This document summarizes an approach called customer value accounting that combines traditional marketing techniques to evaluate customer perceived value of products. It discusses how the approach integrates importance-performance analysis, engineering economics, and conjoint analysis. It provides an example analyzing room air cleaners that combines cost-in-use data with performance scores on key attributes to estimate the monetary worth differences between products based on their relative performance. The goal is to understand customer perceived value in order to set rational prices based on value rather than just costs.
10 marketing activities to improve your bottom lineSomething Big
It’s crucial to review your marketing efforts at year-end in order to improve productivity and effectiveness. It could have a significant impact on whether you meet your annual targets, as well as what next year has in store for your business.
Read our advice for what you need to think about during the festive period.
If you need any support with your marketing and communications activities, or want to discuss ideas for future campaigns, get in touch via hello@somethingbig.co.uk or 01483 746650.
Need help planning your marketing communications? This guide was prepared for precisely that task by the senior strategists at LOOMIS, the country's leading challenger brand advertising agency. Want help with the process? Just give us a call at (972) 331-7000. Otherwise, we hope you find this to be a useful tool for your own planning efforts.
Good luck!
Mike Sullivan
President, LOOMIS
The Internet has given rise to a new dynamic where the buyer is in control. As a result, marketing teams need access to new skillsets. Get some clarity on what these are.
10 marketing activities to improve your bottom lineSomething Big
It’s crucial to review your marketing efforts at year-end in order to improve productivity and effectiveness. It could have a significant impact on whether you meet your annual targets, as well as what next year has in store for your business.
Read our advice for what you need to think about during the festive period.
If you need any support with your marketing and communications activities, or want to discuss ideas for future campaigns, get in touch via hello@somethingbig.co.uk or 01483 746650.
Need help planning your marketing communications? This guide was prepared for precisely that task by the senior strategists at LOOMIS, the country's leading challenger brand advertising agency. Want help with the process? Just give us a call at (972) 331-7000. Otherwise, we hope you find this to be a useful tool for your own planning efforts.
Good luck!
Mike Sullivan
President, LOOMIS
The Internet has given rise to a new dynamic where the buyer is in control. As a result, marketing teams need access to new skillsets. Get some clarity on what these are.
Marketing Automation sounds like the perfect solution, but perhaps it hasn’t delivered quite as well as you thought? Here are 10 reasons why Marketing Automation missions fail, and the solutions behind them!
A quick guide on what Marketing Automation is, steps to success in launching your campaigns, how to optimise activity and enables sales to help drive revenue.
Strategic Marketing Services is a 360 Degree Marketing Agency & Marketing Services Outsourcing expert. Our clients value our relentless focus on results and Return on Marketing Investment. Our approach is, first and foremost, anchored around your pain points and objectives. Secondly – tools and channels – always with a clear objective and ROMI focus in mind. To that end, our Strategic Marketing Consulting Unit and our Client Performance Units are instrumental in meeting and exceeding our clients' expectations. Since its inception in 1999, Strategic Marketing Services is committed to providing result oriented digital marketing. Strategic has grown to be an 1800+ strong company. Spread across US and India, we have catered to over 40% of Fortune 500 companies in both B2B and B2C.
Strategic Marketing Services is a one-stop shop for the entire range of marketing services and solutions. We create marketing concepts, develop strategies, execute and help companies' market services and solutions on a global scale.
Marketing Communications Audit - Template by Brand AuditorDaniel Diosi
Identify the strengths and weaknesses of your brand marketing communications, benchmarking your performance with the industry average.
This audit offers a comprehensive analysis based on expert ratings, in-market customer survey feedback, and 3rd party data. The report will give you specific insights on how to improve the execution of your brand marketing communications, become more relevant for your audience and improve your marketing effectiveness overall.
This audit is suitable for:
- Startups, before finding investors
- Startups, before launching marketing campaigns
- Small companies
- E-commerce websites
- Medium-sized enterprises
- One-person businesses
The 19-page audit covers the following sections:
- Brand personality
- Multi-channel content
- Public relations
- Advertising
In each section, 5 items are analyzed. In total, your report will include the evaluation of 20 key points of your marketing communications management.
Each section includes the following insights:
- Ratings from expert auditors
- Results of in-market customer perceptions survey
- Strengths and weaknesses between you and industry average
- Feedback from in-market customers
- Brief suggestions from expert auditors
Insights are based on first-hand data collected from targeted in-customers surveys, expert opinions, and 3rd party data.
Visit www.brandauditor.me for more information
This report presents the findings of Inbound Marketing research, providing all marketers with a useful set of benchmarks to compare their use of these approaches.
Online And Offline Marketing Proposal PowerPoint Presentation SlidesSlideTeam
If your company needs to submit a Online And Offline Marketing Proposal PowerPoint Presentation Slides look no further.Our researchers have analyzed thousands of proposals on this topic for effectiveness and conversion. Just download our template, add your company data and submit to your client for a positive response. http://bit.ly/2vq0WXH
2016 Lead Nurturing Report In Partnership With Salesforce PardotVeena Glover
Lead nurturing is a powerful marketing strategy and it is evident that marketers would like to continue reaping the rewards of their nurturing programs by setting a variety of objectives that revolve around this indispensable tool.
emedia and Pardot set out to discover the latest and greatest lead nurturing strategies currently deployed by the top tier marketers to drive their prospects through the buying cycle.
This report draws its conclusions from a 2016 survey that polled a large sample of B2B marketers based in EMEA and US/NA.
Insight into the mind of your peers: Discover the benefits that marketers have reaped, challenges they've faced and the future goals that they're now aspiring to.
You'll find top tips on numerous topics including segmenting data, personalising programs and marketing automation. This report will fuel your future plans and help you to design and implement successful lead nurturing campaigns.
Driving SEO with Press Releases How-To GuideDemand Metric
This How To Guide will explain how press releases can boost SEO efforts, how to write press releases for SEO, the pros and cons of doing so and conclude with an action plan on using press releases in your SEO efforts.
For decades, press releases were the basic building blocks of a public relations strategy. A company that wanted press coverage would write and issue a press release. The more skilled the company was at media relations, the better this strategy worked. Press releases still serve this purpose, although a new and important use of press releases has evolved as a tool for Search Engine Optimization (SEO).
For companies whose websites are key to revenue generation, the SEO benefits are the primary motivation for writing and issuing press releases. If releases also produce favorable media coverage, that’s viewed as a bonus. The benefits of this SEO strategy result from the links a press release can produce back to the issuer’s website. These links are known as backlinks. The more external, authentic backlinks a website has pointing to it, the higher it ranks on a Search Engine Results Page (SERP). While this strategy is conceptually simple to grasp, executing it effectively requires some insider knowledge of both media relations and SEO.
Read this brief 8-page guide to understand the following:
How press releases boost SEO
Writing press releases for SEO
The pros and cons of a press release SEO strategy
Using press releases in your SEO efforts
Demand Metric's How-To Guides are designed to provide practical, on-the-job training and education and provide context for using our premium tools & templates. If there is a topic that you would like to see covered, please contact us at info@demandmetric.com to make a content request.
