The document discusses the importance of value-based innovation and pricing strategies for new products, emphasizing that innovation is defined by the value it creates rather than mere novelty. It outlines various pricing approaches, examines how customer perceptions of value influence their purchasing decisions, and highlights tools like Kano analysis and conjoint analysis for understanding customer needs and prioritizing product features. Additionally, it stresses the significance of capturing value through economic value analysis and the necessity of effective value communication to maximize market success.

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Today’s Speaker
Moderator:
Hector Del Castillo, PMP, CPM, CPMM
Presenter:
Jose A. Briones, Ph.D.
General Manager
SpyroTek Performance Solutions
Email: brioneja@spyrotek.com
Twitter: @Brioneja

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FEATURED PRESENTATION

7. Jose A. Briones, Ph.D.
SpyroTek Performance Solutions
Twitter: @Brioneja
www.Brioneja.com
AIPMM Webinar April 19, 2013

8. Background
 In this chapter of the Beyond Stage Gate
series we describe to how use value-based
innovation for new product introductions to
increase the probability of commercial
success
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Pricing of a New Product
 There are multiple ways to approach pricing for
a new product
 Cost-plus
 Competition-driven pricing.
 Customer-driven pricing
 Minimum Return on Investment (ROI)
 Cost in use analysis
 Value in use analysis
 We must move away from cost-based pricing to
value-based pricing

10. Definition of Value
 Value is
 A measure of the magnitude of how much an unmet need
is met
○ Desirability
○ Functionality
 Innovation is not a measure of the change you
make. It is a measure of the need you
address
 Maslow's hierarchy of needs
 Physiological
 Safety
 Love and Belonging
 Esteem
 Self-actualization
 Self-trascendence
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11. www.Brioneja.com
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Value and Innovation
 Innovation exists at the intersection of
invention and value
 If your new product/invention/service does
not offer value, it is just new - not innovative.

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Twitter: @Brioneja
How Do We Capture Value?
 Value is captured through
 Pricing
 Market share
 Brand awareness
 In order to capture value, we must first be
able to measure value

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Twitter: @Brioneja
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Relationship Between Innovation and
Value Creation
• Value Co-CreationDisruptive
• Joint Value DevelopmentRadical
• Value Sharing/SplitIncremental

14. Value in Use Analysis
 Clayton Christensen: Customers do not
buy products, they hire products to do a
job.
 Define the job your product is hired to do
and the benefit your customer gets from it
 Absolute price/unit is irrelevant. We
must compare cost in use and value in
use.
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www.Brioneja.com

15. 3 Types of Voice of the
Customer
 Unmet needs
 Job to be done
 Product features
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16. Gillette’s Custom Plus Disposable
 Amazon’s price of 3
Pack with 10
razors/pack: $10.61
 Cost/razor: $0.35
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www.Brioneja.com

17. Gillette’s Fusion
 Amazon’s price:
$16.95
 8 Cartridges
 Cost/cartridge: $2.12
Twitter: @Brioneja
www.Brioneja.com

18. Gillette’s Custom Plus vs. Fusion
 Price of product
$10.61 vs. 16.95
Fusion package is 50% more expensive
The custom plus package has 30 units vs. 8 for the
Fusion
 Cost in use
$2.12. vs $0.35 per razor.
 Fusion has a unit product cost 6 times higher than
Custom Plus
The customer believes that the additional value in use
that the Fusion provides justifies the additional cost in
use
 Durability of blade
 Comfort
 Less irritation Twitter: @Brioneja
www.Brioneja.com

19. 3M Scotch® Tape
 Amazon price: $1.00
 300’ length
 Cost per inch: $0.003
 Cost to hang a poster:
 $0.01
Twitter: @Brioneja
www.Brioneja.com

20. 3M Command® Strips
 Amazon Price: $1.95
 12 strips
 Cost per strip: $0.15
 Cost to hang a poster:
 $0.60
Twitter: @Brioneja
www.Brioneja.com

21. Scotch Tape vs. Command
Strips
 Price of product
 $0.99 vs. $1.95
 Scotch tape sells for half the price of Commander strips
 Using Scotch tape, the user can hang 75 posters vs. 3 for the
command strips
 Cost in use
 $0.01 vs $0.60 to hang one poster
 Commander strips have a product cost twice as high as
Scotch tape but 60 times the cost in use to hang up a
poster.
 Why would a customer choose to buy a product that has a cost in
use 60 times higher?
 The customer believes that the additional value in use that
Commander provides justifies the additional cost in use
○ Less damage to walls
○ Simplicity to remove
○ Durability
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www.Brioneja.com

