Can you deploy value-based strategies without having the trade channels on board? The answer is simple: no you cannot. What happens when you go through trade channels that have their own processes, goals, and buying behaviors? How do you avoid retailers, distributors, and agents from becoming “value bottlenecks” because of their irrational focus on gross margins and because of the sheer number of brands they represent?
During my last Professional Pricing Society workshop, we discussed the following example. I recently purchased start-up fluid for my French 1979 Citroen antique that would not start. (French cars! What do you expect?) Anyway, I walked in AutoZone and requested assistance finding the products. Two choices were available to me: Pennzoil for $3.70 a can and a branded generic for $2.70 for a similar can. Shocked by the price differential, I inquired with the sales associate which brand I should purchase. Without hesitation the response was: “Buy the generic brand! It is the same product inside and you save a dollar”.
Here is the problem: you can do all the value-based pricing programs you want, but they are ineffective unless you get your trade channels on board on the value journey. Easier said than done of course. Here are five of the programs I often recommend:
- Create differentiation for your channel partners: Your innovation and marketing processes need to create excitement for your trade partners. Give them a reason to pay attention to your offerings among the hundreds of brands they might represent and carry. Being above the pack is a necessity to get the employee’s attention at retail locations and in their marketing materials.
- Create an EVE® model for trade channels: The main focus of your EVE® and value models is on your end-user customers. You need to do the same exercises for your trade partners to demonstrate to them the value of your offerings. Your value models will look very different. They will include value drivers focused on supply chain, cash flow management, support activities, and possible gross margin differentials. This is part of your stakeholder mapping.
- Engage with top leaders and owners: Your leadership needs to engage your channel partners’ leadership. They need to show the value scorecard and deliver the value of the strategic relationship. A customer value file is also a good tool to use.
- Design dedicated training programs: Value-based training programs have to be done with your trade channels commercial and store staff. In other words, you need to explain to them how to sell the value of your products and services. That includes explaining product or service advantage and differentiation as well as concepts of dollarization. Training programs related to value have to be blended with your product training. The key for success here is to conduct the training yourself and to avoid leaving this to your trade channels who may not have the time and expertise. It might be tough to get approval for it but your chances of success are greater if you do this yourself. You can also train all store employees on concepts of value by equipping them with the right tools.
There are other ways to bring your channels on board. I have used all five recommendations as an executive and a value practitioner. The LeveragePoint value-based pricing software can help you with stakeholder value analysis. The system dynamically allows you to build your stakeholder maps and to adapt your value models for each constituent of your value chain. You cannot go to market with your value-based strategies without paying close attention to your trade channels and engaging them with intention. This was a big part of the success in deploying value-based pricing.
Be bold. Join the value-based revolution!
To access the On Demand webinar Best Practices to Deploy Value-based Pricing and EVE® Across an Enterprise from Dr. Liozu, click here.
About Dr. Stephan Liozu:
Dr. Stephan Liozu is a Pricing Evangelist and Thought-Leader as well as the Founder of Value Innoruption Advisors. He specializes in the design of innovative and differentiated business strategies for B2B firms, and the implementation of value-based pricing strategies. His acclaimed Customer Value Modeler (CVM®) certification program trains professionals in value modeling best practices. Stephan is co-author of Innovation in Pricing, A User’s Guide to Value Modeling, and The ROI of Pricing, as well as numerous academic papers. He holds a PhD in Management from The Weatherhead School of Management at Case Western Reserve University where he is an Adjunct Professor and a Visiting Scholar. Stephan sits on the Board of Advisors of the Professional Pricing Society and LeveragePoint Innovations. Stephan can be reached at email@example.com.