Skills and roles for value-based pricing and sales
Steven Forth is co-founder and managing partner at Ibbaka. See his skill profile here.
Value-based pricing and value-based selling are key growth strategies and are especially important when it comes to introducing innovations to the market. The value based approach assumes that the price paid should reflect the value received. Introducing the value based approach to a company requires the skills need to support the journey around the value cycle.
Please share how your organization is gathering and applying skill data
The value cycle is built on an understanding of value.
Create - One begins by creating value. At some point in the offer lifecycle this required innovation. Meaningful innovation is innovation that creates new value.
Communicate - The value needs to be communicated to potential buyers and users. How this is done will depend on the growth model. It could be done by marketing, by sales, by delivery teams and even by the users themselves. Most often value communication is something that all of these different people do.
Deliver - The value promised has to be delivered in a specific context. Different buyers and users will be acting in different environments each with their own constraints. Value delivery takes the potential for value that has been created, the value that has been promised and makes sure it is delivered.
Document - For a sustainable business it is not enough to deliver value. You also have to document that value. There are many ways to do this, depending on the type of solution, but this is the step that is most often skipped.
Capture- At some point the people and organization providing the value have to be compensated. If not, they will stop providing the value. Beyond that, they need to capture enough of the value being delivered to invest in the creation of future potential value.
What roles and skills are needed to deliver on the value based approach?
What are the common roles used to execute on the value based approach? What skills are needed for these roles? Any organization introducing value-based pricing needs to be able to answer this question and be able to test if it has the right people, with the required skills, in the right roles.
This is role coverage and skill gap analysis.
Performing this type of analysis is one of the key ways that Ibbaka provides value to its clients.
The first step in this work is to identify the critical roles. Let’s see how this could work for an organization introducing a new pricing model, based on value-based pricing, and a new sales model to support the new pricing design.
We will do this by working our way around the value cycle. I am going to skip the Value Creation phase as that is more the concern of product and service design and is part of the innovation space. One does not want to needlessly proliferate roles in an organization, so one of the design goals here is to reuse the roles where possible. This can also lead to a more agile organization where people can move between different roles and jobs.
Roles and Skills for Value Communication
These are generally the existing roles for marketing and sales. Rather than adding a lot of new roles, lets identify a few skills that could be added to existing roles.
Trust building (the value based approach depends on trust)
Story telling (value is best communicated through stories)
Customer understanding (value is value for the customer)
Value modelling (this will be a new skill for most people, the value analyst will build the model - see below - but everyone will need to be able to understand the value model, build a value model for a specific client and to translate a value model into a value story - hence the need for storytelling as a skill)
Existing roles that will need to have these skills layered in include:
Product Marketing
Marketing Communications
Sales Representative
Pre Sales Engineer
There is one new role needed here, one missing in many companies, that is the role of value analyst.
The Role of Value Analyst
A few companies already have people in the role of value analyst or value engineer. This person is generally the person who builds the initial value model, maintains it over time, and continuously tests and improves it. The value analyst will work closely with the pricing designer (see below) to make sure that the pricing model aligns with value. They will also support the sales team in developing value stories for specific opportunities. In best of breed companies, the value analyst also supports customer success.
Key skills for the value analyst include:
Economic Value Estimation (skill in carrying out EVE analysis and building EVE models)
Business Models (knowledge of different business models)
Profit and Loss Statement Analysis (skill in understanding in most cases economic value is defined in terms of its impact on the customer’s profit and loss)
Measurement (skill in developing ways to measure the impact of different functionality on value)
SaaS Metrics (knowledge of these metrics is important, given the predominance of subscription models an understanding of the key SaaS metrics and what drives them: Lifetime Value of a Customer (LTV), Value to Customer (V2C), Customer Acquisition Costs, churn analysis, cohort analysis and so on)
Curiosity (an inquiring mind, always trying to understand new business models, new forms of measurement, new modelling techniques)
Roles and Skills for Value Delivery
These are generally the people on the implementation teams. They are responsible for implementing what was sold. Just implementing what was sold, and meeting the Statement of Work, is not enough. One has to understand what value has been promised and make sure that the solution is set up to deliver that value.
For companies with subscription models, or more generally repeat customer businesses, customer success is another place where value delivery comes to the fore. This is so important that we suggest moving from the customer journey map to the customer value map. The customer value map shows how value is delivered and captured over time. See this post for how to layer value into the customer journey map.
Roles involved in value delivery include:
Project Manager
Implementation Manager
Customer Relationship Manager
Customer Success Manager (and team roles)
What about customer support? In most companies customer support is a reactive function, it responds when a customer has a problem. Value based approaches require a proactive approach. The people accountable for value to the customer (V2C) must be reaching out and shaping how the solution is used and making sure that value is being delivered.
