Value-Based Strategy: Are Instant Results Possible?


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You want higher prices. You get it that a value-based strategy can deliver.

Your team has brought you up to speed on what it really takes to adopt a value-based strategy. You know it will have a broad impact on how you define, create, and market products. Everything you do will need to be oriented to create unique customer value.

It’ll be a significant undertaking. But you need results now.

The Problem

A value-based strategy deliberately creates more economic value for the target customer than alternative offerings. It then extracts for you fair, profitable compensation for that value. The result is more customers at higher prices.

A value-based strategy requires you to embark on a journey through the four step framework shown below:

Value Strategy Process

And there you see the problem. It’s in step two. You have to actually create valuable products before they can be sold.  It’s the “Create Value” part that can take so long and frustrates the need-results-now crowd.

Don’t give up. Near instant results are still possible.

The Shortcut

You haven’t been operating in a vacuum.  You engage customers, battle competitors, and develop products every day.  Your strategy is well-informed even if it hasn’t been guided by a value-based framework. It’s possible that your existing portfolio contains untapped value.

To find out if it does, you first have to complete the “Define Value” step.  Here you need to develop an economic value model for the products in your portfolio. You’ll need two inputs:

  1. The added economic value that your customer gets from your product when compared to your competitor’s
  2. Your competitor’s reference price

The market value of your product is simply the reference price for your competitor’s product, plus (or minus) your added value.  See the figure below:

Economic Value Model

This is immediately useful.  Use this definition of market value to “value audit” your existing product portfolio.  This will produce one of three outcomes for each product:

  1. You’ve priced it correctly.
  2. You expect a price higher than its actual market value.
  3. You’ve underpriced it.

A discovery that you’ve underpriced a product is like found gold. When you find one, immediately take a short-cut from “Define Value” directly to “Market Value.”

Value Strategy Process Shortcut

When your get there:

  • Increase the product’s price to reflect its value.
  • Update your marketing materials and strategy to substantiate your revised value proposition
  • Train sales to defend your new value-based price

Then get ready to enjoy near instant value-based strategy results.

Gold is Often Found in an Unexpected Place

The impetus to “go find instant results” is often a low margin product. The hope is that a value-based approach will boost its price. It might help, but the odds are against you. When a product is under price pressure, the market is already signaling the maximum that they will pay for it. There’s probably not much juice left in that orange.

You are far more likely to find an underpriced product among your best performers. These are the products that routinely achieve target profitability. Management doesn’t complain about the price they’re getting. Customers don’t complain about the price that they’re paying. Price tension is low. This is where underpriced products usually hide.

Final Word

Instant results are possible by taking the value-based strategy shortcut described here. Everybody should try it. Just don’t forget this shortcut is just that, a shortcut. It’s a retrospective portfolio assessment.  Value-based strategy is “deliberate.” Discovering unexpected value in products that were developed without a value-based approach isn’t deliberate. It’s lucky.