The Value Disciplines

Disciplines 2

In order to go-to-market a company must create product offerings (Development), select market opportunities (Strategic Marketing), set prices (Pricing), communicate to the market (Product Marketing) and sell the offers (Sales).  In most companies, these activities are performed without a clear understanding of the value being created for customers and, as a result, opportunities to create or capture more value in the process leak away.  These value and price leaks undercut sales volume and margins and are a primary reason why companies underperform.  Value Management transforms these functional activities into Value Disciplines designed to eliminate leaks and maximize value creation and capture.

Learn more about The Value Disciplines

  • Value-based Development

    The majority of product development efforts rely on some form of “Voice of the Customer” data to determine which features will be included in a new product. The problem with most customer research is it often focuses on what customers “want” instead of what they value and are willing to pay for. This results in a series of high performing products that never seem to command the price premium they should.

    Value Management addresses this shortcoming by using a quantified understanding of customer value to support development decisions. It enhances the existing stage-gate approach by adding “value-gates” so that features that improve performance but don’t add value are dropped early in the process. The result is more profitable products and lower development costs.

  • Value-based Marketing

    Market segmentation and targeting are, arguably, the most important contributions the Marketing discipline has made to strategy. By focusing their go-to-market efforts on the right customers companies improve customer acquisition and retention rates along with profits. The key question is which are the right customers? Customer value helps answer this question and enables the company to focus its go-to-market activities where it has the greatest potential to create value and get paid for the effort.

    Products create value for customers in different ways. A logistics software solution will be more valuable to a company with an in-house logistics function compared to one that has outsourced its logistics to UPS. Similarly, the ability to get paid for value-added products varies across customer as well. Larger customers use their buying power to drive down prices, while smaller customers tend to be less sophisticated and are willing to pay more.

    Capturing these value-based characteristics in a segmentation model enables us to target those customers with the highest profit potential. Of course, a value-based approach to Marketing can improve more than just segmentation.

  • Value-based Pricing

    Value-based pricing is the most mature of the functional strategies having been introduced in The Strategy and Tactics of Pricing in 1987 (the book is in its fifth edition and I am a co-author). Many companies have struggled with the transition to value-based pricing because they focused solely on prices and discounts. But value-based prices will have limited impact if the products are not designed to maximize value or if the prices aren’t supported by clear value-selling efforts.

    One of the keys to the Value Management approach is that it leads to more effective pricing strategies by addressing the upstream and downstream profit leaks that undermine pricing effectiveness.

  • Value-selling and Negotiation

    Value selling and negotiation are essential to capturing the value created for customers. In today’s sophisticated procurement environment, purchasing managers are expertly trained to commoditize products and extract discounts. The goal for a value-based sales and negotiation strategy is counter aggressive procurement tactics in order to have a legitimate conversation about price and value. As part of that conversation, sales must have the tools and training to communicate value and defend value-based prices.