Maximizing Value: The Art of Measurement: PeakSpan & Ibbaka Masterclass Q&A

Written By Karen Chiang

Karen Chiang is a Managing Partner at Ibbaka. See her LinkedIn Profile. Rashaqa Rahman is a Principal Consultant at Ibbaka. Connect on LinkedIn.

Last week on June 5th, Ibbaka was invested to present at PeakSpan’s Master Class series. In the session, Rashaqa and I honed in the practical things you need to do to build a value model. A value model is a system of equations you use to estimate economic value.The value model is the foundation of all value-based pricing and is incredibly useful for sales, customer success, and product management. Even before presenting the price, it is important to establish a strong narrative on value impact; having a powerful value story is key.

Watch the Master Class recording here on Vimeo.

I wanted to take this blog opportunity to answer the questions posed. Although we answered these questions during the session, we thought we would elaborate in a post. For this post, we utilized AI to expand our consideration of the responses.  We fed the AI some of our own information.

1. How do you justify the assumptions made when quantifying the economic value?

Justifying assumptions in economic value quantification involves several steps:

  • Data Collection: Gather data from reliable sources such as customer feedback, competitor analysis, and internal and publicly available benchmarks. Sources can include prospects, customers, competitor websites, industry associations, and academic institutions and the assets they produce.

  • Validation: Test assumptions with internal stakeholders and customers to ensure they are realistic and applicable. Iterative testing and refinement are crucial.

  • Transparency: Clearly document and communicate the basis of each assumption, including the data sources and the rationale behind them. This transparency helps build trust with stakeholders and customers and can shed light on why previous decisions or insights were made.

You need the value model to pull all this data together and make it meaningful.

2. We are bringing a radical innovation to market. Can too much value-added be a problem?

Yes, too much value-add can be problematic. Overloading a product with features can lead to complexity, higher costs, and potential customer overwhelm. It’s essential to focus on the most critical value drivers that align with customer needs and market demand. Over-customization can also alienate customers if the product becomes too tailored to specific requests. At Ibbaka, some of our customers have specific requests to simplify and reconfigure their bundles and offers. Doing so makes adoption more manageable leading to better upsell and cross-sell paths.

3. How do you quantify emotional value?

Indeed, it is a challenge to quantify emotional value but in certain cases, it can be done. 

Marketing and Consumer Behavior:

  • Bayesian Modeling: Used to identify and quantify the target emotions associated with purchasing decisions. For example, emotions like love for a mortgage, pride for a new car, and happiness for chocolate are quantified to understand their impact on consumer behavior.

  • Implicit Prophecy Feelings® Scale: This scale measures the emotional responses elicited by different marketing stimuli. For instance, Nestlé used this scale to determine that the emotion of love explained 26% of the variance in consumer responses to different meal preparation scenarios.

Customer Experience and Loyalty:

  • Net Promoter Score (NPS): This score is used to measure the emotional impact of customer experiences. It quantifies how likely customers are to recommend a product or service based on their emotional responses.

  • Customer Satisfaction (CSAT): This metric quantifies the emotional drivers of satisfaction, such as the impact of human interactions versus mechanical processes in customer service.

Because it is difficult to translate emotional drivers into real dollar numbers, we recommend that these drivers be called out as part of the overall narrative.

4. How does the team align foresight analysis and trend forecasts into the analysis of consumer values for future-focused value anticipation?

Aligning foresight analysis with consumer values involves:

  • Scenario Planning: Create multiple forecasts based on different potential future scenarios to assess the impacts of various strategic decisions and external factors.

  • Trend Analysis: Use tools like trend and technology radars to track and assess drivers of change and prepare for future shifts.

  • Customer Engagement: Engage with customers to validate foresight insights and ensure they align with current and future needs. This can be done through surveys, interviews, and focus groups.

5. Are there standard methods to measure impact (community/student etc.) value drivers?

Standard methods to measure impact include:

  • Engagement Metrics: Track metrics such as active users, participation rates in community events, and content consumption.

  • Outcome Metrics: Measure specific outcomes like student performance improvements, community growth, and user satisfaction.

  • Surveys and Feedback: Collect direct feedback from community members or students to understand their perceived value and areas for improvement.

6. Is Economic Value Estimation (EVE) customer-specific given the cost savings could be different based on customers’ situations?

Yes, EVE is often customer-specific. The economic value can vary significantly based on the customer's unique circumstances, such as their current costs, usage patterns, and specific needs. Customizing the value estimation for each customer ensures more accurate and relevant results. On Valio, we do this by toggling value drivers on and off and adjusting the value of the inputs. Then one

7. When assessing economic value from the customer’s perspective, are the drivers additive?

Economic value drivers can be additive, but it’s essential to avoid double-counting. Each driver should be distinct and contribute uniquely to the overall value. For example, cost savings and revenue increases should be calculated separately to ensure accuracy.

8. Do value calculators resonate with decision-makers in terms of justifying price even after adjusting assumptions?

Value calculators can resonate with decision-makers if they are transparent, data-driven, and aligned with the customer's specific context. Clear documentation of assumptions and iterative validation with customers can enhance their credibility and effectiveness in justifying prices. It is also helpful to benchmark against industry norms.

9. How do these calculators affect win rate?

Value calculators can positively impact win rates by providing a clear, quantifiable justification for the product's price. They help demonstrate the tangible benefits and ROI, making it easier for decision-makers to justify the purchase internally.

10. Do you have any sense of the weighting of how value calculators influence a sale?

The influence of value calculators on a sale can vary, but they are generally significant. While it’s challenging to assign a precise percentage, value calculators can be a critical factor in the decision-making process, especially in competitive markets where demonstrating clear ROI is essential.

11. How often do you see these value calculators revealed to customers in the public domain?

Value calculators are sometimes made available in the public domain, such as on company websites, to help with self-qualification. However, this approach can backfire if the assumptions are not well-explained or if the calculator produces unrealistic results. It’s crucial to ensure that any publicly available calculator is robust, transparent, and easy to understand.

Karen Chiang
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