22. Economic Value Definition
 Reference Value (RV): The cost of the competing
product that the customer views as the best alternative
to our product
 Differentiation Value: (DV) The value to the customer
(both positive and negative) of any differences between
our offering and the reference product.
 Economic value (EV): The price of the customer best
alternative (reference value) plus the value of whatever
differentiates the offering from the alternative
(differentiation value).
 EV=RV+DV
Twitter: @Brioneja
www.Brioneja.com

23. Economic Value Analysis
 Step 1: Identify the cost in use of the competitive
product or process that the customer views as the
best alternative
 Step 2: Identify all factors that differentiate your
product from the competitive offering
 Step 3: Determine the value to the customer of these
differentiating factors. Sources of value can be
subjective or objective.
 Step 4: Add up the reference value and the
differentiation value to determine the economic value.
Twitter: @Brioneja
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24. www.Brioneja.com
Twitter: @Brioneja
The Concept of “Hard” vs. “Soft” Value in
Use
 Hard or objective value in use is value which can be readily
quantified by the customer: “cash out the door”
○ Raw material savings
○ Energy savings
○ Reduction in spare parts cost
○ Product Features
 Soft or subjective value in use are benefits that, while real, can not
be quickly quantified or monetized immediately by the customer.
○ Improved safety
○ Improved quality
○ Environmental/Green benefits
○ Ease of use
○ User Experience (UX)

25. Value Split
 Value must be shared between seller
and customer
 Customer will not switch from alternative
technology unless new offering carries
enough value to make the switch
worthwhile
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26. PaperBoard Value Split
Example
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What should be the price of the additive?

27. PaperBoard Value Split
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28. Value Maximization
 In order to maximize value, we must determine the value
in use associated with our product by using mapping
tools
 There is no “perfect” value analysis technique. All
techniques will have advantages and disadvantages.
 The value captured by of your product will also depend
on the number of players in the value chain that will split
the value of the product
 Stop talking about attributes and start talking about
benefits
Twitter: @Brioneja
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29. www.Brioneja.com
Twitter: @Brioneja
29
Tools for Product Attribute Value
Analysis
Level 1
•Market Perceived Quality Profile
Level 2
•Kano Analysis
Level 3
•Conjoint Analysis

30. Market Perceived Quality Profile
(MPQP)
 Rank the importance of attributes on a 1-10
scale or by distributing a fixed number of
points (i.e. 100)
 Rank comparative performance of each
attribute
 Multiply performance by weight to obtain
overall product rating
Twitter: @Brioneja
www.Brioneja.com

31. MPQP Scooter
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32. MPQP Segway
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33. MPQP Example for
Adhesive
Attributes Importance
Rating
Performance
Rating
Performance
Rating
Durability 8 7 56
High Temperature
Resistance
9 8 72
High Quality 8 10 80
High Water Resistance 9 6 54
Low Price 10 8 80
Overall Rating 342
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www.Brioneja.com

34. iPad vs. Competitor’s
Tablets
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www.Brioneja.com Source: PCMagazine.com 10/29/10

35. iPad MPQP vs. Competition
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36. MPQP Issues
 Advantages
 Good for a first discussion with the customer and to generate
a basic list of requirements when little is known about the
market
 Provides overall product rating comparison
 Disadvantages
 No clear differentiation between important variables
 “Everything is important”
 “We want everything”
 Hard to quantify usability/ease of use
 We need further differentiation of the importance of
attributes to achieve sub-segmentation based on real
customer needs
 Kano Analysis
 Attribute Map
Twitter: @Brioneja
www.Brioneja.com

37. Kano Analysis
 Kano analysis is a tool which can be used to classify and prioritize
customer needs.
 Customer needs are not all of the same kind, not all have the same
importance, and are different for different populations
 Kano stated that there are four types of customer needs, or
reactions to product characteristics / attributes:
1. The 'Surprise & Delight' factors. These really make your product stand
out from the others. Example, a passenger jet that could take off
vertically
2. The 'More is Better'. E.g. a jet airliner that uses a little less fuel than the
competition.
3. The 'must be' things. Without this, you'll never sell the product. E.g. A jet
airliner that cannot meet airport noise regulations.
4. Finally, there are the 'dissatisfiers', the things that cause your customers
not to like your product. E.g. a jet airliner that is uncomfortable to ride in.
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38. Kano Example: Banking
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39. Attribute Map
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@Brioneja
www.Brionej
a.com
Attribute of Product or Service, Relative to Competing Offerings
Basic Discriminator Energizer
Positive
Non Negotiable:
Performs at least as
well as the
competition
Differentiator: Performs
better than competition
where it counts
Exciter: Performs better
than competitors
Negative
Tolerable:
Performs no worse
than the
competition
Dissatisfier: Performs
below the level of
competitors
Enrager: Must be corrected
at any cost( to capitalize on
competitor's negatives)
Neutral
So What?: Does
not affect the
purchasing
decision in a
meaningful way
Parallel: Influences
segment attitudes but is
not directly related to
product or service
performance