Dr. Paul Frost, a Digital Strategist in our London office, presented at Event Tech Live this year. His presentation is titled "Creating effective digital ecosystems: Amplifying audience footprints through end to end digital enablement."
Onset of digital and the integration of sales and marketing is redefining the way B2B demand generation programs can be successfully run. In this 20 slide eBook we break down some of the basics of running a B2B marketing 2.0 campaign.
Marketing Automation sounds like the perfect solution, but perhaps it hasn’t delivered quite as well as you thought? Here are 10 reasons why Marketing Automation missions fail, and the solutions behind them!
A quick guide on what Marketing Automation is, steps to success in launching your campaigns, how to optimise activity and enables sales to help drive revenue.
Strategic Marketing Services is a 360 Degree Marketing Agency & Marketing Services Outsourcing expert. Our clients value our relentless focus on results and Return on Marketing Investment. Our approach is, first and foremost, anchored around your pain points and objectives. Secondly – tools and channels – always with a clear objective and ROMI focus in mind. To that end, our Strategic Marketing Consulting Unit and our Client Performance Units are instrumental in meeting and exceeding our clients' expectations. Since its inception in 1999, Strategic Marketing Services is committed to providing result oriented digital marketing. Strategic has grown to be an 1800+ strong company. Spread across US and India, we have catered to over 40% of Fortune 500 companies in both B2B and B2C.
Strategic Marketing Services is a one-stop shop for the entire range of marketing services and solutions. We create marketing concepts, develop strategies, execute and help companies' market services and solutions on a global scale.
Marketing Communications Audit - Template by Brand AuditorDaniel Diosi
Identify the strengths and weaknesses of your brand marketing communications, benchmarking your performance with the industry average.
This audit offers a comprehensive analysis based on expert ratings, in-market customer survey feedback, and 3rd party data. The report will give you specific insights on how to improve the execution of your brand marketing communications, become more relevant for your audience and improve your marketing effectiveness overall.
This audit is suitable for:
- Startups, before finding investors
- Startups, before launching marketing campaigns
- Small companies
- E-commerce websites
- Medium-sized enterprises
- One-person businesses
The 19-page audit covers the following sections:
- Brand personality
- Multi-channel content
- Public relations
- Advertising
In each section, 5 items are analyzed. In total, your report will include the evaluation of 20 key points of your marketing communications management.
Each section includes the following insights:
- Ratings from expert auditors
- Results of in-market customer perceptions survey
- Strengths and weaknesses between you and industry average
- Feedback from in-market customers
- Brief suggestions from expert auditors
Insights are based on first-hand data collected from targeted in-customers surveys, expert opinions, and 3rd party data.
Visit www.brandauditor.me for more information
This report presents the findings of Inbound Marketing research, providing all marketers with a useful set of benchmarks to compare their use of these approaches.
Online And Offline Marketing Proposal PowerPoint Presentation SlidesSlideTeam
If your company needs to submit a Online And Offline Marketing Proposal PowerPoint Presentation Slides look no further.Our researchers have analyzed thousands of proposals on this topic for effectiveness and conversion. Just download our template, add your company data and submit to your client for a positive response. http://bit.ly/2vq0WXH
2016 Lead Nurturing Report In Partnership With Salesforce PardotVeena Glover
Lead nurturing is a powerful marketing strategy and it is evident that marketers would like to continue reaping the rewards of their nurturing programs by setting a variety of objectives that revolve around this indispensable tool.
emedia and Pardot set out to discover the latest and greatest lead nurturing strategies currently deployed by the top tier marketers to drive their prospects through the buying cycle.
This report draws its conclusions from a 2016 survey that polled a large sample of B2B marketers based in EMEA and US/NA.
Insight into the mind of your peers: Discover the benefits that marketers have reaped, challenges they've faced and the future goals that they're now aspiring to.
You'll find top tips on numerous topics including segmenting data, personalising programs and marketing automation. This report will fuel your future plans and help you to design and implement successful lead nurturing campaigns.
Driving SEO with Press Releases How-To GuideDemand Metric
This How To Guide will explain how press releases can boost SEO efforts, how to write press releases for SEO, the pros and cons of doing so and conclude with an action plan on using press releases in your SEO efforts.
For decades, press releases were the basic building blocks of a public relations strategy. A company that wanted press coverage would write and issue a press release. The more skilled the company was at media relations, the better this strategy worked. Press releases still serve this purpose, although a new and important use of press releases has evolved as a tool for Search Engine Optimization (SEO).
For companies whose websites are key to revenue generation, the SEO benefits are the primary motivation for writing and issuing press releases. If releases also produce favorable media coverage, that’s viewed as a bonus. The benefits of this SEO strategy result from the links a press release can produce back to the issuer’s website. These links are known as backlinks. The more external, authentic backlinks a website has pointing to it, the higher it ranks on a Search Engine Results Page (SERP). While this strategy is conceptually simple to grasp, executing it effectively requires some insider knowledge of both media relations and SEO.
Read this brief 8-page guide to understand the following:
How press releases boost SEO
Writing press releases for SEO
The pros and cons of a press release SEO strategy
Using press releases in your SEO efforts
Demand Metric's How-To Guides are designed to provide practical, on-the-job training and education and provide context for using our premium tools & templates. If there is a topic that you would like to see covered, please contact us at info@demandmetric.com to make a content request.
Dr. Paul Frost, a Digital Strategist in our London office, presented at Event Tech Live this year. His presentation is titled "Creating effective digital ecosystems: Amplifying audience footprints through end to end digital enablement."
Onset of digital and the integration of sales and marketing is redefining the way B2B demand generation programs can be successfully run. In this 20 slide eBook we break down some of the basics of running a B2B marketing 2.0 campaign.
Customer Value Analysis: How Customers Make Purchase DecisionsEndeavor Management
Customers make purchase decisions by their perception of product quality versus price. Learn the key questions and tools needed to define their perceptions using our whitepaper: Customer Value Analysis: How Customers Make Purchase Decisions.
Question 3 Are the Company’s Prices and Costs CompetitiveOne o.docxsimonlbentley59018
Question 3: Are the Company’s Prices and Costs Competitive?
One of the most telling signs of whether a company’s business position is strong or precarious is whether its prices and costs are competitive with industry rivals.
Price-cost comparisons are especially critical in a commodity-product industry where the value provided to buyers is the same from seller to seller, price competition is typically the ruling force and lower-cost companies have the upper hand.
Two analytical tools are particularly useful in determining whether a company’s prices and costs are competitive and thus conducive to winning in the marketplace:
value chain analysis and benchmarking.
Core Concept
The higher a company’s costs are above those of close rivals, the more competitively vulnerable it becomes.
The Concept of a Company’s Value Chain
The value chain consists of two broad categories of activities:
a.
Primary activities: foremost in creating value for customers
b.
Support activities: facilitate and enhance the performance of primary activities
Figure 4.3, A Representative Company Value Chain, depicts the linked set of value creating activities.
Core Concept
A company’s
value chain identifies the primary activities that create customer value and the related support activities.
Why the Value Chains of Rival Companies Often Differ
A company’s value chain and the manner in which it performs each activity reflect the evolution of its own particular business and internal operations, its strategy, the approaches it is using to execute its strategy, and the underlying economics of the activities themselves.
