The Power of Value Modeling in the Pricing Council

by | Aug 15, 2012 | Increase B2B Sales, Pricing, Quantify Customer Value, Why LeveragePoint?

 Guest Post by Stephan Liozu

Our July pricing council at ARDEX Americas was probably one of the best council meetings since the launch of the process 18 months ago. We engaged in profound and productive conversations about our level of differentiation, our value positioning and our price setting for our new products which are ready to be launched. The major difference? The first hour of the Pricing Council was dedicated to the review of value models developed in the LeveragePoint platform! I left this meeting particularly energized, confident and satisfied with the decision to select and implement the LeveragePoint value-based pricing software. I could not wait to share this with you.

Here is a summary of what was different this time:

1) Rational discussion about our real level of differentiation.

With LeveragePoint platform there is no going around the true level of differentiation versus the next best alternative. Going through the value modeling process forces you to rationally measure differentiation levels and to face reality. For one of our products, we had that realization. We were not well differentiated and we actually discovered that our competitive offer was superior than we were. That forced us to modify our positioning, our value maps, and our final price setting process. Before that discussion, we were all convinced that we had great differentiation, we were going to price high and do well. The injection of rationality brought us back to earth and removed all perceptual and irrational elements from the discussion.

2) Rational conversation about true value drivers and their potential stickiness with customers.

Reviewing the value drivers of the specific value models was also en eye opening process. Our value modeling process is conducted by multi-functional teams. However, not everyone is involved in the process. During the pricing council, we were able to challenge the choice of specific drivers, their perceived position in the eyes of the customers and also the level of need-based segmentation. Are we selecting the right drivers for the right customer segments? Do we need to have several versions of the products thus creating several value models?

3) Constructive discussion on how to bring distribution channels on board with higher priced innovative offerings.

ARDEX is a differentiated and premium company. When our pricing levels are on the fringe of the maximum acceptable pricing zone, we are forced to have an open discussion about the potential barrier that our trade channels might represent when communicating value to the end users. How do bring channels on board? How do we communication with them? Do we have to conduct training? The discussion we had led to some specific product-related action plan to bring our distributors on board?

4) Final discussion on price setting process with an in-depth exchange on the value sharing process.

During this specific pricing council, I was able to ask difficult questions on the final price level proposed by the pricing team for three of our new products. When you can do this with the support of the value model visual being beamed on the wall, it provides a great support for a rational discussion. As the champion in charge of value for the business, with one powerful visual design, I am able to address issues with segmentation, drivers selection, and value sharing rationale. There is no hiding or making up story. The value story is in front of you based on credible value research.

5) High level of energy and collaboration.

This was the best pricing council we have had. The level of energy and collaboration was great. We were able to have candid, transparent, positive and constructive discussions. We refined our value stories for these three innovations. We also had specific action items to follow up on. I could feel a high level of energy with the process and the overall conversation. We had experienced this in the past but never to that extent and with this intensity.

Bottom line: I am convinced we made the right decision to implement the LeveragePoint value-based pricing software. We are gaining in confidence, in control and in better rationality when reviewing our true positioning and level of differentiation. We are not sticking our head in the sand hoping that our perceived differentiation is true. We now have a tool to find out.

What are you waiting for? Join the value-based pricing revolution and inquire about LeveragePoint unique software.

Stephan Liozu is President & CEO of Ardex America Inc (www.stephanliozu.com), an innovative and high-performance building-materials company located in Pittsburgh, PA. He is also a PhD candidate in Management at Case Western Reserve University and can be reached at sliozu@case.edu.

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