Main takeaways:
- Establish a framework for assessing market value
- Identify value based on the next best alternative
- Value ownership and communication
12. Reference Value -
The price of the
customer’s next
best alternative
Positive
Differentiation
Value
Negative
Differentiation Value
Total Economic Value
Differentiation Value - The unique value
you provide to the customer
Total Economic Value
13. Quantifying Economic Value
Use Value
Economic
Value
Reference
Value
Differentiation
Value
Monetary
Value
Psychological
Value
17. • Watching Movies in 3D
• Large Enough Screen Size
• Appealing Brand
Jane
Typical Home User
18. Identify Next Best Competitive Alternative
CosttoCustomer
Valueto Customer
High
Your Offering
NBCA 1
Low
High
Low
NBCA 2
2
19. Brand Your Brand Brand 1
Market Share 20% 40%
Processor Dual Core 2.5 GHz Dual Core 2.5 GHz
Hard Drive 1 TB 1 TB
RAM 8 GB 8 GB
Screen Size 15” 13”
Movie Conversion 1 hr 1 hr
HD Video Editing 50% faster 50% faster
3D Yes No
Jane’s Next Best Alternative
20. Identify Value Drivers3
Monetary Value Drivers Psychological Value Drivers
Size Brand
Capacity Design
Performance Courtesy
Delivery Speed Trust
Customer Service
21. Quantify Value Drivers4
Price
$600
+ -
Reference
Value
+ / - Value
Drivers
Three Main Quantification
Methods –
• Economic Value
Estimate
• Intrinsic value Analysis
• Conjoint Analysis
Product
Features
Value
Screen Size $
3D $
Brand $
22. Quantify Value Drivers
Price
$600
+$89
-$30
Reference
Value
+ / - Value
Drivers
Three Main Quantification
Methods –
• Economic Value
Estimate
• Intrinsic value Analysis
• Conjoint Analysis
Product
Features
Value
Screen Size $25
3D $64
Brand - $30
23. Quantify Value Drivers
Price
$600
+$89
-$30
Reference
Value
+ / - Value
Drivers
$600
$59
$659
Indifference
Price
Three Main Quantification
Methods –
• Economic Value
Estimate
• Intrinsic value Analysis
• Conjoint Analysis
Product
Features
Value
Screen Size $25
3D $64
Brand - $30
25. Value Assessment
$$ NA
TB
D
X
NA $$
Your Offering Customer NBCA 1
YourOfferingCustomer
Cost Assessment
? NA
X NA
X $$
Your Offering Customer
YourOfferingCustomer
NBCA1
NBCA 1
NBCA1
29. Resources
The Strategy and Tactics of Pricing
by Thomas T. Nagle, John Hogan, Joseph Zale
How to Put a Value Tag on Your Product
Whitepaper by Ed Arnold from LeveragePoint