40. Limitations of Attribute Map and Kano
 The Kano model and the Attribute Map can be used to
help identify customer segments, based on the relative
priority of each segment's requirements.
 Disadvantages
 Kano analysis determines value of individual product
attribute but does not provide value of specific level within
the attribute
 Customers choose products based on the overall
profile of properties, rarely on one single property.
 Ranking of combination of properties may differ from
individual property rankings
 Conjoint analysis may be needed for breaking ties
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41. Conjoint Analysis
 Rather than directly ask customers what they prefer in a
product, or what attributes they find most important,
Conjoint Analysis employs the more realistic context of
respondents evaluating potential product profiles with
different combinations of attributes.
 By varying the combinations attributes and observing
the responses we can determine the real value of each
attribute and the magnitude of the value within each
attribute
 Forces the customer to make choices of what they are
willing to trade-off
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www.Brioneja.com

42. Types of Conjoint Strategies
 Conjoint Value Analysis (CVA)
○ Full-profile approach: Useful for measuring up
to six attributes
 Adaptive Conjoint Analysis (ACA)
○ Respondents do not evaluate all attributes at
the same time, which helps solve the problem
of "information overload"
 Choice-based Conjoint (CBC)
○ Respondents are shown a set of products on
the screen (in full-profiles) and asked to
indicate which one they would purchase
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43. Conjoint Techniques Application
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ACA CBC CVA
Six or fewer attributes X X X
More than six attributes X X(a)
More than nine levels
per attribute X
Computerized
questionnaire X X X(b)
Paper questionnaire X(c) X
Interactions X
Small sample size X X
Individual-level utilities X X

44. CVA Conjoint Analysis Example
Attributes Product A Product B Product C
Durability, years 2 2.5 1.5
High Temperature
Resistance, C
240 220 260
High Quality,
Impurities/lb
0.05 0.1 0.07
High Water Resistance,
hrs.
24 48 64
Price, $/lb 1.25 0.95 1.40
Customers’ Rating 8 7 9
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www.Brioneja.com
The exercise is repeated for multiple combinations and the
analyst or the computer can statistically deduce what product
features are most desired and which attributes have the most
impact on choice

45. The Value Box© Concept
 The Value Box is a tool to assess strategy based on an
overall picture of the value space
 The total cost of manufacture is the lower level of the box
 The minimum desirable ROI targets for the product form the next
lower levels of the box.
 Intermediate levels are set by the cost in use of competitive
technologies.
 The upper levels are set by the degree of value in use of the new
product
 The right axis can be the number of players in the value chain or
number of value sub-segments
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46. The Product Value Box© Concept
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www.Brioneja.com
Price Number of players
in the value chain
Time
Minimum
Floor
Price
Full Value
in
Use Price
Cost in Use
Competing
Technology
Total Cost of
Manufacture

47. The Product Value Box© Concept for a
Generic ProductPrice Number of players
in the value chain
Time
Target Return on Investment
“Hard + Soft” Value in Use Price
“Hard” Value in Use Price
Cost in Use
Competitive Technology
Minimum ROI
Retailer
Converter
Manufacturer
Total Cost of
Manufacture Twitter: @Brioneja
www.Brioneja.com

48. Value Box for PaperBoard
Example
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Price
Time
Cost of Production
100% Full Value in Use Capture
25% Value Capture Pricing
$5/lb
$2.5/lb
$1.3/lb
50% Split Value in Use Pricing
$1/lb

49. iPad Value Box
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Price
Time
iPad’s Cost of Manufacture
Kindle DX Price
Dell’s Mini 10 Netbook Price
$489
$399
Kindle’s Price
$270
$279
$259
Archos Droid Tablet Price
iPad’s 16G Price
$499

50. Pharmaceutical Pricing
 Return on Investment
 Price must compensate for entire investment
in R&D, trials – Well above cost of
production
 $700 MM to bring a new drug to market
 The fewer patients a drug helps, the more it
costs
 Value in Use Pricing
 What is the cost of alternative treatment?
 Pill vs. Surgery
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www.Brioneja.com

51. The Product Value Box© Concept a
Concept Pharmaceutical
Price
Time
Cost of Production/dose
Full Cost of Surgery to Treat Ailment
Price at Full Return of Investment including R&D and Trials
$50,000
$30,000
$10,000
50% Split Value in Use Pricing
$1000
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www.Brioneja.com

52. Hybrids vs. Non-Hybrids
 Is buying a hybrid car worth it?
 Gas savings vs. higher monthly payment
 Depends on
○ Gas mileage difference
○ Price of gasoline
○ Mileage driven/yr
○ Price differential of comparable models
Twitter: @Brioneja
www.spyrotek.com

