6 Steps to Quantifying the Economic Value of B2B Products

by | Oct 9, 2014 | Quantify Customer Value

Every product has a price tag, but you never see a “value tag”.  A value tag tells the customer “what’s it worth for me?” to buy the product.  Economic theory says that customers are willing to pay more for products that deliver them higher value.  If every product in the world had a value tag, then selling products would be much simpler than it is today. But few, if any, do and that’s because most sellers think that calculating value is too difficult.

Actually, calculating the economic value of your product is easier than you think.

It is definitely worth doing – now more so than ever.  The forces of globalization and technology have made the marketplace for all goods and services much more competitive. Competing primarily on low price/low cost, even if you have the capability to do so is not a sustainable business strategy. Instead, according to the experts (such as Dr. Thomas Nagle, author of Emerging from the Great Recession 8 Keys to Driving Profits, Growth, and Customer Value), competing on value is really the only viable strategic option.

Many a successful B2B product has profited handsomely from this approach. Internal and external strategic pricing consultants have relied upon it faithfully for years. And more recently, sales professionals are deploying more and more value selling techniques and tools.

Forward thinking B2B enterprises are following six steps in order to determine the economic value of products for customers.

  1. Answer questions that provide further insight on your product, audience, and competitive alternatives
  2. Define a Unit of Measure
  3. List Differentiating Features and Map Them to Customer Benefits
  4. Link Customer Benefits to Potential Economic Impacts
  5. Build Specific Value Drivers
  6. Quantify the Value

These steps can be done with just a few hours of effort, using just the existing data at hand. For a typical product manager within a larger global B2B enterprise, this modest time investment can find millions of dollars of “money left on the table”.

To access the white paper How to Put a Value Tag on Your Product by Ed Arnold, click here.

About The Author

Ed Arnold is VP, Products at LeveragePoint. Previously, he held senior positions at Communispace, Diamond Management & Technology Consultants, and OmniTech Consulting Group. He directs product design and development and drives the go-to-market strategy for LeveragePoint. Mr. Arnold holds an MBA in Marketing from New York University and MA and BA degrees in Political Science from Boston University.

Photo Credit: J West Photography via Compfight cc

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