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The Art of Designing and Testing EVE® Models Q&A

April 3, 2020

Posted by Nick Welter

Posted in Quantify Customer Value

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For our March Webinar, Stephan Liozu shared secrets to the soft skills required to develop great Economic Value Estimation® Models. To conclude the webinar, he answered some questions from the audience. Here is the first half of his live answers:

Which of the 10 golden rules of EVE® do you see people struggle with the most?

I would say two of them. The prioritization of which value driver do I start with? That’s number one. And then the second real difficulty is finding the reference value. It’s easier if there’s direct competitors, but a lot of times the teams are struggling picking which one to start with. And then eventually in the discussion they start comparing all the competitors. So I have to bring them back to, the specific competitor that they’re doing EVE® for. Picking and choosing what goes first is usually difficult for teams, especially if you have, like, six drivers. Which one do I start with? Which one would I pick? Which is the first one I deploy in my value story? So that is often a struggle.

Could you share a good example of a value story where the customer likes numbers, and one where the customer does not like numbers?

Well, let’s imagine you sell to airlines and you’re used to weighting the path of the aircraft and therefore you provide fuel savings. So most airlines will have a fuel savings theme. When you go into a discussion with a fuel savings team, you better show numbers. You can be theoretical. Like, here’s number planes here you’re flying. Time is how much fuel you burn. And this is how much, a reduction of 10 pounds is going to bring to you. That’s pretty rational. You could always put a brand and a soft factor at the end of the day, but you’re going with a TCO model and it’s pretty cut and dry.

An example where you wouldn’t use numbers is when you get into the value of a life. Governments and pharmaceuticals know the value of your life or they know the value of extending your life by one year or multiple years. Do they use that as a number? Maybe when they interact with insurance companies, but generally speaking, they don’t use a number of flat out in the seminar. In the defense world when you would use casualty – we all know the value of the cost of a casualty to a country. Generally speaking, it’s not well accepted in to discuss the value of the life. So those are the two extremes, right? So you have to be careful.

So when you analyze your buyers, this is where you make a careful decision of using number or not. You may find yourself in a situation where your customer says “Hey, show me the number. I want to discuss that with you.” And then you can open the spreadsheet or LeveragePoint. Other times, you start with the benefits and see what comes up when you say that you can save them 5%. And let them react.

When you’re doing EVE®, if we are the first in the market offering highly innovative solution and there is no competitive reference value, what can we do to estimate a competitive reference value?

Well first of all, I would do an analysis against the do-nothing. Because this is great situation to be in. As long as you’ve done all the homework, the pains and gains of replacing something, right? You’re replacing a manual process or fragmented process or replacing something that the customer does in a way that you have to find out what they do. I haven’t seen a situation where there’s no reference. Value is always in the reference of the customer’s something. Now, if you’re doing truly disruptive, then you have to do a little bit more customer research insights. This is what the B2C companies do very well, the Apples and Googles.

But generally speaking in B2B and B2C, you are replacing something. So you have to map it out. But it’s a good situation to be in because generally speaking, when there is no reference value or it’s not clearly established or it’s not in the mind of the customer clearly set and you’re saving a lot of money, you have an opportunity to establish the value benchmarks and the threshold. So that’s a great situation to be in.

Is it a good idea to do EVE® multiple times with different stakeholders?

Yes, it is. I would say is required just to test that the time when they did it that it wasn’t influenced by some bias or what’s happening out there external factors or an alpha dog in the room. So I’ve done a that in some accounts – the same model multiple times and sometimes up to six to eight times. And eventually when you see the same answer coming up, I think that’s where you have a consensus. But I can guarantee you if you do a model with six people and the next day you do a model with different people, something will come up differently. It will be different. Drivers will be different. The calculation, the way they calculate it will be different. The outcome will be different. So then which one do you use? So it is essential to not only refine the first version, but also if you get a control, you can get another group doing it to see if we’re not completely irrational in our analyses.

So I encourage you to do the same multiple. Eventually when people get used to doing this and you do this day in and day out, it’s second nature. You will see that convergence comes quickly. Because remember the beauty of LeveragePoint is that you can document all your drivers, all of your history so you don’t reinvent the wheel every time. If you have no software, then you reinvent the wheel every time because there is no way of sharing it. So that’s one of the strong benefits of using LeveragePoint.

Watch the Full Webinar or Download the Slides

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