Why Ibbaka is changing Valio pricing
Steven Forth is a Managing Partner at Ibbaka. See his Skill Profile on Ibbaka Talio.
Ibbaka has changed what is included in the software packages for Valio. In the interests of transparency, and sharing best practices, we wanted to be transparent about what we have changed, why we made these changes, and how this new pricing enhances the value of Ibbaka Valio.
What is Ibbaka Valio?
Valio is Ibabka’s software platform for managing value, packaging and pricing models and to enable value selling and customer success. It is part of every Ibbaka engagement and is a key part of how we deliver value.
Valio can also support other models that are implemented as systems of equations and are used to estimate impacts. These do not need to be economic impacts or dollar values. Some Ibbaka customers have added sustainability models. Other models that can complement economic value estimation or EVE are health outcomes, such as HEOR, or customer satisfaction measures.
One of the mode important uses of Valio is to create and manage value stories. A value story takes a value model and translates it into a buyer friendly format that can be used by sales and customer success.
Sceen shot of the Ibbaka Valio dashboard for a customer.
Why have we changed pricing?
The original pricing model for Ibbaka was based on the number of models. That has not changed. We do not price based on the number of users. One can add as many users to Ibbaka as one wants and it does not change the pricing. We chose number of models and value stories as the pricing metric as this is what best aligns with how we create value.
We originally assumed a 1:1:1 mapping. One value model, one pricing model, one value story.
As we worked with more and more customers we realized that this assumption was wrong.
Pricing Models: Customers often want to compare the old pricing model and the new pricing model. They could not switch everyone onto the new pricing model right away and needed to have both pricing models available. In other cases, there are different pricing models for different segments or in order to align pricing with the customer’s buying model. A common example is companies that want to be able to offer pricing to companies that are going to allocate the cost to operating expenses vs. those that allocate to capital investment. There is a one to many relationship between value and pricing models.
Value Stories: As we used value stories in more and more context we realized that there are four different ways the value stories are being used.
To validate value, in a non sales context. This is mostly done by Ibbaka as part of our work to validate value models.
To explore value, early in the sales process. This is a conversation and not a presentation. Price is usually not part of the story at this point.
To present value and to put price in the context of value during price discussions.
To document value. Customer success needs an interface to gather and present data that documents the value being delivered.
The value model to value story mapping is also one to many.
How have we changed pricing?
Given that the ratio of value model to pricing model and value story in not 1:1:1 but 1 to many we needed to be more generous with our customers.
It has always been possible to buy additional models or value stories, but some buyers felt that the original pricing was designed to make this happen and that they had been set up. This is not the relationship we want with our customers.
We decided to code this one-to-many relationship into our pricing.
For each value model you get two pricing models.
For each value model you get three value stories.
Growth: 1 Value Model, 2 Pricing Models, 3 Value Stories
Scale: 3 Value Models, 6 Pricing Models, 9 Value Stories
Enterprise: 5 Value Models, 10 Pricing Models, 15 Value Stories
Like most companies that sell to large enterprises, we also have a Custom package, but the pricing is based on extending the Enterprise package to includes more models, more types of models and integrations with custom support packages also possible.
How will existing customers be effected?
Is this a hidden price increase? No. For most of our customers there is no change to what they are paying, but they have more flexibility in how they roll out and use Valio.
For the Enterprise Package, we have reduced the number of value models from 7 to 5. On the other hand, under this new pricing one gets more pricing models and many more value stories. This better aligns with both how people are actually configuring Valio and with best practices.
We do have customers that see a pricing increase. To encourage them to move the model we are letting them keep the old pricing for one year of renewal if that will lead to lower pricing given the number of models and value stories they expect to have. They thus have plenty of time to budget and adjust.
Some lessons learned
Usage patterns matter: We believe that for Valio the number of models is the one that best tracks value while not discouraging use. But our initial assumption about use was wrong. Study usage patterns and how usage interacts with value and pricing. Adjust pricing as usage evolves.
Scaling matters: Value and pricing can interact in different ways as usage scales. It is important to maintain the critical relationship Value > Price > Cost across different scales. In fact, value should grow faster than price should grow faster than cost as use increases. Make sure you model this in your initial pricing and that you monitor this as you follow changin usage patterns.
Be generous: When changing pricing be generous with buyers. Reward their loyalty. Encourage exploration and use.
Price changes need a lot of thought and analysis. To be successful you need to work through a process. To help you, we have a Checklist for Best Practices in Introducing New Pricing.