Five Key Factors for Deploying a Successful Value-based Pricing Strategy

by | Jul 29, 2014 | Quantify Customer Value

For B2B enterprises that choose a Value-based Pricing strategy, perhaps their biggest organizational challenge is embedding best practices into the actions, decisions and behaviors of their cross-functional teams. Consistent execution is where the “rubber meets the road.” Otherwise, the significant financial rewards of a successful Value-based Strategy are missed. Yet companies are often deterred from pursuing a Value-based Strategy because of the perception that it is a costly, multi-year change management process.

Our experience implementing a cloud/SaaS value management application suggests that this does not necessarily need to be the case. We have found that each successful customer implementation had five common success factors in place. Many business people will recognize these as just good change management discipline, but they take on a really important role in deploying a Value-based Strategy.

1. Commitment to Value
At a high executive level the enterprise must be committed to value. Most B2B enterprises have some mission statement related to value; it’s either in their shareholder reports or on their website. These are usually the companies that invest in R&D and are looking for a return on their investment. So usually the leaders and the companies that are innovating in their markets do have a commitment to value, they may not call it a Value-based Strategy, but they certainly have the mindset for it.

2. Pro-Active Program Management
Someone has to be the driver, share successes and generate interest for Value-based Pricing initiatives. Our best program managers are relentless in terms of communication — they communicate up, down, and laterally. They’re always nudging the team: making sure they stay on task, and providing the resources they need. Program managers have to be the spokesperson — communicate the work that the teams are doing and the wins they have accomplished. Internal promotions, such as “Value Day,” are a good way for program managers to get the entire company behind this initiative.

3. Core Multi-functional Group Focused on Value
The program leader is not trying to become the internal expert — everybody needs to have some level of expertise. By that, you’ll be able to cover a lot more ground quickly. A core multi-functional group focused on value will be able to train and support others in the enterprise and help reinforce best practices.

4. Embedded into the Workflow
A lot of times when there are new initiatives there’s this tendency to think that we have to stop work, learn something, and then go back to work. This cannot be the case when deploying a Value-based Strategy. It must be part of the workflow. So, if you are developing new products that have value, you better have a value-based approach embedded in that stage gate process. If you’re responding to competitive threats, you also need to have an embedded value-based approach. The goal isn’t to lay on something new. The purpose is to integrate Value-based Strategies into what’s already existing.

5. Focused Phase Deployment
Much like a development cycle’s sprint, deployment cannot all happen at once — it should be adapted in phases, such as by region, product-line, business unit, etc. This can be referred to as “Choiceful Phase Deployment” — different groups will come on board and you have to decide who goes first. Everything can’t just be turned on at the same time.

 

Enterprises that possess all five of these factors can expect steady adoption of a Value-based Strategy. The collaboration that will arise from the execution of this strategy can lead to better decision making in the areas of product, customer and pricing strategy along with improved profit and margins.

 

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