Because these factors differ from company to company, the value chain of rival companies sometimes differs substantially – a condition that complicates the task of assessing rivals’ relative cost positions.
The Value Chain System for an Entire Industry
Accurately assessing a company’s competitiveness in end-use markets requires that company managers understand the entire value chain system for delivering a product or service to end-users, not just the company’s own value chain.
Core Concept
A company’s cost competitiveness depends not only on the costs of internally performed activities (its own value chain) but also on costs in the value chain of its suppliers and forward channel allies.
Suppliers’ value chains are relevant because suppliers perform activities and incur costs in creating and delivering the purchased inputs used in a company’s own value chain.
Forward channel and customer value chains are relevant because:
3.
a. The costs and margins of a company’s distribution allies are part of the price the end user pays
b. The activities that distribution allies perform affect the end user’s satisfaction
Figure 4.4, A Representative Value Chain for an Entire Industry, explores a value chain for an entire industry.
Activity-Based Costing: A To.
2Photo of a man holding a knight chess piece and using it to tip.docxtamicawaysmith
2
Photo of a man holding a knight chess piece and using it to tip over a bishop chess piece.
Dominik Pabis/Vetta/Getty Images
Gaining Competitive Advantage Through Operations
Learning Objectives
After completing this chapter, you should be able to:
Understand how business processes create competitive capabilities that enable organizations to satisfy customer requirements.
Explain how operations management can maintain an organization's competitive edge through high-quality production, convenient delivery, effective customer service, and competitive cost.
Describe key business processes including strategy development, product development, system creation to produce services and goods, and order fulfillment.
Discuss why operations are strategically important.
List and define the steps necessary to link operations to corporate strategy.
Describe how operations managers use information technology to increase productivity, improve quality, provide a safer environment, and reduce costs.
2.1
Achieving Competitive Advantage
Photo of a runner crossing the finish line.
Stockbyte/Thinkstock
A competitive advantage gives an organization the edge over its competition. By improving profits, increasing market share, and expanding into new areas, operations can work toward achieving this desired advantage.
Operations presents top management with many opportunities to develop competitive advantages. A competitive advantage is a capability that customers value, such as short delivery lead-time or high product quality that gives an organization an edge against its competition. When properly used, operations can be an important tool for improving profits, increasing market share, and developing new markets. A firm's market share is its percentage of sales in a particular market, that is, its sales divided by total sales for all organizations competing in a particular market.
An organization creates a competitive advantage by giving customers what they want in a better way than other companies. What do customers want, or in other words, what do they value? Figure 2.1 provides a model for understanding how an organization can deliver competitive advantage to its customers. An organization should know its external environment (threats and opportunities) and its internal environment (strengths and weaknesses), and have a clear understanding of the customers it is trying to serve. This is often called "SWOT analysis," for strengths, weaknesses, opportunities, and threats. An in-depth understanding of customer requirements allows the firm to determine a set of competitive capabilities that will enable it to delight, rather than merely satisfy, customers. These competitive capabilities are, in turn, the result of well-designed business processes. These key business processes are cross-functional and require operations managers to work closely with their counterparts in accounting, finance, information systems, marketing, and other d ...
Connecting B2C to B2B: a Top Down Approach for Industrial DistributorsStephane Bratu
In this article, the author discusses the importance for pricers in many industries – and particularly in the distribution industry – of engaging in both business-to-business and business-to-consumer markets. This article focuses on proposing a new way to execute pricing strategies and operations for industrial distribution companies that sell both to other businesses (B2B) and directly to consumers (B2C). This industry specific example provides pricing strategies and analytic approaches that can be applied by pricers in multiple businesses and markets. Dr. Stephane Bratu is Direc- tor of Pricing and Analytics at Arrow Electronics.
Internal analysis, the six fundamental questions answered in analyzing the internal environmental of business.How well the company’s present strategy working,Discuss the difference between corporate level strategy and business level strategy,the four building blocks and their impact on overall company strategy,Define horizontal and vertical integration with example,explain the five major competitive strategy?
Estimating the Software Product Value during the Development ProcessPaul Houle
Nowadays software companies are facing a fierce competition
to deliver better products but offering a higher value to the customer.
In this context, software product value has becoming a major concern
in software industry, leading for improving the knowledge and better
understanding about how to estimate the software value in early development
phases. Other way, software companies encounter problems such
as releasing products that were developed with high expectations, but
they gradually fall into the category of a mediocre product when they
are released to the market. These high expectations are tightly related
to the expected and offered software value to the customer. This paper
presents an approach for estimating the software product value, focusing
on the development phases. We propose a value indicators approach to
quantify the real value of the development products. The aim is early
identifying potential deviations in the real software value, by comparing
the estimated versus the expected. We present an internal validation
to show the feasibility of this approach to produce benefits in industry
projects.
The Price comparison to competition (updated 2023).docxintel-writers.com
Price comparison to competition
is a crucial aspect of business strategy and marketing. It involves analyzing and evaluating the prices of products or services offered by a company in relation to its competitors in the marketplace. By understanding the pricing landscape, businesses can make informed decisions to set competitive prices that attract customers while maintaining profitability.
some key points to discuss regarding price comparison to competition:
1. Market Research: To conduct an effective price comparison, businesses need to gather comprehensive market research data on competitors’ pricing strategies. This involves studying the prices of similar or substitute products, identifying price trends, and analyzing pricing models used by competitors.
2. Differentiation: Price comparison helps businesses identify their unique selling proposition and positioning in the market. By comparing prices, businesses can evaluate their products or services’ value proposition and differentiate themselves from competitors based on factors such as quality, features, customer service, or brand reputation.
3. Competitive Advantage: Price comparison provides insights into the competitive landscape and helps businesses identify their competitive advantage. It allows them to assess whether they offer products or services at a lower price, higher quality, or with additional value compared to competitors. Understanding this advantage helps businesses position themselves effectively to attract customers
2. 1
Value-Based Marketing & Pricing
Bradley T. Gale and Donald J. Swire
(October 2006)
Today, many companies are shifting from cost-based pricing to customer-perceived value
analysis and value-based pricing. The benefits of this shift include developing a better
understanding of:
What factors differentiate your product from the competition
How much those differences are really worth to the customer
How much of a price premium (if any) you should be able sustain over the competitors
What improvements to your product would add the most value from the customers’
perspective
How you should position and promote your product to stress your comparative
advantages
Value-Based Marketing and Pricing describes the tools that Customer Value, Inc. uses to help
companies achieve a comprehensive, consistent approach for appraising their customer-
perceived value versus rival brands and executing value-based pricing.
Contents
1. Approaches to Customer Value Measurement -- provides an overview of some
popular approaches to the problem of valuation and shows how they can be extended and
combined
2. Customer Value Accounting for Value-Based Pricing -- Combining Cost-In-Use
Estimates and Attribute Performance Scores -- presents a case example of how to
combine cost-in-use analysis and attribute performance scores and set a fair price
3. Building a Value-Based Marketing Strategy System -- explains how to use the
Marketing War Room™ software toolkit to create a physical war room setting for
supporting deliberations regarding product-line and multi-product, division strategy.
