The Pricing Office Services
Offer Value Analysis
Value analyses help product managers and product marketers understand how the components of an offering translate into benefits and quantified value for customers.
- Quantifies customer value proposition
- Enables value-based pricing
- Provides guidance for meaningful packages
- Garners greater confidence in negotiations
- Supports customers’ internal business case
Internal value analyses take 1 to 2 weeks to complete and rely on internal experts to help quantify value. External value analyses (recommended) incorporates interviews with customers and can last 1 to 2 months depending on number of interviews (20 to 25 recommended).
The Pricing Office provides the tools and guidance to allow your product and marketing teams to perform value analyses.
Our approach is Lead-Train-Support:
- Lead the first Value Analysis alongside your teams
- Train teams on tools and techniques
- Support on subsequent Value Analyses that are led and managed by your teams
Value-based Roadmapping takes an outside-in view of value to define and prioritize product development. This analysis prioritizes your product pipeline by quantifying the customer value they can drive.
- Prioritizes scarce investment resources
- Aligns product roadmap with market needs
- Drives quicker time-to-value
- Increases investment ROI
- Informs build/buy decision
It starts with a knowledge of customer pain points. This knowledge is gained through customer interviews, product advisory panels and customer senior leadership councils. The Pricing Office designs or refines your customer intelligence program to best capture this information and quantifies potential value-add to customers. The high-value functionality is assessed based on impact to your organization and your company’s chances of successful development.
Our approach is Plan-Participate-Prioritize:
- Plan and structure information gathering needs
- Participate and facilitate customer council meetings
- Prioritize feature development with internal teams based on customer feedback
Perhaps the most critical aspect of Value Management is Value Communications. Building offers based on customer value is useless if you can’t effectively communicate how you drive value to your customers. This works translates the value you drive for customers into sales enablement tools.
- Supports premium pricing
- Builds purchase business case for customer
- Quantifies value of offer
The degree to which customers agree with your information in value communication tools will determine their success. Many value communication tools, such as ROI calculators, lose credibility when they produce high returns with assumptions from internal sources.
Our approach is Assess-Augment-Add:
- Assess the validity of Value Communication tools
- Augment existing data with customer interviews or user studies
- Add information to the tools to fill in the assumption gaps
Discounts are often expected from customers and become a cost of sales. However, having an understanding of the characteristics of your discounting is critical. Any discount cuts directly into the bottom line of your business. Gaining control of discounting is a critical function of any finance team. A Discount Analysis determines if discounting is consistent with your business strategy and identifies potential sales training opportunities.
- Identifies patterns of discounting for better management
- Helps evaluate sales effectiveness
- Helps with customer segmentation
- Indicates whether price level is appropriate
The level of discounting is often a point of contention between Sales, Product Management and Finance. Product Management feels that the value of the offering is “given away”. And like most things, selling capabilities within your organization can be plotted along a bell curve with high performers and sub-optimal performers. Also, different customers or market segments may be getting higher or lower discounts depending on what the customers see as price/value tradeoff.
Our approach is Clean-Crunch-Cut:
- Clean the data pulled from the CRM for the analysis
- Crunch the numbers and identify key variables to assess
- Cut the numbers based on key dynamics of your business
Pocket Price Analysis
Most offers require additional products or services to be used by customers. However, these products and services have costs associated with them that can impact the ultimate profitability of the deal. The Pocket Price Analysis quantifies the total revenues and costs of delivering your offer to provide an understanding of where there may be profit leakages in doing business.
- Identifies cost leakages that can be managed during negotiations
- Provides insights into deal profitability
- Identifies potential packages and “value adds” for different customer segments
To get a solid understanding of margin leakage, you need to understand what costs apply to serving customers. These costs are often added products or services that customers get or ask for in negotiations. By identifying the largest buckets of costs, companies can identify areas to manage to increase profitability.
Our approach is Map-Group-Identify-Develop:
- Map all components of offer required to enable customer value
- Group costs associated with each component
- Identify largest areas of offer costs that can be managed
- Develop processes and metrics to track and manage the largest cost buckets
A key to successful negotiations with customers and vendors is understanding the value delivered and the costs incurred delivering these items. Good negotiators will maximize what they get and pay as little as possible. Negotiation Plans map the value of the offer components against their costs to help negotiators better understand deal trade-offs.
- Identifies highest points of negotiation leverage
- Identifies high-value “give-aways” to close the deal
- Focuses conversations on most important items to better ensure successful outcomes
- Aligns deal terms with value delivery
Successful negotiation planning begins with an understanding of value – either in a purchasing or selling role. This is a benefit derived from successful Value Management Capabilities. By assessing the value delivered versus the incremental cost of delivering, you can successfully close more deals and drive more value for customers.
Our approach is Structure-Value-Bucket-Ask:
- Structure the offer/package so items can be carved out or added easily
- Value the components of the offer
- Bucket value components based on cost to serve
- Identify your “asks” or $ for what you will include in the negotiation
Price Optimization Analysis
Assessing transaction data yields insights on how different groupings of customers may get higher value (and pay for) your solution differently. Transaction data can be used with a multivariate analysis to model which variables are most correlated to price variance. Understanding this variance yields insight into how you can develop different pricing packaging for key segments of your business.
- More effective segmentation
- Higher “upsell” potential
- Greater confidence in negotiations due to market reference accounts
- More valid “going in” price for RFPs and deal negotiations
To successfully conduct a price optimization study, you need a clean data set parsed in meaningful ways. Key geographic, demographic, customer and product data is required to build meaningful groupings of customers that can be used to market/pricing strategies and offer packages.
Our approach is Clean-Combine-Crunch-Correlate-Create:
- Clean the data pulled from the CRM for the analysis
- Combine customer and product data with third-party market data sets
- Crunch the numbers and sanity check to ensure analysis is correct
- Correlate data points to identify meaningful groupings of customers
- Create packages and pricing strategies for the meaningful customer groupings
Your price should not be a static number. Pricing needs to be adjusted based on many factors including changing competitive landscape/actions, changes in economic value, market economics and customer mandates. On-going assessments of discounting data and win/loss information provides visibility into whether pricing needs to be adjusted.
- Higher Margins
- Lower discount rates
- Higher retention rates
Here is where the art of price management comes into play. Balancing the pragmatic need to meet revenue targets with customer account management in a competitive environment is not easy. It requires defining a target, making a plan, consistent communication and ability to adjust.
Our approach is Identify-Quantify-Launch-Measure-Adjust:
- Identify opportunities for price increases
- Identify level of price change based on additional value or market forces
- Launch price change to Field teams
- Measure change in realized price and churn
- Adjust (up or down) according to feedback