Monthly Webinar Series - June 2012     Driving Value Upstream   into Product Development                by          Tom Lu...
Sponsored by LeveragePoint    the Software Solution for Value-based Pricing2
Today’s Presenter                Tom Lucke is Managing Director of Value Management                Advisors (VMA) which he...
Polling QuestionCopyright © 2012 Value Management Advisors, Inc.   4
Value to Customer in Marketing and Sales  Value to the customer is a well-accepted basis for making decisions about pricin...
Value to Customer in Product Management    But the concept of value to the customer has not generally been applied in Prod...
Driving Value Upstream – Two Examples  Within Development, two areas that offer particular opportunities are decisions abo...
Tools for Resource Allocation  The core tools for applying value in Development are the same ones we use in pricing – Feat...
Example – Value Estimate for New Product  For example, here is a simple value model for a product we worked on during its ...
Using the Value Estimate in Resource Allocation In this case, the client was able to apply what we knew about the value of...
Framework for Product Configuration    Decisions about product configuration are based on identifying groups of customers ...
Making Product Configuration DecisionsCreate two versionsbased on Types of                                                ...
What if We Look at Value by Segment?                                                                         Biggest sourc...
Driving Value Upstream into Development      Ultimately, there is a need to embed value-based tools and concepts into    ...
Our Next Webinar – July 18th     • Stephan Liozu, President & CEO, ARDEX Americas           h               d     •O      ...
Thanks for Watching!                                  Tom Lucke      Value Management Advisors   tlucke@valuemanagementadv...
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Driving Value Upstream Into Product Development

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Many companies put significant effort into understanding value as they work to set pricing in the final weeks prior to launch of a new product. Yet there are tremendous opportunities from explicitly considering value to the customer much earlier in the product development process. Understanding value lets you configure products and create product variations in a way that maximizes revenue and margin across customer segments. Applying the right tools and methodology can optimize the value of product offers, focus development spend, and reduce cannibalization.

Tom Lucke is our presenter. Tom is Managing Director of Value Management Advisors (VMA), which helps companies develop growth and pricing strategies in a range of industries including high tech, software, manufacturing, data & information, and process industries.

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Driving Value Upstream Into Product Development