3. 2
Section 1
Approaches to Customer Value Measurement
All customers want good products and no customers want to overpay. Regardless of the product
category, it is the customers’ perception of value that will determine which vendor gets their
business. For this reason, it is important for companies who make and price products to
understand how much their products are worth.
A product’s worth depends on how it stacks up against competing products. If it is a better-than-
average product, it is worth more than average. Such products could be sold for a premium price.
On the other hand, customers will often tolerate reduced performance if they can get the product
at an economy price. Customer value measurement and accounting is a structured approach for
comparing a product or service against the competition to understand its comparative strengths
and weaknesses, assess its worth, and provide a rational basis for setting its price.
Traditionally, the primary approaches for analyzing differences in the worth (or value) of
competing products to potential buyers in a product-market category were:
Importance-Performance Analysis
Engineering Economics
Conjoint (tradeoff) Analysis
Customer value accounting, developed at Customer Value, Inc., combines and extends aspects of
these traditional approaches to provide a comprehensive system for measuring the differences in
worth/value among competing products. Here we outline the key features of the component
approaches. In Section 2, we provide a case illustration that combines a monetized importance-
performance analysis with a cost-in-use, engineering economics analysis.
Importance-Performance Analysis
Importance-performance analysis is a technique frequently used in business on both the selling
side and the buying side of a purchase. The technique uses a “scorecard” (CVI refers to this as a
“market profile”) for comparing different products. Listed across the top of this table are the
different competing products in the category. The rows show different “attributes” (also called
“key buying factors”), aspects of the product or service (e.g. “Power” or “Appearance”) that are
important to the customer. In this grid, each product is given a “score” showing that product’s
performance on each attribute. Because some attributes are more important than others to the
customer, each attribute is also given an “importance weight”, a measure of its relative
importance. Hence the name: “Importance-Performance Analysis”.
For marketing applications, the data supporting importance-performance analysis often comes
from market research surveys. These studies provide customer-perceived performance scores for
a predefined set of attributes for each product/brand competing in a market category. They also
4. 3
provide data on the relative influence weights for each attribute. Such studies are similar to
“customer-satisfaction” surveys in that they collect customers’ perceptions of performance,
typically on, say, a 1-to-10 scale. However, to support customer-value accounting, surveys must
sample the customers of all of the key vendors in the market category, not just the customers of a
single vendor.
Traditional market perception studies provide insights into differences in the value delivered to
customers by each brand. But, typically these studies do not provide estimates of the worth
differences in financial, or monetary, terms. “Dollarizing” these data is one of the key extensions
to the traditional analyses provided by CVI.
Monetized Importance-Performance Analysis
At CVI we use a hybrid approach to combine (a) monetary price data from competitive
intelligence with (b) 1-to-10 performance data and data on importance weights from market
perception studies. We call this hybrid approach a monetized importance-performance analysis.
The currency can be $ US, Euros, etc. A monetized importance-performance analysis provides
estimates of the worth (or value) of the differences in performance scores among competing
products, by attribute. Section 2 provides an example of how such analyses work. An interesting
feature of this approach is that it enables us to monetize the worth differences associated with
performance differences on not only the functional dimensions of customer value analysis, like
product attributes and service attributes, but also the dimensions that yield differences in
psychological benefits, like relationship attributes and brand affinity attributes.1
Engineering Economics
Some products are more expensive than others to purchase. However, costs don’t stop with the
purchase; some products may be more expensive to own or operate than others. Engineering
economics focuses on quantifying the costs of owning and using one product versus other
products. Other terms used for this kind of analysis are “value engineering”, “cost-in-use
analysis”, and “economic value analysis.”
People using an engineering economics approach typically focus on quantifying those costs that
might be affected by choosing one product over another. The approach is useful when studying
operations or logistics costs. The approach is more difficult to apply when trying to quantify the
worth of performance attributes not usually discussed in purely monetary terms (for example,
safety in use or aesthetics). Economic value analysis is useful when assessing a new technology
versus an established technology, especially when the focus is on doing the job cheaper rather
than better.
Using new software tools (see below), practitioners can now produce a hybrid analysis that
combines (a) cost-in-use data from an engineering economics study with (b) the purchase price
data and a monetized importance-performance analysis. The hybrid analysis covers the cost
5. 4
savings, the worth of functional benefits, and the worth of psychological benefits of each product
versus any other product in the market category.
Conjoint (tradeoff) Analysis
Conjoint analysis is a form of market research typically applied to the design of new products.
The focus is on understanding how much value possible features or performance improvements
might add to the worth of the product. Practitioners use conjoint analysis to select which features
to include in the product and to choose enhanced performance levels that seem to add the most
value relative to the cost of improving performance.
By itself, conjoint analysis does not assess the performance differences and associated worth
differences of products actually competing in a market category. The choices offered to
respondents in a conjoint survey are typically a hypothetical construct of what various offers
could be.
On rare occasions, a company may carry out both a market perception study and a tightly
coupled conjoint study. In such cases, if a monetary selling price variable is included in the
conjoint study, the conjoint data can be used to estimate the increased price that people are
typically willing to pay for better composite overall performance. This information can be used
to calibrate the trade off of higher prices paid for better performance that we use in a monetized
importance-performance analysis based on market perception data.
Customer Value Accounting integrates the pieces
As noted above, customer value accounting is a comprehensive system of analysis that integrates
whatever data is available from
Importance-performance analysis based on market perception studies
Price data from competitive intelligence
Engineering Economics studies
Conjoint Analyses that are tightly couple to market perception studies
In the next section, we show an example of customer-value accounting in action.
6. 5
Section 2
Customer Value Accounting for Value-Based Pricing
Combining Cost-In-Use Estimates and Attribute Performance Scores
As we have seen, two widely used approaches to measuring the differences in worth among
competing products are engineering economics (cost-in-use analysis) and importance-
performance analysis. Customer value accounting, developed at Customer Value, Inc., combines
and extends aspects of these traditional approaches to provide a comprehensive system for
measuring the differences in worth/value among competing products. In this section we use
customer value accounting to illustrate how to integrate data on cost-in-use with data on
importance, performance, and equipment price for room air cleaning equipment.
Comparing Products In Terms of Cost-In-Use
Let’s start with the analysis of cost-in-use differences. To illustrate the process, we use an
evaluation of room air cleaners published by Consumer Reports. The article provided a cost-in-
use analysis for energy and filter costs for each of the sixteen air cleaner models evaluated.
Consumer Reports measured the number of kilowatts of electricity used by each model,
estimated annual kilowatt-hour consumption, and monetized the differences in energy
consumption using the average cost per kilowatt-hour in the US. Filter costs were calculated in a
similar fashion – Consumer Reports engineers calculated the estimated number of filters used by
a model in a year times the cost per filter. Knowing the cost per kilowatt-hour and cost for each
vendor’s filters made it easy to convert energy and filter usage into annual energy and filter costs
for each of the sixteen room air cleaner models evaluated.
Differing costs in using the product make some air cleaner models more valuable than others. If
energy usage is the sole difference between two air cleaners, the model that uses less energy will
be worth more to consumers. Cost-in-use analysis helps to quantify how much more. For
example, based on the sixteen models evaluated, the price of the average air cleaner is $209.
