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COMPANY CONFIDENTIAL

How to Grow Profitably by Capturing Value

Monthly Webinar Series – March 27, 2013

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Sponsored by LeveragePoint the Software Solution for Value-based Pricing

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Today’s Presenter How to Grow Profitably by Capturing Value

Harry Macdivitt is Director of Axia Value Solutions,

Ltd, a UK-based consultancy. Co-author with Mike Wilkinson

of the books Value-Based Pricing, and The Challenge of

Value, and author of Pricing Pointers - Pricing Principles for

Practitioners (in press), Harry trains and consults on a wide

range of marketing and business areas across the world.

He brings a wealth of experience in strategic marketing and

management to his training – having worked in senior

positions in sales, marketing, business development, and

general management for the public sector, academic,

manufacturing and services sectors. Harry is a Visiting

Academic at Strathclyde University Business School.

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Agenda

• Why is capturing value so important?

• How do we identify and capture value?

• Case study #1: Bespoke Wooden Furniture

• Case study #2: Copper Wire Theft Prevention

• Key Takeaways

• Q & A

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Are you leaving

money on the

table…?

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If you are doing this,

you sure are!

A single price cannot

possibly capture all

the available business

Price

Quantity

Demanded

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By segmenting the market we can create additional price points to attract more customers and generate more revenue.

We do this by differentiating our products and services on customer value.

8 Price

Quantity

Demanded

Price

Segments

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2

3

4

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By identifying more

segments we leave

less on the table…

9 Price

Quantity

Demanded

The more distinct and “actionable”

segments we create…

… the more we increase the overall

size of the market and

… the less money we leave on the

table

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So, what is Value, and how do we identify it?

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If a Martian asked me “What is

Customer Value?” I would

answer…

“…anything that helps a

customer increase his profitability

through reducing costs and

increasing revenues, but in a

manner that gives him an overall

great feeling of satisfaction.”

This leads us straight to the

Value Triad!

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The Value Triad©

VALUE TO THE CUSTOMER

REVENUE GAINS (RG)

Higher prices Better productivity Higher market share

COST REDUCTION (CR)

EMOTIONAL CONTRIBUTION (EC)

Removal of hassle Comfort Confidence Peace of mind

Cheaper labour Efficiency gains Part reductions Cheaper materials

Source: Value Based Pricing, H Macdivitt & M Wilkinson, McGraw Hill, 2012

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The Value Triad© factors are the things that

impact – economically and emotionally – on

the business and its managers, or upon the

consumer.

The Value Triad© framework provides us

with a structured way of thinking about

these factors.

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Identify every attribute

of the product that you

can that contributes to

Customer Value

Identify every atom

of value that the

customer is seeking

Link them using

Customer Impact

Analysis

Keep asking yourself “So

What?” until you have squeezed

out every bit of juice you can –

and you are really sure you

have captured everything

Use the Value Triad until you

have identified everything

that matters. It is hard work

but vitally important.

Attribute (So What?)n From customer perspective

Customer Impact

Built to precise, quality controlled

standards (Hydraulic Cutting

Equipment)

Machine output meets spec

All outputs completely consistent

dependable and reliable performance

No rework needed (CR,EC)

Eliminates anxiety about quality, and time to

resolve (EC)

Well designed, built and attractive

product (Apple iPad)

Comprehensive, well-built apps

Carefully selected components

Cleverly engineered

Proud to own (EC)

Save purchase of multiple items (RG)

Sought after product (EC)

Output from manufacturing process

clean and free of oil

(Global Lubrications Supplier)

Avoids re-work

Eliminates scratching

Saves cost (CR)

On-time/early delivery (RG, EC)

Highly attractive product (EC)

Ergonomic design

(Bespoke Office Furniture)

Conform to human body shape

Avoids discomfort

Minimises fatigue

Prevents Repetitive Strain

Reduces absence rates (CR, RG)

Enhances productivity (RG)

Enhances employee morale (EC)

Reduces lawsuits (EC, CR)

Solves problems before they arise

(Telco Network Monitoring System)

Software program sits on network

No human intervention needed

Regular condition reports

Regular problem resolution reports

Peace of mind (EC)

Maintains “up” state for longer (RG, EC)

Prevents expensive and time consuming

problem search (CR, EC)

Antibacterial coating

(Catheters)

Can remain in situ longer

Prevents wound infection

Reduces nursing time

Saves replacement cost (CR)

Lower patient discomfort (EC, CR)

Avoids expensive antibiotics (CR)

Builds confidence in healthcare provider (EC)

Increased bed utilisation (RG,CR)

Database of energy cost tariffs

(Energy Consultancy)

Can match customer to best choice

Full cost comparisons possible

Saves unnecessary expenditure (CR)

Confidence in best choice (EC)

Confidence in consultant (EC)

Customer Impact Analysis©

Some Real Life, Right Now examples

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Case I

Bespoke Wooden Furniture (UK)…

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What part of FUR-NI-TURE don’t you understand?

