The Art and Science of Pricing: Simple tools to align price with value (Roberto Rivera) ProductCamp Boston 2014
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You have the offering and you know which markets to target, but do you really know how much to charge? Learn how to set prices with confidence. * Overview of value based pricing principles * How to align price with the value that your offerings deliver * How to structure product offerings to capture that value * How to use simple tools to set prices with greater confidence
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The Art and Science of Pricing: Simple tools to align price with value (Roberto Rivera) ProductCamp Boston 2014
- 1. The Art and Science of Pricing: Simple tools to align price and value May 3, 2014
- 2. Ultimately, what matters in pricing is customer value. © 2014 2
- 3. Can you reduce your customers’ costs? Can you increase your customers’ revenue? Measure it and communicate it to your customers © 2014 3
- 4. $300,000 per year • Used by patients that fall under a specific genetic profile •Breakthrough results: •replaces 12 less effective drugs •reduces hospitalization costs, •reduces likelihood of transplants • doubles the life of patients $100,000 per year • It’s not yet known what the drug may do for individual patients, •Finding out who will benefit is through costly, inefficient trial and error •Value is at best uncertain and at worst no greater than that of a barely effective alternative at half the price. •50 percent discounts in USA •U.K.’s drug watchdog, the National Institute for Health Care and Excellence (NICE), turned the drug down for reimbursement. © 2014 4
- 5. vs. How does Boeing justify a price premium on its latest aircraft models? Innovation: Benefit: Reduced Fuel Costs VALUE $140, 000 in annual fuel savings © 2014 5
- 6. Breaking Down a Broad Customer Benefit We have a strong brand! What does your brand mean to a typical customer? (why do they buy from you?) © 2014 6
- 7. Breaking Down a Broad Customer Benefit Why is that important to the customer? It means we have the most reliable product in the industry. © 2014 7
- 8. Breaking Down a Broad Customer Benefit How often does it happen with your competitor? Because unplanned downtime is a big issue for them. How does that impact the customer’s cost of operation? How do you measure the cost of unplanned downtime? © 2014 8
- 9. Can you estimate the impact of better quality? Benefit Cost or Revenue Probability of event % improvement Less rework Cost of defects/scrap/rework Establish estimates Establish benchmarks Less repairs Repair costs Less likelihood of downtime Cost of downtime Higher competitiveness due to higher reliability Profit potential from access to markets © 2014 9
- 10. Set a value based price in 4 easy steps © 2014 10
- 11. To get started • Offering • Customer or segment • Competitor • How value is measured • Competitor price • Advanced coating system • Contractors • Existing coating technology • Per Year • Estimate based on customer size Establish Context Case Study © 2014 11
- 12. © 2014 12
- 13. Use pricing metrics that capture value © 2014 13
- 14. Are you ready for a price change? © 2014 14
- 15. Thank You! Roberto Rivera Founder, Price on Value roberto@priceonvalue.com © 2014 15