Ask the Expert, Follow-Up on June Webinar: Driving Value In Product Development

by | Jul 5, 2012 | Quantify Customer Value, Sales

In our June webinar, Tom Lucke, Managing Director of Value Management Advisors, talked with us about how top companies put significant effort into understanding value early on during product development. To see this webinar On-Demand, please visit leveragepoint.com/resources/ Tom addressed a few questions that came from the audience during the webcast:

Q: How do you come up with a value estimate of a product that is totally new? How do you get the data, and how do you quantify value?

There’s two pieces to that question. The first one is, how do you even think about what the product is supposed to do? How do you walk through that feature-benefit value chain? Typically, you have a PRD (Product Requirements Document), which is a functional set of specifications. You can use those specifications, roll them up into a more consolidated list to get the set of features, and then estimate the value of those features.

The second part is, where do you actually get the data for those parameters? Those can be had from a variety of third party sources, or in many cases you can talk to sales.

Q: You can create value models and value propositions by segment, but how do you get salespeople aligned around selling that? In your work, do you see a disconnect between the product and sales departments?

Yes, and some of it goes upstream because, if you talk to sales, one of the things that they will tell you is that they are saddled with the wrong product. Or, they have a product that they are trying to sell to a customer but there’s a disconnect between the price of the product and the value that the customer receives. Part of the problem is back upstream, because if there were two variants, you would have been better off.

So, a piece of the answer is that you have to fix it upstream. Another piece is, as a product person, you need to understand the job of sales. Simply pushing stuff out doesn’t always solve the problem. In fact,  understanding the nature of their problem to say “let’s develop something together” is going to help you. And that’s why the idea of, for example, piloting things like value-based selling around a small group counts. Getting the input of sales as to how it actually works is critical.

Q: You’ve launched the product, you’ve done things right, you’ve designed and configured for different segments. But technology changes, customer needs change, and competitors respond. How do you manage that?

Knowledge is power. Once you’ve modeled value, you have a structure for thinking about how different changes are going to affect that value. For instance, if a competitor drops their price, a value driver that had been $500 just became $400. Or, if a competitor introduces a new product that can now do what used to be a differentiator for you, that $200 value driver just went away because the products are now equivalent.

You now have a rational way to manage price. This allows you to determine if you list price no longer makes sense and needs to be changed. Being able to manage price in a thoughtful way, based on changes in value, is pretty important.

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