How to Win - Portfolio and Pricing Choices are Well Matched
Karen Chiang is a Managing Partner at Ibbaka. See her Skill Profile on Ibbaka Talent.
The third choice in the strategic choice cascade is “How to Win.” This is where things get really exciting for those of us interested in pricing. To win and to achieve our pricing aspirations, this third choice centers around the design of our portfolio, the way in which we communicate our value proposition. The design of our pricing needs to be well aligned with needs of our the target market. Pricing design is central to our ability to win.
How to Win Choices for Pricing
Remember that our “How to Win” choices need to support our “Where to Play” choices. Our “Where to Play” choices have identified our prioritized segments and give us guidance on who we are choosing to target. This is informed by understanding for whom we create value for. Value has been defined and quantified in terms of economic value, emotional or community value. As we transition to How to Win, we will leverage our market knowledge to clearly articulate our value proposition, communicate this value and track the delivery of our value to our customers over time.
The delivery of our value proposition comes in the form of the portfolio of offers that our customer consumes from us. Our offer comprises product, service and our unique capabilities. It is packaged in a way that is mapped to the way in which our customers would like to consume it and in a way where value is realized.
At the heart of “How to Win” is how we price. Pricing is where it all comes together. We need to price effectively in order to have a transaction at all. Transactions fuel our aspirations and the volume, frequency, and quality of our transactions have a direct impact on our growth and performance indicators which translate to the valuations of our companies. As such, to keep transactions healthy, we need to serve our target market by ensuring that our customers are not only receiving but are also recognizing and acknowledging the value we provide and are willing to pay for it. Better yet, we want to establish a high degree of trust with transparency, fairness, and consistency because with trust our customers will guide us in how we can continue to innovate and serve them better.
Selected Approaches for How to Win
I’ll only cover a couple of approaches for How to Win, focussing specifically on pricing and value delivery. I will not be covering offer design or value proposition and value communications. If there is interest in these topics, I will put it into the Ibbaka content queue so please let us know with a comment on this post.
The value metric - pricing metric relationship
A good pricing model connects our value metrics with our pricing metric. The value metric is the unit of consumption by which our customer gets value (from our customer’s perspective NOT ours). By definition, value metrics track value drivers. The pricing metric is the unit by which we charge. It is how our customers pay us. For a quick read on the relationship of value metrics and pricing metrics read our still relevant post from years ago, “When is 'user pricing' a good pricing metric?”
Tracking value to customer (V2C) using a customer journey maps
Having a clear understanding of how you are providing value to your customers is paramount to enabling How to Win. To enable a deal your sales team needs to be able to define, position and defend the value of your offer and capture a fair price for that offer. The tool that we use to effectively document our interactions with our customers is the customer journey map. This map covers each phase from awareness through marketing, sales, customer services and support, upsell and renewal and potentially to end of life. Customer journey maps help:
Illustrate how we consistently deliver value to our customers over time.
Inform our marketing, sales, customer success, service delivery and product development
Track whether we are on target to deliver on our vision, mission and key strategic choices
Show when price is communicated (including renewals)
Make sure that the Value to Customer (V2C) and Lifetime Value of the Customer (LTV) are aligned over time
Learn more about the process for building a customer journey map in one of my past posts, Customer journey maps as a key tool to inform and shape value.
Read other posts in the strategic choice cascade for pricing series
Winning Aspirations - What pricing goals are we trying to achieve
Where to Play - Making Pricing Choices to Define your Market
How to Win - Portfolio and Pricing Choices are Well Matched
Capabilities - Skill Around the Value Cycle
Systems in the Strategic Choice Cascade - Tools and applications used to across the value cycle