A software solution for achieving fairness, transparency and consistency in value-based pricing

June 23, 2021 Rashaqa Rahman

Rashaqa Rahman is a Principal Consultant at Ibbaka. See her Skill Profile on Ibbaka Talent.

At Ibbaka, we believe trust is the foundation of value-based pricing, and trust is based on three things - fairness, transparency and consistency. We often come across organizations that struggle to support their sales team in their value-based selling endeavours. Sales teams often find it difficult to defend pricing and communicate the differentiated value of the offer. Good pricing needs great execution. In order to successfully execute value-based pricing, an organization must invest in building trust with the customer.

With that in mind, we developed The Ibbaka Value Pricing Dashboard which is a software as a service (SaaS) application that connects value to price, and helps organizations quantify and demonstrate the value that they deliver to their customers.

Fairness

What do we mean by fairness in pricing? Understanding the value an offer provides to a customer, relative to the next best alternative is foundational to value-based pricing. In order for pricing to be perceived as fair by the customer, an organization should be able to clearly articulate a) how the offer creates differentiated value for the customer and b) how a fair share of the value created is captured through their pricing.

Value is relative and contextual. While there may be similarities in how value is derived, not all customers will derive value the exact same way. As such, we wanted to develop a tool that allows organizations to weave fairness into their pricing strategy and execution while taking into account the customer context.

The Ibbaka Value Pricing Dashboard allows organizations to build and execute on fairness within their value-based pricing strategy by using a rich set of quantitative and qualitative data from customers, competitive intelligence, internal sales data as well as advanced analytics to:

define value-based customer segments
guide the development of pricing based on the key value and usage metrics
develop customer value models that quantify and demonstrate the economic value to individual customers over time

Buyers want reassurance that they are not overpaying. Most customers would be willing to pay a fair price if you are able to address their specific needs and pain points through your differentiated offer, and are able to quantify and demonstrate how much value you are creating for them in the process.

Transparency

Transparency in pricing is as important as perceived fairness in building trust with the customer. The Ibbaka Value Pricing Dashboard is an investment into building trust with the customer and lends to transparency within the overall sales process:

by taking the time to truly understand the customer’s business process to build the pricing and value models
fairly referencing the customer’s next best competitive alternative to calculate the differentiated value of the offer

In the Ibbaka Value Pricing Dashboard, each product/customer segment has its own unique value model, which is comprised of economic value drivers organized into broad categories such as Operating Cost Impacts, Revenue Impacts, and Risk Impacts, for example.

Each model is populated with default economic value estimates based on industry averages which can be adjusted according to the specific customer situation. The estimate of value is fine-tuned as the customer becomes willing to share more information. Having these in-depth value-based discussions early in the sales process with customers also helps foster long-term relationships, as the narrative moves away from price and cost to VALUE.

Consistency

Pricing should also be consistent. Ad-hoc discounting takes away from the perceived fairness of an offer, especially in industries where customers reference each other. Buyers want to have confidence that they are being offered fair prices and competitors are not negotiating better deals. More often than not, ad-hoc discounting results in a lose-lose situation as it tends to drive prices down, and customers are none the happier for it.

The Ibbaka Value Pricing Dashboard enables sales to develop pricing proposals based on the key value and usage metrics for each product/customer segment. This helps organizations win sales without having to resort to reactive discounting.

At Ibbaka, we strive to ensure your customer-facing teams have the tools to deliver on the value promise, are able to clearly communicate and document the value delivered, and are able to capture a share of the value created through a fair, transparent, and consistent pricing process.

If you are looking to explore a data-driven, repeatable process to connect value and price for your customers, read more about The Ibbaka Value Pricing Dashboard here.