53. The Product Value Box© Concept for
Toyota Prius
Price
Time
Discount Pricing Approach
Full “Hard + Soft” Value in Use Price
Full “Hard” Value in Use Price
Price of Competitive Technology, 40mpg economy car
$21,000
$13,500
$12,000
(Break even hard value for customer)
$11,000
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www.spyrotek.com

54. Value Co-Creation Case
Study
 Value is co-created with customers when a
customer is able to personalize his/her
experience using a firm’s product-service
proposition to a level that is best suited to
get his/her job(s) or tasks done. – Wim
Rampen
www.Brioneja.com
Twitter: @Brioneja

55. Augmented & Alternative
Communication
 Augmentative and Alternative
Communication (AAC) refers to
methods and devices that
supplement or replace speech and
writing when these are temporarily
or permanently impaired
 Until a few years ago AAC
communication devices consisted
of bulky electronic boards costing
over $7 K each
 Best known example:
 Stephen Hawking
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Twitter: @Brioneja

56. Disruptive Innovation: iPad and
AAC
 iPad apps are being used by
special needs children, such
as those who have speech
impediments as a
communication tool
 New apps give a person the
ability to communicate basic
needs and interests through
the use of pictured images
and corresponding audio.
www.Brioneja.com
Twitter: @Brioneja

57. Features vs. UX/UI
 Features
 Images & Symbols
 Can add more images
 # of Audio Voices
 Can Record Voices
 Create phrases
 Can add categories
 Text to speech
 Quality of audio
 Automatic conjugations
 Word prediction
 In-App expansion
 UX/UI
 Usability/Navigation (UI)
 Customization
 Communication capability
 Visual appeal
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Twitter: @Brioneja

58. Customization
 Customization to the individual’s
communication level and needs is
critical for usability
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59. AAC Apps – Features
Analysis
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Twitter: @Brioneja
Features
Images & Can add # of Audio Can Record Create Can add Text to Quality of Automatic Word in-App
Symbols more images Voices Voices Phrases categories Speech Audio Conjugations Prediction Expansion
TouchChat 10,000 Y 3 Y Y Y Y High Y Y Y
Proloquo2Go 8,000 Y 3 Y Y Y Y High Y Y N/A
Expressive 650 Y 2 Y Y Y N/A High N/A N/A N/A
One Voice 100 Y 4 Y Y Y Y High N/A N/A N/A
iComunicate 10,000 Y 1 Y N/A N/A Y Low N/A N/A N/A
Grace 100 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A

60. UX/UI
 How easy is it to use,
navigate?
 How much knowledge is
required about programming
or manuals?
 How simple and intuitive is to
setup and customize to the
individual’s communication
level and needs?
 What is the level of
communication capability
that the app can provide?
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Twitter: @Brioneja

61. UX/UI Capability Ratings
www.Brioneja.com
Twitter: @Brioneja
User Experience
Usability Setup Communication Visual
Navigation Customization Capability Appeal
TouchChat Complex Complex Advanced Medium
Proloquo2Go Complex Complex Advanced Excellent
Expressive Easy Easy Medium Excellent
One Voice Medium Easy Low Excellent
iComunicate Easy Minimal Entry Level Low
Grace Easy Minimal Entry Level Good

62. Features vs. UX/UI
www.Brioneja.com
Twitter: @Brioneja
Features/
Capability
UX/UI
TouchChat
Proloquo2Go
Expressive
iCommunicate
Grace
OneVoice
Area of Opportunity

63. Summary
 To be successful in the marketplace and create
innovations, products must deliver clear value
that addresses unmet needs
 Value in use can be measured and quantified
 Pricing is a tool used to share the value with the
customer
 The Value Box© is a new tool to facilitate the
mapping of the value space and determine the
best commercial strategy
Twitter: @Brioneja
www.Brioneja.com

64. Contact Information
 Brioneja@SpyroTek.com
 www.Brioneja.com
 Twitter: @Brioneja
www.Brioneja.com
Twitter: @Brioneja

65. © AIPMM 2013 www.aipmm.com @AIPMM
Q&A
Moderator:
Hector Del Castillo, PMP, CPM, CPMM
Presenter:
Jose A. Briones, Ph.D.
General Manager
SpyroTek Performance Solutions
Email: brioneja@spyrotek.com
Twitter: @Brioneja

66. © AIPMM 2013 www.aipmm.com @AIPMM
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Hector Del Castillo, PMP, CPM, CPMM
Transforming products to wealtht for technology-based organizations.TM
Product Marketing Director
hmdelcastillo [at] aipmm.com

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