Relative to the average air cleaner, the best performing Frederich model saves $3 in energy and
$71 in filter usage over a two-year period. Based on these cost-in-use differences, the Frederich
model is worth $283 -- $74 more than the average model.
Comparing Products on the Basis of Performance Differences
The different brands of air cleaners differ in terms of the cost of owning and operating. That fact
makes certain brands worth more than others. However, there are typically other differences that
customers should consider when making a purchase. Generally we refer to these as performance
differences. Quantifying the worth differences associated with different levels of performance on
benefit attributes, like removes dust and removes smoke in the air cleaner case, is much more
difficult. In the following sections we will outline customer value accounting, a technique for
7. 6
inferring the differences in incremental value associated with a product’s performance
differences on benefit attributes relative to competing products.
It is usually difficult to calculate directly the monetary value of all performance differences
among products. However, using the right tools, you can infer the worth of your comparative
advantages and disadvantages. Customer value accounting consists of three basic steps. First we
have to define what we mean by overall performance. Then we measure the performance of our
products and the competing products. Finally, we compare the overall performance of the
products in the market with the prices they command. This gives us a sense of the price
premiums that are justified by superior performance.
How should overall product performance be measured? The standard approach, used by market
research firms, Consumer Reports Magazine, and most marketing departments, is to break down
performance into a list of what are commonly referred to as “key buying factors.” These are the
product and service attributes that customers look at in determining which brand to purchase.
Once these factors are identified, each vendor’s products can be given a “score” reflecting
performance on each attribute. These scores are the basis for assessing overall performance.
Overall performance is thus a composite, weighted average, of the performance scores on the
individual key buying factors.
It is important to note that the attribute list should include all of the key factors that are important
to the customer. Generally, these will include product features, quality, and service. The
attribute list may also include aspects of the relationships that exist between buyer and seller,
and, occasionally, factors that reflect customers’ affinity for certain brands apart from the
brands’ product and service characteristics.
The customer value accounting process starts with a simple table that shows the different
performance levels of competing products. Here is the abbreviated market profile for room air
cleaners. It shows the performance scores of six of the sixteen room air cleaner models on four
performance attributes on a 1 to 10 point scale. The complete market profile spreadsheet would
show scores for the other ten brands where the white band is located in the middle of this exhibit.
In addition to estimating the cost-in-use data for energy and filter usage described above,
Consumer Reports evaluators measured how well each room air cleaner removed dust and
smoke. These are efficacy attributes. The evaluation also covered noise (a side effect) and ease
of use. To set the stage for calculating a weighted overall performance level, we have
transformed the underlying performance metrics, like particles of dust per measure of volume or
decibels of noise, onto a comparable, 1 to 10, scale.
In addition to performance scores, the market profile shows the relative weight or influence of
each benefit attribute. We use these weights to reflect the leverage that each attribute has in the
vendor selection process. Weighted performance scores measure how models stack up on overall
performance. This is the primary measure of performance that we use in evaluating the worth of
a product.
8. 7
Next we describe how to monetize the added value created by brands that outperform
competitors on key benefit attributes.
The Customer Value Map and Fair-Value Line
The key tool that product and pricing managers use to assess the worth of their products in the
marketplace is the customer value map. Using customer value accounting, we can infer the worth
differences associated with the efficacy, side effects, and ease-of-use attributes.
First, we produce a customer value map for the room air cleaner models. In this example the
value map is a plot of total cost versus overall performance on the four benefit attributes. Total
cost is the price of the air cleaner plus electricity and filter costs for the relevant time period.
Second, we establish the tradeoff that customers are willing to make by paying more for better
performing products. Generally, as in the room air cleaner market, the value map will show
products to be differentiated from each other in both the vertical and the horizontal dimensions.
Products plotted in the lower right (high performance, low price) are good deals for customers;
products in the upper left (high price, low performance) are bad deals.
Looking at this value map, we find that in order to get better than average overall performance
customers are incurring a higher than average total cost. In this category, the slope of the fair-
value line is $115 per benefit point on a scale of 1 to 10.2
Performance Profiles
Air Cleaners -- CR Feb. 02
Market Profile Attrib. Value
Air Cleaners -- CR Feb. 02 Performance Scores WeightWeight
Dimension Attributes
Friedrich
Whirlpool
Bionaire
Hol-625
HW-17000
SharperImage
Average
Benefits Dust 9.0 8.0 7.0 3.0 3.0 2.0 8.8 40.0
Smoke 7.0 7.0 6.0 3.0 3.0 2.0 7.2 30.0
Noise 6.0 6.0 4.0 7.0 6.0 10.0 8.3 20.0
Ease of use 6.0 6.0 6.0 6.0 8.0 6.0 6.7 10.0
Weighted benefit scores 7.5 7.1 6.0 4.1 4.1 4.0 8.0
Costs Price Equipment Price 475 250 220 120 130 350 245 100.0
In-use 2 year Energy 110 126 124 48 106 8 83 100.0
In-use 2 year Filter 144 260 264 120 250 0 150 100.0
Weighted cost scores 729 636 608 288 486 358 478
Slope of fair value line 115
9. 8
Based on the slope of the fair-value line and the fraction of weight associated with each attribute,
we calculate the worth differentials associated with performance differences on a 1 to 10 scale.
These monetization coefficients, worth per point data, are shown in the product appraisal table
below. Like the cost per kilowatt-hour information, the worth per point data enable you to
estimate the worth differences associated with the performance differences on benefit attributes
in monetary terms.
At this point we have assembled all of the pieces we need to do a product appraisal. We have the
performance scores showing how our product stacks up against the competition on the key
buying factors. We’ve used data on the relative importance of these factors to construct a
weighted average overall performance index for our business and the other players. We’ve used
the value map to calibrate the degree to which customers will pay a premium for better overall
performance. This information all feeds into the appraisal process.
The appraisal process evaluates a product by comparing it against a reference product. Usually
(but not always), we use the “average product” as the reference. We start with the average price
of products in the market. Then, attribute-by attribute, we compare our product’s benefit scores
to the average scores. For each comparison, we estimate the differential worth of our product.
These increments are then added onto the starting reference price to arrive at an appraisal.
In equation form, the appraisal logic can be expressed as
Value Map for Air Cleaners -- CR Feb. 02
Sharper Image
HW-17000
Hol-625
HW-18150
Panasonic
Ken-83353
Hun-170
Hol-650
HW-17400
Ken-83259
Hun-30375
HW 13520
Hol-675
Bionaire
Whirlpool
Friedrich
250
350
450
550
650
750
3.5 4.0 4.5 5.0 5.5 6.0 6.5 7.0 7.5 8.0
Performance Index
Total Cost ($)
Fair-value line passes through average price and average benefit. Slope = $115 per benefit point.
High
Price
Low
Price
Worse Better
Fair-value line
10. 9
Justified (Fair) Price = Price of reference product
+ Value of your product advantages
+ Cost savings in using or owning your product
Product Appraisals: Combining Performance Appraisals and Cost-In-Use Estimates
We will now apply this logic to appraise the top-performing Frederich air cleaner. We will use
the average air cleaner as our reference product. The average model sells for $209. The
Friedrich model is worth $233 more due to performance advantages and an additional $74 more
due to cost savings versus the average model. So its worth relative to other products in this
market category is $515. Accounting for both cost-in-use differences and performance
differences, we find the Frederich model is worth about $300 more than average.
