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A Prof es s ional P r i c i n g S o c i e ty P u b l i c a ti o n
PRICING ADVISOR
es and solidify your competitive position. The clock is ticking and your competitors are catching up. A powerful methodology that links price with value is Economic Value Estimation (EVE). EVE is a framework for collecting industry and customer insights to quantify the economic benets that your solutions deliver relative to competitive alternatives. It is this economic understanding of value that establishes the foundation for setting price and determines what to communicate to customers. Example: Supply Chain Solution IntegraSoft, a supply chain software company, has an innovative new technology for tracking, monitoring and optimizing transportation, inventory and facility operations. IntegraSofts technology was designed to deliver the following customer benefits: Improve customer responsiveness
3535 Roswell Road, Suite 59 Marietta, GA 30062 770-509-9933 w w w.pri ci ngsociet y. com
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Figure 1
Streamline personnel was tasked to determine o your products and services timededicatedtosupplychain keting team deliver higher value than the Reduce supply chain complexity how much of that value they could capactivities byautomating existingprocesses competition? Make the most ture through price.
Improve asset utilization
Variable
a b c d e Totalemployees: %ofemployeestouchingsupplychainmanagement: Average%oftimespentonsupplychainmanagement: Averageemployeecompensation: %improvementinsupplychainefficiencyrelativeto competitor: EstimatedEconomic Valueperyear: a*b*c*d*e
To set prices using the EVE framework, the marketing team first established the cost of the next Value best competitive alternative available 500 in the market. 20% Using external sources they set20% tled at a cost of $350,000, which $40,000 covered licensing 5% and implementation fees charged by similar Supply $40,000 Chain solutions in the mid-market January 2012
PRICING ADVISOR
ValueMessage Value $45,000 $40,000 $22,500
3535 Roswell Road, Suite 59 Marietta, GA 30062 770-509-9933 w w w.pri ci ngsociet y. com
Gaingreatervisibilityintoinventorylevelsthus enablingimprovedresponsivenesstoclientneeds Streamlinesupplychainactivitiesandincrease efficiencybyautomatingexistingprocesses Reduce theneedfordiscountingbyproviding greatervisibilityandimprovedmanagementof inventorylevels Reduce timetocashby minimizingerrorsand improvinginvoicingprocesses Minimizestheneedforexpensivesoftwarelicenses, upgradesandmaintenancecosts Gaingreatervisibilityandcontrolsoverinventory levelsthusenablingbetterdecisionmakingandan overallreductionininventorycarryingcosts
segment. Based on this information, they priced their solution at $400,000 representing roughly a 15% premium over the competition.
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premium but also be in a great position to gain share. Linking price and value to the sales process All sales reps were trained on the complete value proposition of the solution including value messages, specific data points, research, assumptions and calculations used to determine value.
As a result of this effort, the sales team felt confident with the pricing and sales goals set by senior management and vigorously attacked the market. Overtime, the sales team was able to continually refine their understanding of value, engage in powerful dialog with customers, reduce discounting and stay a step ahead of competitors.
1 Despite the higher price, the analysis showed that IntegraSoft delivered $77,580 of additional value relative to competitive solutions. The marketing team and senior management felt strongly that they could not only capture a
January 2012