  1. 1. Monthly Webinar Series - June 2012 Driving Value Upstream into Product Development by Tom Lucke Copyright © 2012 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 Presenter Tom Lucke is Managing Director of Value Management Advisors (VMA) which helps companies develop growth and (VMA), pricing strategies in a range of industries including high tech, software, manufacturing, data & information, and process industries. Previously Tom held senior positions at the Monitor Group, the Strategic Pricing Group, CSMG and Price Waterhouse.3
  4. 4. Polling QuestionCopyright © 2012 Value Management Advisors, Inc. 4
  5. 5. Value to Customer in Marketing and Sales Value to the customer is a well-accepted basis for making decisions about pricing and go-to-market strategy Create Design Price Go to Market Manage ProductProducts and and Revenue and Sell Lifecycle Solutions Model Develop pricing that Design go-to-market is consistent with strategies and sales value across approaches that products as well as align with – and customer segments capture – valueCopyright © 2012 Value Management Advisors, Inc. 5
  6. 6. Value to Customer in Product Management But the concept of value to the customer has not generally been applied in Product Development and Product Management, where there is significant potential Create Design Price Go to Market Manage Product Products and and Revenue and Sell Lifecycle Solutions Model Create solutions Develop pricing that Design go-to-market Optimize productthat deliver the right is consistent with strategies and sales configuration, value to key value across approaches that targeting and pricingcustomer segments products as well as align with – and as value to the customer segments capture – value customer evolves over time Copyright © 2012 Value Management Advisors, Inc. 6
  7. 7. Driving Value Upstream – Two Examples Within Development, two areas that offer particular opportunities are decisions about resource allocation and product configuration Resource Allocation Product Configuration • How should we allocate limited • How many variants of the product development resources? should I have? • Which features should we consider • What set of features should be in deferring when there is a crunch? each variant?Copyright © 2012 Value Management Advisors, Inc. 7
  8. 8. Tools for Resource Allocation The core tools for applying value in Development are the same ones we use in pricing – Feature- Benefits-Value, and Differential Value Estimation F-B-V Value Estimation Negative Feature Differential Value Positive Differential Value Benefit Economic Value V l Reference Value ValueCopyright © 2012 Value Management Advisors, Inc. 8
  9. 9. Example – Value Estimate for New Product For example, here is a simple value model for a product we worked on during its developement Differential Value Estimate for Network Test Equipment $1,200 $1 095 $1,095 $100 $60 $1,000 $115 $120 $800 $595 $200 Differential Value $600 $500 $400 $200 $ $0 Competitors Detection of Faster Error Automated Intuitive User Custom Our New Product More Types of Analysis Error Interface Reporting Product Errors Correction Note: Disguised dataCopyright © 2012 Value Management Advisors, Inc. 9
  10. 10. Using the Value Estimate in Resource Allocation In this case, the client was able to apply what we knew about the value of particular features to make informed choices about the priority of those features and the appropriate allocation of resources Value of Feature Compared to Development Effort Estimated Development Effort ential Value Differe Error Detection Error Analysis Error Correction Custom User Interface p g Reporting Note: Disguised dataCopyright © 2012 Value Management Advisors, Inc. 10
  11. 11. Framework for Product Configuration Decisions about product configuration are based on identifying groups of customers that derive value in different amounts and different ways – and creating tailored versions of the product for each group Leaves money on th t bl L the table for high value customers Segment 1 High Value Val e Single Product, Priced HereValueV Segment 2 Moderate Value Segment 3 Low Value And prices lower value customers out of the marketCopyright © 2012 Value Management Advisors, Inc. 11
  12. 12. Making Product Configuration DecisionsCreate two versionsbased on Types of Remove Custom Errors? Customer Reporting for a Low Tiermay have different version? – Costly to needs Differential Value Estimate for Network Test develop, and not all Equipment q p customers may use it $1,200 $100 $1,095 $60 $1,000 $115 $120 $800 $200 $500 $600 $400 $200 $0 Note: Disguised data Copyright © 2012 Value Management Advisors, Inc. 12
  13. 13. What if We Look at Value by Segment? Biggest sources of difference are Automated Value – Segment 1 Error Correction and Value – Segment 2 Faster Error Analysis $1,600 $1,600 $1,400 $100 $1,330 $1,400 $65 $1,200 $275 $1,200 $100 $978 $1,000 $1,000 $180 $58 $90 $35 $800 $210 $800 $195 $600 $600 $500 $500 $400 $400 $200 $200 $0 $0 Note: Disguised dataCopyright © 2012 Value Management Advisors, Inc. 13
  14. 14. Driving Value Upstream into Development  Ultimately, there is a need to embed value-based tools and concepts into development and product lifecycle management  Build discovery of value into process  Deploy tools to support teams  Incorporate into key development documents and metrics  Tools and process allow us to use value to the customer to improve decision-making at critical points  Feature prioritization  Resource allocation  Product configuration  Using value-based concepts in development also creates a common language of value to support product launch and hand-off to marketing and salesCopyright © 2012 Value Management Advisors, Inc. 14
  15. 15. Our Next Webinar – July 18th • Stephan Liozu, President & CEO, ARDEX Americas h d •O Organizational C fid i ti l Confidence: Generating “Pricing Superheroes” • 12:00pm Eastern15
  16. 16. Thanks for Watching! Tom Lucke Value Management Advisors tlucke@valuemanagementadvisors.com (617) 775 – 5923 Ed Arnold earnold@leveragepoint.com (617) 252 – 2967 www.leveragepoint.com16

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