Note that the incremental worth of Frederich related to superior performance on dust removal is
$169, which is much greater than the combined cost savings ($74) related to lower energy and
filter costs. So, it is important for pricing teams to go beyond cost-in-use differences to also
account for worth differences associated with performance differences.
The Value-Pricing Chart
Product Appraisal: Friedrich room air cleaners -- CR data, February 2002)
Estimating the worth of the Friedrich product using Average as a reference
Average price ($)
Equipment Price 209
Worth of Friedrich Benefit Advantages
Worth ($) Performance Scores Worth ($) of
per point Friedrich Average Differences
Dust removal 46 9.0 5.3 169
Smoke removal 34 7.0 5.0 69
Quietness (transformed from noise) 23 6.0 6.0 0
Ease of use 11 6.0 6.5 -6
Net worth of Friedrich benefit advantages 233
Cost savings ($) in using / owning Friedrich
2 year Energy 110 113 3
2 year Filter 144 215 71
Net cost savings 74
Friedrich Worth
Implied worth 515
11. 10
Pricing teams use the data in the product appraisal to produce a value-pricing chart. The value-
pricing chart summarizes the worth differences between your product and a reference product
and sets the stage for pricing your product based on its worth in the marketplace, as well as based
on your costs. As noted earlier, the reference product is often the average or all products, but
could be a key customer’s current product, a product close to your product in overall
performance, or any other product you are competing against. The left side of the value-pricing
chart plots the results of customer value accounting. The right side of the chart focuses on value-
based pricing.
We show the appraisal calculations numerically in the Product Appraisal table and graphically in
the Value-Pricing Chart. Knowing the worth of your product and the cost of your product
establishes a framework for pricing your product. Hopefully you find that the worth of your
product is greater than its cost. If you price your product above what it is worth, you will have
difficulty attracting customers. If you price your product below its cost, you lose money.
Setting your price determines the split of worth minus cost to the customer and to your business.
We refer to worth minus price as customer surplus. If a product is worth more than you charge
for it, customer surplus is positive. A Frederich air cleaner is worth $515; the price is only $475.
Therefore the customer surplus is $40. We often measure customer surplus in percentage terms,
relative to the worth of the product. When expressed as a percentage of its worth, Frederich’
customer surplus is 7.8 percent. Customer surplus is a measure of the goodness-of-the-deal that
customers get from an offer.3
The percentage measure of customer surplus is comparable across
Value-Pricing Chart
Average Price
Price
Unit Production
Cost
Better benefits
In-use savings
Worth
Margin
Surplus
0
100
200
300
400
500
600
Estimating the worth of Friedrich using Average as a
reference
$
Customer value
accounting
Value-based
pricing
12. 11
products that sell at different price levels. Price minus cost per unit is the profit margin for your
business. For illustration purposes, we have assumed that Frederich’s cost per room air cleaner is
$375. Using this hypothetical cost, the profit margin would be $100.
Customer Value Accounting
Customer value accounting is closely related to, but more comprehensive than economic value
analyses focused on cost savings to the customer. Pricing specialists using economic value
modeling typically compare a new (subject) product versus an existing (reference) product. They
note the tangible and perhaps the emotional differences in benefits between offers. They attempt
to estimate the monetary differences in worth for the tangible attributes. They find it easy to
monetize some of the tangible attributes that relate to costs, like energy usage. They can use
miles per gallon data, a typical number of miles driven per year, and the cost per gallon to
estimate differences in fuel costs. But they have no monetary conversion factor like $3 per gallon
of gas that they can use to monetize differences in ride comfort, seating comfort, acceleration,
emergency handling, and braking. Yet these attributes are important whether one is analyzing
minivans sold to consumers or heavy-duty trucks sold to industrial customers.
Note that modeling a market and each vendor versus every other vendor, including the category
average, is a more comprehensive approach than just modeling two of the vendors in a category,
a subject and a reference vendor. By modeling a market category, we can also produce a head to
head value appraisal and a value-pricing chart for any subject vendor’s offer versus any vendor
in the category.
Pricing teams use these tools4
-- the customer value map, product appraisal, and value-pricing
chart -- to help resolve classic pricing issues:
Pricing a new, premium-performance product
Pricing a new, low-cost, lesser performing product
Repositioning a product that is currently positioned deep into the negative customer
surplus zone, with a price that far exceeds it worth
Identifying and re-pricing products that are offering a large customer surplus versus the
average vendor – perhaps leaving money on the table
As illustrated in the marketing-war-room collage in Section 3, product positioning and pricing
teams display the value-pricing chart, product value appraisal, and the customer value map side-
by-side. This enables them to focus on their offer versus a key reference vendor while keeping a
close watch on each of the other vendors’ positions on the value map.
13. 12
Section 3
Building a Value-Based Marketing Strategy System
The products and services that attract customers and retain their loyalty are the ones that deliver
better overall performance and/or lower prices than their competitors. They win by delivering
better customer-perceived value.
To understand and manage the positioning of your products, your management team needs to
know how customers perceive your product’s performance on key benefit attributes and price
relative to competing offerings. They need competitive positioning data. Yet, most companies
manage their business units based on financial data, performance versus budget, and bonuses tied
to “meeting the numbers” for revenue growth, profit, or shareholder value. Most companies do
not have a competitive positioning information system and a set of marketing strategy tools to
help manage their product lines with data that reveals their prices and performance versus
competing products.
In this section we describe what a value-based marketing strategy system is. The ingredients
include competitive positioning data covering the key product-market segments that you serve
and a software toolkit for developing competitive marketing strategy.
Value-Based Marketing Strategy
The objective of value-based marketing strategy is to sell the right products to the right customer
segments at the right price to maximize profits and growth. The underlying philosophy is that if
we understand customer needs and satisfy them better than the competitors do, our business will
be successful.
What a Value-Based Marketing Strategy System Should Do for You
For each market you serve, you should have a system that can help you:
• Understand your competitive strengths and weaknesses
• Identify opportunities to improve your product and service, and set priorities for
improvement based on your customer needs
• Set prices that are consistent with your strengths and weaknesses
• Sharpen your marketing message to highlight your strengths and correct customers’
misperceptions
• Test new product concepts
For companies that serve many markets (e.g. product lines of related products, different
geographical markets for core products, different key account customers for a product), the
system should help you
14. 13
• Evaluate your product line coverage
• Avoid cannibalizing a high-margin product with a low-margin one
• Coordinate product and pricing across different geographical regions.
• Develop benchmarks for evaluating product success in one market or key account
customer based on results in other markets or key accounts
• Maintain pricing consistency across different regions
• Identify cross-market management issues, systemic strengths or weaknesses, that merit
centralized attention
Analyzing a Product-Market Segment
A value-based marketing strategy system applies a core set of marketing strategy tools for
customer value management of individual product-market segments. These tools include:
• Market Profile – a compact data set that compares your product to the competition from
the customer perspective
• Value Map – a visual display that looks at competitors in a price-performance space,
allowing you to see if you are competitively positioned
• Product Appraisal – a collection of tools for helping you set prices based on what your
product is really worth
• Value-Pricing Chart – a graph that shows how much more, or less, your product is worth
than a reference product and how setting your price splits the difference between your
product’s worth and cost into profit margin for you and customer surplus for buyers
• Value-Selling Tools -- to help you identify how to extract the full value of your
performance advantages
• Improvement Priorities Tools -- helping you to identify who must do what by when to
improve your competitive position.
