Core Concepts: The Value Cycle
By Gregory Ronczewski, Director of Product Design at Ibbaka. See his skill profile.
We try to start the Core Concepts posts with a few definitions. Value seems to be a straightforward concept, so let's look at what Merriam-Webster has on cycle.
an interval of time during which a sequence of a recurring succession of events or phenomena is completed
a course or series of events or operations that recur regularly and usually lead back to the starting point
one complete performance of a vibration, electric oscillation, current alternation, or other periodic processes
a permutation of a set of ordered elements in which each element takes the place of the next, and the last becomes first
a circular or spiral arrangement
The key point here is that the value cycle is not a linear process. It is iterative and repeated.
The London Business School defines the Value Cycle as follows:
The Value Cycle articulates a broadly applicable management process for achieving and sustaining superior performance; specifically, it ties together: Value, which refers to an organization's ability to exceed the specific needs of its customers.
The concept of a customer can be more complex than it appears. Included in ‘customer’ are the different members of the decision making unit, the business buyer, the economic buyer, the technical buyer and other stakeholders who may not be buyers, or even users, but who are impacted by the outputs of the solution.
Ibbaka Valio - our Pricing and Value Management Platform - helps B2B SaaS companies communicate the value of their offering and put price in the context of value. We use the Value Cycle Framework to visualize the five-step process. The value cycle defines how organizations create, communicate, deliver, document and capture value (in price). Here is a good summary written by Steven Forth.
The five steps in the value cycle are all based on value understanding. A value model is one of the best ways to develop a shared understanding of value, shared inside your organization and with your customers.
The five steps in the value cycle are …
Value Creation - seeing from our customer's perspective and how we create that value for them. People and businesses receive value in terms of economic, emotional, and community measures.
Value Communication - this is how businesses communicate and articulate value. It boils down to our value proposition. Different stakeholders will experience value in their specific ways. Therefore, communication must map to buyers and value segments.
Value Delivery - this is how the value is delivered, and how does the value get recognized as received by your customer?
Value Documentation - customers sometimes need help to quantify and document the value they are receiving. Having value recorded serves as a reference to make a case for our customers to invest in us.
Value Capture - It boils down to pricing. Ibbaka promotes value-based pricing. When we can quantify our positive impact on our customers, we have a greater chance of capturing value.
For another perspective on the Value Cycle see Understanding the Value Cycle by Matt Wensing.
More reading for you
Core Concepts for Pricing and Customer Value Management
Value Cycle (this post)
Coming soon …
Community Value Driver
Connecting Value and Pricing Models
Cross Price Elasticity
Customer Value Journey
Customer Value Management
Economic Value Driver
Interactions of Cross Price Elasticity and Price Elasticity of Demand
Package Design
Pocket Price Waterfall
Price Elasticity of Demand
Pricing Design
Pricing Model
Value Based Market Segmentation
Value Ratio
Value to Customer (V2C)
