Value-based Pricing is More than a Pricing Strategy!

Guest Post by Stephan Liozu, PhD, CPP

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. To help organizations and pricing teams operationalize value-pricing and the EVE® methodology, I have designed a unique workshop which will be held at the upcoming Professional Pricing Society conference in Las Vegas on 10/21/2014 (http://pricingsociety.com/home/workshops-conferences/conferences/north-america---fall/fall-2014-workshops-and-conference/las-vegas-2014-workshop-day-1/stephan-liozu). This one-day workshop will cover four key blocks:

1. Latest science on value-based pricing and the EVE® methodology
2. Critical capabilities to execute value-based pricing and EVE®
3. Operationalizing EVE® and customer value across all customer facing functions in the organization
4. Creating a value culture to enable value-based strategies

Participants will be able to assess their capabilities with value-based pricing and EVE®, as well as their current value culture. They will receive specific tools and tips on how to execute value-based innovation, value-based marketing, and value selling programs so that value-based pricing activities can be fully leveraged. I hope you can join us.

Be bold! Join the customer value revolution!