For periodic strategy review meetings, you post these tools on a conference room wall,
transforming it into a Marketing War Room. A who-does-what-by-when exhibit summarizes your
product line team’s competitive marketing strategy and tracks time lines for executing it.
Pictured here is a mock up of a marketing war room for a key product, followed by a collage of
marketing-war-room exhibits for the Friederich room air cleaner.
15. 14
KBF Weights
Value Map
Price
Performance
Mockup of a Marketing War Room --
a dozen tools for analyzing a single product
Market Profile
KBF-1
KBF-n
Price
Other costs
Ca Cb Cc
Product Appraisal
Value Pricing Chart
Plot of KBF Scores
Value Selling
KBF Positioning
Worth of KBF Moves
Weight
Performance Gap
Average
price
Better benefits
Worth
Cost
Price
Who What When
KBF-1
KBF-n
What / Who
Market Share Trends
NPS vs Performance
Performance
NPS
x
xx
x
Share
0
30
a
a
aaa bb
b
b
b
ccc
cc
a
b c
d
Attribute Scores, Air Cleaners -- CR Feb. 02
Ease of use
Noise
Smoke
Dust
0.0 2.0 4.0 6.0 8.0 10.0 12.0
Performance Scores
Friedrich
Whirlpool
Bionaire
Hol-675
HW 13520
Hun-30375
Ken-83259
HW-17400
Hol-650
Hun-170
Ken-83353
Panasonic
HW-18150
Hol-625
HW-17000
Sharper Image
Relative Importance of Benefit Attributes
Air Cleaners -- CR Feb. 02
Dust
Smoke
Noise
Ease of use
Marketing War Room wall, Air Cleaners -- Frederich
Value-Pricing Chart
Average Price
Price
Costs (Illustrative)
Better benefits
In-use savings
Worth
Margin
Surplus
0
100
200
300
400
500
600
Estimating the worth of Friedrich using Average as a
reference
$
Value Map for Air Cleaners -- CR Feb. 02
Sharper Image
HW-17000
Hol-625
HW-18150
Panasonic
Ken-83353
Hun-170
Hol-650
HW-17400
Ken-83259Hun-30375
HW 13520
Hol-675
Bionaire
Whirlpool
Friedrich
200
300
400
500
600
700
800
3.5 4.0 4.5 5.0 5.5 6.0 6.5 7.0 7.5 8.0
Performance Index
Total Costs ($)
Fair-value line passes through average price and average benefit. Slope = $115 per benefit point.
High
Price
Low
Price
Worse Better
Value Comparison for Air Cleaners -- CR Feb. 02
-300 -200 -100 0 100 200
Dust
Smoke
Noise
Ease of use
Equipment Price
PV energy costs
PV filter costs
Friedrich Value vs. Average ($)
StrengthsWeaknesses Total= $40 ( $233 from benefits, $-192 from price)
Product Appraisal: Friedrich (Air Cleaners -- CR Feb. 02)
Estimating the worth of the Friedrich product using Average as a reference
Average price ($)
Equipment Price 209
Worth of Friedrich Benefit Advantages
Worth ($) Performance Scores Worth ($) of
per point Friedrich Average Differences
Dust 46 9.0 5.3 169
Smoke 34 7.0 5.0 69
Noise 23 6.0 6.0 0
Ease of use 11 6.0 6.5 -6
Net worth of Friedrich benefit advantages 233
Cost savings ($) in using / owning Friedrich
PV energy costs 110 113 3
PV filter costs 144 215 71
Total other costs 254 328 74
Friedrich Worth
Implied worth 515
Weight vs. Performance Gap
Air Cleaners -- CR Feb. 02
Ease of use
Noise
Smoke
Dust
Friedrich Avg.
Gap
0
5
10
15
20
25
30
35
40
45
-4.0 -3.0 -2.0 -1.0 0.0 1.0 2.0 3.0 4.0
Friedrich Performance vs. Average
Performance Profiles 10/26/02
Air Cleaners -- CR Feb. 02 Sue&Brad
Market Profile Attrib. Value
Air Cleaners -- CR Feb. 02 Performance Scores Weight Weight
Dimension Attributes
Friedrich
Whirlpool
Bionaire
Hol-675
HW13520
Hun-30375
Ken-83259
HW-17400
Hol-650
Hun-170
Ken-83353
Panasonic
HW-18150
Hol-625
HW-17000
SharperImage
Average
Benefits Dust 9.0 8.0 7.0 7.0 6.0 6.0 6.0 6.0 5.0 5.0 5.0 4.0 3.0 3.0 3.0 2.0 5.3 40.0
Smoke 7.0 7.0 6.0 6.0 6.0 6.0 6.0 6.0 5.0 5.0 5.0 4.0 3.0 3.0 3.0 2.0 5.0 30.0
Noise 6.0 6.0 4.0 5.0 5.0 5.0 5.0 5.0 7.0 7.0 7.0 5.0 6.0 7.0 6.0 10.0 6.0 20.0
Ease of use 6.0 6.0 6.0 6.0 6.0 6.0 8.0 8.0 6.0 6.0 6.0 8.0 6.0 6.0 8.0 6.0 6.5 10.0
Weighted benefit scores 7.5 7.1 6.0 6.2 5.8 5.8 6.0 6.0 5.5 5.5 5.5 4.6 3.9 4.1 4.1 4.0 5.5 99.1
Costs Price Equipment Price 475 250 220 200 180 170 170 170 160 170 220 200 160 120 130 350 209 100.0
In-use PV energy costs 110 126 124 126 188 210 130 136 88 112 50 160 84 48 106 8 113 100.0
In-use PV filter costs 144 260 264 240 338 256 342 294 190 176 210 154 200 120 250 0 215 100.0
Weighted cost scores 729 636 608 566 706 636 642 600 438 458 480 514 444 288 486 358 537 -0.9
Slope of fair value line 115
Friedrich Performance-Improvement Opportunities
Air Cleaners -- CR Feb. 02
0 20 40 60 80 100 120
Dust
Smoke
Noise
Ease of use
Value of Improvements ($)
Catch up
Benchmark
Breakthrough
Air Cleaners -- CR Feb. 02 Annual cost vs. Weighted Benefits
Sharper Image
HW-17000
Hol-625
HW-18150
Panasonic
Ken-83353
Hun-170
Hol-650
HW-17400
Ken-83259Hun-30375
HW 13520
Hol-675
Bionaire Whirlpool
Friedrich
-50
0
50
100
150
200
250
300
3.5 4.0 4.5 5.0 5.5 6.0 6.5 7.0 7.5 8.0
Weighted Benefits
Annual cost
Attribute-Actions
Dimension Attribute Weight Score Aspects Strategy Actions Target Score Target WeightPeople When
Dust 40 9.0
Smoke 30 7.0
Noise 20 6.0
Ease of use 10 6.0
Price Equipment Price 100 475.0
In-use PV energy costs 100 110.0
In-use PV filter costs 100 144.0
16. 15
Reviewing a Portfolio of Related Product-Market Segments
For companies that serve many markets or several key account customers, a value-based
marketing strategy system should also apply a core set of tools for managing a portfolio of
related product-market segments or key accounts:
KBF Performance Review – a table showing the portfolio’s performance relative to
competitors, by key buying factor across the set of product-market segments. This table
reveals systemic strengths and weaknesses in performance across the portfolio and paves
the way for initiatives to improve your performance across several products and markets.
