Editor’s note: At LeveragePoint, the concept of value-based pricing is important to every member of the company. In this blog post, one of LeveragePoint’s software developers, Aaron Williams, outlines his experience using value-based pricing during his time as the CEO of a startup company.
While I was building my startup company there was a lot of chaos and uncertainty. My co-founders and I were constantly making critical decisions on competition, product development, sales, customer support, and finances. Often, we needed to make decisions happen faster than information could be thoroughly researched. However, we knew that in order to survive, we needed to spend a small amount of time in creating a value proposition for our company to provide clarity for our business.
This blog series is a quick introduction on how my team developed our value proposition. A number of topics are going to be covered, but the goal is to be able to show how we completed the whole process during a one hour meeting. (Obviously, for large B2B enterprises this process is more sophisticated, but it is important to note that value-based pricing methodologies and tactics can have an impact on small organizations as well.)
Topics covered will be:
- Identifying the customer (5 minutes)
- Assessing the competition (5 minutes)
- Listing features (10 minutes)
- Calculating differentiated value to the customer (20 minutes)
- Choosing a price (15 minutes)
- Selling using the value proposition (5 minutes)
What is a value proposition?
A value proposition is a business statement that summarizes why a customer should buy your product or service. Beyond this basic concept, a value proposition can vary in level of detail and format. The value proposition we will be creating will be a series of handwritten notes and lists that describe how we compare to our competition from the customer’s point of view.
Why should startups create a value proposition?
The process of making a value proposition helps startups step back and look at their company objectively from the customer’s point of view. Creating value propositions helps answer the following questions:
- How do we compare against our competition?
- Do we provide enough value to our customers?
- How much should we charge for our products and services?
- How can we convince people to buy from us?
Grab your stopwatch, coffee, co-founding team and find a whiteboard. The next article in this series will start detailing the first steps in creating a value proposition, including identifying a customer and assessing the competition.
About the Author:
Aaron Williams is a software developer for LeveragePoint. Previously he was the CEO and co-founder of a ride-sharing startup, Rootless, Inc and a software engineer for Cisco Systems. He is passionate about new technology, startups, and traveling. Mr. Williams holds a BS in Electrical and Computer Engineering from The Ohio State University.