Assessing customer value is not an easy proposition. Difficulties in assessing customer value remain the number one barrier to successful value modeling and is often cited as the most difficult step of the process. However, there are customer research methods and techniques that exist and can help you in this difficult process. Each method has its strengths and limitations. In 1993, a group of researchers led by Anderson and Jain conducted a study to identify the use and familiarity of these methods in business markets. Based on in depth field interviews, the authors were able to define nine research methods that have been used to assess customer value in business markets.
We believe that these nine methods are still the norm today and are still highly relevant. Three of these methods are more complex in nature and require the greatest levels of internal skills.
- Internal engineering assessment: An estimate of the value for a product offering obtained in laboratory tests conducted by scientist/engineers within the supplier’s own firm.
Pros: scientific in nature; controlled environment; reliable test methods.
Cons: internally driven; potential biases in testing methods and assumptions. Often, these tests lack competitive benchmarks to compare whether the product offering outperforms competition.
- Field value-in-use assessment: Interviews are conducted at customer firm(s) to determine a comprehensive listing of costs elements and relative value associated with the usage of a product offering compared with the incumbent product offering. Techniques might interviews, site observations, time-flow analysis, usage trials, TRIZ analysis.
Pros: customer-centric; differential value estimation; engineering-based.
Cons: requires customer collaboration; need appropriate respondents; time constraints.
- Conjoint of tradeoff analysis: In a field research survey, respondents are asked to evaluate a set of potential product offerings in term of their firm’s purchase preference for each of the offerings. Respondents provide a purchase preference rating for the offerings based on an array of attributes or features.
Pros: scientific trade off analysis; excellent for final concept testing; web-based.
Cons: perceived costs; complexity in analytics; sampling requirements.
Find out more about these methods in the recently published value modeling eBook that is available at www.stephanliozu.com/index.php/store.
Finding the data and validating them scientifically remain a critical success factor for value modeling. This is why managers in firms rely on easier methods to assess value. The use of internal engineering assessment, value-in-use analysis and conjoint analysis require advanced internal capabilities, dedicated resources and a willingness to scientifically derive the worth of product offering. Other techniques might be less robust and scientific in nature but may play a role in validating the results of the most advanced methods.
Value-based pricing is a difficult journey that requires change and investments. Investments in voice-of-customer programs are a critical and a necessary part of the process. You cannot do this on the cheap and you have to learn how to ask the right questions. When you do it right though, you might be able to assess customer perceived value, to measure relevant levels of willingness-to-pay and you might be able to communicate value with impact.
Be bold. Join the value-based revolution!
Stephan Liozu (www.stephanliozu.com) is the Founder of Value Innoruption Advisors and specializes in disruptive approaches in innovation, pricing and value management. He is also a PhD candidate in Management at Case Western Reserve University and can be reached at firstname.lastname@example.org.
Linda Trevenen is Director of Marketing Excellence at Philips Home Healthcare Solutions and specializes in customer centricity processes. Drive and inspire a customer-centric mindset by deploying customer-driven innovation approaches that drive top and bottom line growth. She can reached at email@example.com.