Value-based Pricing Requires Value-based Innovations

Let me open this short essay with a very direct statement: value-based pricing is not just a pricing strategy. It is a go to market strategy. It is a customer-focused approach that touches segmentation, differentiation, communication and much more.

Why am I making this statement? I have been working with many organizations and their pricing teams over the past few years as they are trying to design and execute value-based pricing strategies. Most of them are full of good intentions but are facing a lot of organizational resistance, strong silos, and roadblocks during the execution phase.

At the heart of value-based pricing is a different value mindset that requires a strong alignment between all customer-focus functions: innovation, marketing, pricing, and sales.

This is why I am making this strong statement. Putting customer value at the center of your pricing models requires putting customer value at the center of your innovation, marketing and sales models as well.  And it does start with the innovation process as your organization’s innovators create new pockets of customer value in the front-end of innovation. Value-based marketing and technical programs in turn articulate compelling value propositions and value messages to the market using the outcome of the innovation work and of the dollarization process. Pricing teams bring more science on how to measure and dollarize customer value as well as on how to deploy pricing tactics that will prevent leaving money on the table. Finally, sales organizations negotiate for value and enter into value conversations with customers.

In addition to deploying all four of these value-based processes, business professionals also need to make sure the three steps of the value management process are equally managed. First customer value is created or extracted. Then it needs to be measured using the EVE® process. Finally, it needs to be captured during the commercial interactions. The measurement process is a must-do activity prior to deploying value-based tactics. Measuring is all about being in control. It is about measuring how much economic value a firm brings to its customers and how much is shared with them without leaving money on the table.  It is all about not flying blind!

So you get it.  Deploying value-based pricing as a pricing strategy will bring you good results. Doing it as a holistic value-based approach will bring great results. It will align your customer-focused processes and will help you with the transformation of your commercial culture.

Be bold!  Join the customer value revolution!

 

Follow @IXCHAT on Twitter

Wait! Before you go…

Choose how you want the latest innovation content delivered to you:

 


Stephan Liozu specializes in disruptive approaches in innovation, pricing and value management. He is CVO at Thales Group  and the founder of Value Innoruption Advisors. He earned a PhD in Management at Case Western Reserve University and can be reached at sliozu@gmail.com and you can follow him @StephanLiozu

Stephan Liozu

NEVER MISS ANOTHER NEWSLETTER!

Categories

LATEST BLOGS

Christmas Tree Time Saver

By Braden Kelley | November 26, 2007

We went out and got our Christmas Tree last night and it turned out to be more rewarding than last…

Read More

Time to Prepare for Financial Winter

By Braden Kelley | November 24, 2007

The holidays have always been more about family, faith, and giving than spending money which is good because people should…

Read More

Leave a Comment