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Attribute So What? Generic

(So What?)n

From hotel manager’s perspective

Customer Impact

High quality, durable materials

Last longer Resist wear and tear Looks good

Don’t need to replace often Don’t need to repair/fix Pride in appearance

Saves/avoids Capital spend (CR, EC)) Saves/avoids Operation cost expense (CR, EC) Attractive to hotel guests (EC)

Built to exacting standards

Consistent appearance Dependability Meets industry spec

Uniformity Reliable quality Know what I am getting

Won’t fall apart (CR,EC) Can rely on this brand (EC)

Ergonomic design Conform to human body shape

Avoids discomfort Reduces complaints (EC,CR) Comfortable to use/sit on (EC)

Aesthetic design Looks good Guests comment favourably Part of attractive décor Can make a feature in adverts

Guests return (RG) Guests tell friends (RG, EC) Delivered good guest experience (EC)

Use of non-VOC materials in manufacture

No “chemical” odours Environmentally friendly products

Able to make environmental claim Hotel perceived as environmentally aware and concerned (EC, RG)

Customer Impact Analysis©

Bespoke Wooden Furniture (Hotels)

These all become part of our Value Proposition.

We have assembled them from a detailed analysis of our

product/service and how they create value for our

customers (and our customers’ customers). Prioritise

them and “dollarise” the RG and CR elements.

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Case 2

Copper Wire Theft Prevention (Africa)…

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Theft of copper wire from electricity pylons is a serious

crime in many parts of Africa.

• Installations are usually remote

• Often protected by armed guards – who may be

murdered by thieves

• Power supplied to municipalities, other utilities and

factories

• Lucrative black market for stolen wire

• Wire theft costs $’000,000s and causes severe

disruption

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The mobile operator provides network

infrastructure and software to capture all images at

good resolution and transmit them back to security

team

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Attribute So What? (So What?)n

Electricity Utility pov Customer Impact

No human guard

Do not need to maintain force of security guards on site

• Eliminates corruption • No personal risk to guard • No salary/cost payments needed

Continuous System operation (EC, RG) No guard to injure/murder (EC) Eliminates salary/employment costs (CR)

Supply continuity

Minimises or eliminates service interruption

• No service down-time • Avoids need to engineer

troubleshooting or intervention

Saves cost of reinstatement of service supply (CR) Saves cost of new copper ($3.45/lb) (CR) Avoids hazardous visits by staff (CR, EC)

Reliable visual record

Data collected by satellite and fed back to NOC

• Creates electronic record • Visual evidence of attempted

theft • Solid evidence in prosecutions

Deters theft (EC) Easier/cheaper to prosecute (CR, EC)

Wireless alert

System alerts security or police

• Video streamed via satellite to NOC and then recorded on hard disk.

Happens automatically so creates peace of mind (EC) Permanent record (EC, CR) No human engagement (EC, CR)

Customer Impact Analysis©

IP Security Camera Service via Telco Operator

These can all be prioritised in line with our understanding of a customer’s needs.

They allow us to create good questions to ask the customer in sales discussion

The answer the customer’s “So What?” and give us an audit trail to explain in

whatever detail we need to.

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A single price and a single product leaves money on the table;

Create different price points by offering a wider range of products

aimed at segments who look for different (and differential) value;

Maximise the Customer Value you need to deliver using Value Triad©

Analysis;

Stop the customer asking “So What?” by asking it first yourself;

Assess the beneficial customer impacts using Customer Impact

Analysis – and prioritise these.

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Upcoming Events

Quantifying and Using Value in the

Age of Healthcare Reform

Thurs April 18th at 1pm EDT

Chris Provines, CEO of Value Vantage

Professional Pricing Society

Spring Conference

May 1st – May 3rd

The Palace Hotel, San Francisco

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Professional Pricing Society Spring Conference

• Ed Arnold will be presenting, “Anyone Can Build a Value Model: Let Me Show You How”

• You will learn: – Key concepts and steps for building an economic value model – How to use value models to make strategic decisions and craft

marketing messages – How to use value models to create customer-facing value

propositions to support sales in capturing value

• Friday, May 3rd at 1pm PDT

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Thanks for Watching!

sales@leveragepoint.com

www.leveragepoint.com

(617) 945-7075

Harry Macdivitt

hm@axiavalue.com

M: 0044 781 298 1651