Review of Overall Performance – a histogram of relative performance for the portfolio of
product-market segments or key accounts. This histogram reveals how much the portfolio
is outperforming or underperforming its competitors across the market categories served.
Pricing Review – a plot of price versus fair-price for the products in your portfolio. This
plot reveals inconsistencies in product line pricing and whether the products are
systematically priced above or below their worth in the marketplace.
Revenue Pie Chart – showing the relative size of the product lines or key accounts
Portfolio Scorecard of CV Metrics – This table summarizes each product’s performance,
price, and customer-perceived value relative to competitors. It also shows the customer
surplus offered by each product in the portfolio.
Market Share Review – This table summarizes the market rank, market-share level, and
market-share trend of each product in the portfolio or share of customer by key account.
Collage of Value Maps – identifying which product lines are on or near the best value
frontier
Scatter plots of Net Promoter Scores versus Overall Performance scores – showing how
Net Promoter Scores are related to a product’s overall performance versus competitors.
The key buying factor scores that make up overall performance provide a blueprint for
outperforming competitors and boosting net promoter scores.
Here is a mock up of a marketing war room for a multi-product line general manager, his product
leaders, and function heads with responsibility for customer service, relationship building, and
brand affinity across the product portfolio.
17. 16
Gathering Competitive Positioning Data for Your Key Product Lines
To assess and manage a product’s competitive positioning in the marketplace your value-based
marketing strategy system should
• Identify the key benefit attributes (buying factors) that customers value when selecting a
product or choosing a brand
• Measure your performance and the performance of competing products as perceived by
customers
• Estimate the relative importance or weight of each key buying factor
• Measure how customers perceive your price versus competition and measure actual
monetary prices versus competition
• Track market-share trends
Some companies have the data necessary for a marketing strategy system; some companies
don’t. Many companies have the data they need for a system but, because the data lies in bits and
pieces in different functional silos, they are unable to put it all together. For example, relevant
data on customer perceptions might lie within a market research function, relevant data on
competitor prices might be in competitive intelligence or the sales-force feedback system, and
data on market-share trends might lie in the marketing files. A good first step in building a
strategy system is to take an inventory of the relevant data resources available in the company.
Mockup of a Marketing War Room --
tools for analyzing a portfolio of 4 products in related segments
Who What When
Product
Service
Relationship
Brand
What / Who
Overall Performance
1.0
Product Revenues
P1
P2
CV Metrics
P1
P2
P3
P4
Market Share
P1
P2
P3
P4
Value Map Positions Net Promoter Scores
x
x
x
x
x x
x
x
Performance
NPS
x
x
x
x
x
x
x
x
x
KBF Performance
KBF-1
KBF-2
KBF-n
P1 P2 P3 P4
Pricing Review
Price
Fair-Price
XX
X
X
18. 17
The best way to build toward a world-class system is to assemble the best data available and use
it as the basis for your key decisions. At the same time, understand the gaps in your data and
initiate programs to fill them in. The types of data you need and the typical sources for getting
them are listed in the exhibit above.
Your competitive positioning and customer value accounting system won’t be perfect; no
accounting system ever is. But, it should be good enough to help you better understand the needs
of customers in your targeted markets and how you are positioned relative to competing
products. It should help your product line teams to better align their mental models with the
perceptions of customers. And it should help you to position your products to outperform
competing products.
Sources of data for --
Customer Value Analysis & Value-Based Pricing
Type of data Sources
Performance scores -- Your mental models, refined by customers
-- Engineering measures, transformed to 1-10
-- Market perception surveys
Attribute importance -- Mental models, refined by key accounts
-- Rank ordered, top attributes from surveys
-- Influence weights derived from surveys
Transaction prices -- Competitive intelligence
Customer’s other costs -- Cost-in-use analysis
Market-share trends -- Industry analysts
Your unit costs -- Your cost accounting & competitive intelligence
19. 18
Appendix
CVI Resources for Value-Based Marketing & Pricing
Customer Value Inc. can help you implement value-based marketing and pricing with
• Marketing War Room™ software
• Training
• Consulting
The Marketing War Room™ Software Toolkit
Customer Value, Inc.’s Marketing War Room™ is personal-computer software for helping a
product-market team develop strategies to increase the value of their offering to their customers.
The software allows you to do all of the appraisal and pricing steps discussed in this paper. The
software makes it easy to generate the exhibits used in the marketing war room collage of
exhibits for an individual product market segment and also provides the ingredients that you
need for the exhibits summarizing a portfolio of related products.
Applications of the Marketing War Room include:
• Business managers defining their value proposition and setting priorities for product
improvement
• Pricing specialists setting prices
• Key-account managers discussing needs with the customers and sharing insights within their
company
• Marketing-communication strategists evaluating the attributes they want to stress.
• Market researchers analyzing and displaying the results of surveys
We offer division licenses and training programs to help ramp up your organization to meet these
needs.
20. 19
Footnotes
1
Monetized importance-performance analysis focuses on quantifying the added value of
outperforming competitors on key attributes that deliver functional and psychological benefits to
customers. The techniques and tools for a monetized importance-performance analysis are
illustrated in the twenty-page paper, “How Much Is Your Product Really Worth?” by Bradley T.
Gale.
2
For more information on the customer value map, fair-value line, and customer value
accounting see, “How Much Is Your Product Really Worth? – optimize your pricing with Value
Accounting and the Value Scorecard,” by Bradley T. Gale, (Customer Value, Inc., Boston,
2002).
3
Customer surplus is the appropriate measure for the goodness of the deal. Some pricing
practitioners and purchasing teams use the performance-to-price ratio as a measure of the
goodness of the deal, but this is a mistake. This bang-for-buck ratio is not a proper metric for
setting prices based on the worth of your product.
4
At Customer Value, Inc. we have developed a software toolkit for customer value accounting
and value-based pricing that we call the Marketing War Room™. For more information on the
tools in the new value-pricing module, see the brochure for the Marketing War Room release 6
(Customer Value, Inc., Boston, September 2006) available on www.cval.com. Customer Value,
Inc. developed the Marketing War Room software for its consulting practice and offers annual
software leases to operating divisions of client companies. Seat holders typically include product
managers, market managers, product-market-pricing practitioners, key-account managers, and
competitive marketing strategy specialists. For information on how to get started with a
comprehensive and repeatable, yet flexible and adaptable approach to customer value
measurement, analysis, accounting, and management – review a copy of the flyer “Launching
Customer Perceived Value Analysis and Value-Based Pricing” available from the authors.