment terms offered by a firm to its customers.
  16. 16. © TMC 2010 All Rights Reserved 16 Value Proposition Internal Value Proposition Market – who are your customers? Customer experience - what does the market value most? Offering – what product or service are you offering? Benefits – what benefits can be derived from your offering? Alternatives & differentiation – do nothing or do in house? Proof – evidence that you can do what you promise?
  17. 17. © TMC 2010 All Rights Reserved 17 Value Proposition Exercise Answer these six questions for your coaching services. Work in your groups. Help each other!
  18. 18. © TMC 2010 All Rights Reserved 18 Customer Value Proposition A good customer value proposition will provide convincing reasons why a customer should buy a product, and also differentiate your product from competitors.
  19. 19. © TMC 2010 All Rights Reserved 19 Customer Value Proposition See Handout The All Benefits column requires you to know your business. The Favorable Points of Difference column requires you to know your competition. The Resonating Focus requires you to know your customer.
  20. 20. © TMC 2010 All Rights Reserved 20 Customer Value Proposition Exercise Create a customer value proposition for your business: an explanation in three jargon-free sentences of why your customers need your product or service. Work in your groups. Help each other out!
  21. 21. © TMC 2010 All Rights Reserved 21 Value Pricing Types of Pricing Channel-based pricing Competition-based pricing Cost-based pricing Demand-based pricing Demand-backward pricing Differential pricing Value-based pricing
  22. 22. © TMC 2010 All Rights Reserved 22 Value Pricing Pricing method based on the perceived worth of the good or service to its intended customer. To price your services on a value basis, you have to be able to talk about the value that your service has to the customer in terms of your customer’s values. You have to know the ROI of your service as part of convincing your customer of the real worth of your service. What is the magnitude of the benefit realized or threat averted?
  23. 23. © TMC 2010 All Rights Reserved 23 Value Pricing Challenges to Value Pricing Lack of entry barriers to industry Fragmented industry Commodity pricing Perception of a commodity service
  24. 24. © TMC 2010 All Rights Reserved 24 Summary To determine your pricing strategy, you need to know: Your strategy and value-chain Your competition’s strategy and value-chain Your client’s strategy and value-chain
  25. 25. © TMC 2010 All Rights Reserved 25 References Porter, M. E. (1996). What is strategy? Harvard Business Review, November-December, 61-78 (reprint No. 96608). Download from Porter, M.E. (1998). Competitive strategy: Techniques for analyzing industries and competitors. New York, NY: The Free Press. what_is_strategy.pdf
  26. 26. © TMC 2010 All Rights Reserved 26 References Anderson, J. C., Narus, J. A., & Rossum, W. v. (2006). Customer Value Propositions in Business Markets. Harvard Business Review. Parasuraman, A. (1997). Reflections on gaining competitive advantage through customer value. Journal of the Academy of Marketing Science , 154-161.