Roles and Skills for Value Documentation
‘Making sure that value is being delivered.’ Value documentation is the work of documenting how value is being delivered and tracking how that is changing over time. It is generally important to understand how value delivered is translating to the Lifetime Value of a Customer (LTV). The people and roles involved in value delivery should also be responsible for value documentation. Some of the skills required are …
Active Listening (skill in drawing out people on their concerns and then stating back what is heard and confirming understanding)
Documentation (the habit of writing down what is being learned, often in a formal documentation system like Ibbaka’s Value Pricing Dashboard)
Solution Knowledge (knowledge of the solution, the value it is meant to deliver, and how to get it to deliver that value)
Customer Knowledge (knowledge of the customer, the people and their relationships, and how the solution impacts the customer and the customer’s customers)
Industry Knowledge (knowledge of the industry the customer operates in, including competitors, alternatives, key players and thought leaders)
Benchmarking (skill in putting the customer’s data in the context of other companies that use the solution and other companies in their industry)
Roles and Skills for Value Capture (Pricing)
This is where pricing model design comes in. A good pricing model has four properties:
Aligns with value (the Value to Customer (V2C) and Lifetime Customer Value (LTV) move together such that V2C is larger than LTV)
Is scalable (so that the solution can be sold to customers at different scale and price
Is extensible (so that new functionality can be added and new packages or bundles put together)
Can evolve (as prices exist in complex adaptive systems)
The pricing model design role includes many specialized skills. The most important of these are …
Pricing Models (knowledge of the different ways that things have been priced, are being priced and could be priced)
Pricing Metrics (knowledge of different pricing metrics and when they should be used)
Value Metrics (knowledge of different value metrics and when they are relevant)
Packaging (skill in combining functions into packages that are attractive to target market segments)
Modular Systems (skill in decoupling functions so that they can be recombined in new ways - including applying modularity to pricing metrics)
Value capture can also require skilled negotiators. One challenge in introducing value-based pricing is in negotiating with procurement. Procurement is generally rewarded for negotiating lower prices, making sure there are alternate sources of supply, and generally pushing towards generic and commoditized solutions.
Good negotiators have the following skills …
Communication
Emotional Intelligence
Panning
Value Creation (note the connection back to value)
Strategy
Reflection
How to test if you have the role coverage and to find skill gaps
We have a detailed post on How to measure role coverage and skill gaps here.
The basic steps are as follows:
Define goals
Say how you will measure progress towards the goal
Describe roles
(In some cases you may want to layer in behaviors or use competencies rather then roles)Connect skills to roles
Set required levels of expertise (we recommend using a five point scale for this)
Estimate the number of people you will need in a role (always have at least two people who can perform a role so that you encourage diversity and redundancy)
Assess the skills of people who could perform the role
(There are many ways to do this, at Ibbaka we support self assessments, peer assessments, manager assessments and expert assessments. Certifications, especially micro certifications, are another approach, as are evidence based assessments or even testing)See the role coverage and skill gaps
(Ibbaka gives a visualization that let’s one literally see role coverage and skill gaps and dig down into the details)Devise a plan on how to improve role coverage and close skill gaps
(This could be use learning and training, job experience opportunities, or even new hiring)Track the change in role coverage and skill gaps over time
A role is not (necessarily) a job
Note that we use the term ‘role’ and not ‘job.’ A role and a job are not the same thing. Riles are more granular, and modular, and focusing the analysis on roles leads to more insight than basing the analysis on jobs. There are four types or roles to be concerned with:
Job Roles - a job is a bundle of roles, some roles will appear across multiple jobs
Team Roles - people play many different roles on teams and these roles are often more impactful than their formal job roles
Ad-Hoc Roles - people also play roles outside of their normal job or team roles, one often hears people say ‘I am doing this off the side of my desk’
Community Roles - work is not the sum of our lives and many of us play important roles in our families and communities, the skills from these roles are relevant in work as well
A role orientation is critical when introducing a new capability like the value-based approach. When you introduce a new pricing model, especially one designed using value-based pricing, consider including a role coverage and skill gap analysis to make sure you will be able to execute.
More posts on Role Coverage and Skill Gap Analysis
How should your organization measure role coverage and skill gaps?
Why Role Coverage and Skill Gap Analysis is Mission Critical
How is your organization collecting and using data about skill gaps?
How to Understand Skill Coverage for Key Roles in Your Organization - Ibbaka Demo
