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Value driven design is the only enabler for value add pricing

Template Innovation Day presentationCONFIDENTIAL

VALUE DRIVEN DESIGN IS THE ONLY ENABLER FOR VALUE ADD PRICING

Zane SmilgaConsultant Innovation [email protected]

METHODOLOGIES & TOOLS


2CONFIDENTIAL

Grow business?

BUSINESS ABC

Sell more

Raise prices


3CONFIDENTIAL

Grow business?

BUSINESS ABC

Go2market innovation

New added valueProduct/service innovation

Sell more

Raise prices


CONFIDENTIAL 4

WHO TO BLAME IF ABC DOES NOT WORK OUT … ?


5CONFIDENTIAL

HEADACHES

PRODUCT DEVELOPER

MARKETER/SALES/PRICE SETTER

Our products are different from others.

Others have cheaper prices.

Customers choose for cheaper.

My margins erode.

They are very good, even superior.

USERS/CUSTOMERS Clashbetween expected value by developers and value perception by customers

=value erosion& lower price point


6CONFIDENTIAL

CAUSES

PRODUCT DEVELOPER

MARKETER/SALES/PRICE SETTER

Customer value is not understood accurately.

USERS/CUSTOMERS

Lost opportunity3 parties that miss understanding and capturing potential added value

Increase of customer value is only marginal

Value driven design is not followed up by a value add pricing(usually cost based or aligning to competition)

Customer value is not captured in product design.


7CONFIDENTIAL

CONFUSION IN MARKET

Differentiation is not enoughAlmost every product is different It is even too much Often it is irrelevant and confusing for customers

Is it worth the money?

Which product to choose?

How are they

different?

Differentiation that adds significant value to customer will justify the premium price.


8CONFIDENTIAL

A WAY OUT...

HIGH

LOWLOW HIGH

PRICE

CUSTOMER VALUE

Same product, new valuechange of meaning

Change the game of thewhole product category

added value is onlymarginal or irrelevant

it can not justify a higher price

4th gen product1st gen

product

2nd gen product

3rd gen product

New differentiating valueValue driven design

= customer value perception

Robot vacuum

Step away from the market reference to create premium pricing opportunities


CONFIDENTIAL 9

WHY IS IT DIFFICULT?


CONFIDENTIAL 10

Make a guess...what is the price?

robot vacuum cleaner


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DIFFICULTY 1

American Customer Satisfaction Index - http://www.market-guide.com.cn/en/marketing/yhmy.html

293 €

668 €Too high tech,

it might break…

It most likely could clean corners very well

Customer perception is complex. It is even more complex to understand it.

47 €Too cheap to be good….


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DIFFICULTY 2Past does not forecast the future of customer behavior. Customer needs and perception are dynamic.

en.wikipedia.org

YEAR 1906-1930BASIC CUSTOMER VALUES:

- Portable- Easy to store- Can be powered by

anyone (even servant)

BASIC CUSTOMER VALUES:

- High suction performance- Fit to all types of floors- Easy to be maneuvered - Anti-Allergen- …

BASIC CUSTOMER VALUES:

- Automatic & autonomous- Intelligence- Automatic recognition of surface

& right cleaning technique- …

YEAR 2000 - 2015

YEAR 2015 - 2025


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DIFFICULTY 3Customer decision making process is twisted & hybrid.

Decision making process

http://www.metia.com/

emotional vs rational

Motivations

Phycological influencers

Sociocultural environment factors

Influencers

Prior purchase experience

Wow such a discount!

I can not have an unknown

brand...

I have to calculate how much will my electricity bill

raiseI need to get

help with cleaning...

I should ask my mum what

would she do....


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DIFFICULTY 4

CLEA

NING

PER

FORM

ANCE

INTELLIGENT CLEANING

Neato XV Signature Pro Robot Vacuum

293 €

Dirt Devil M607 SPIDER

117 €

Vileda 136134 ViRobi Cleaning Robot

47€

iRobot Roomba 620305 €

ROOMBA880 668 €

ThinkGizmos187 €

TOP 1 BESTSELLER

ON AMAZON.COM

KEY BUYING FACTORS

TOP 4 BESTSELLER ON AMAZON.COM

Often only 2 variables can tell most of the story of what drives the willingness to pay & value perception.Customer needs key purchase criteria of different segments

Recognizing surface & adjusting cleaning means, recognizing steps, scanning area & making cleaning plan, recognizing dirt....

Diffe

rent

type

s of s

urfa

ce, %

of d

irt c

olle

cted

....

Perception of benefits and costs has a long stretch.


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DIFFICULTY 5Perception is not easy to read.

Gap between say and do Silent messages (55%)words (7%)/vocal elements (38%)

I like veggies!

characterdesignnotes.blogspot.com


CONFIDENTIAL 16

HOW TO MANAGE IT?


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POSITIONING NEEDSLook out for underserved needs.

Skip overserved needs. Look out for needs that make a difference.

Plan the competitive positioning

http

://ww

w.lin

kedt

olaw

.co.

uk/

Key inputs for product planning1. Needs based segmentation

Different needs, improtances & perceptionof value and performance.

2. Key needs & value drivers for product design

3. Key performance attributes for competitive positioning for specific values/needs space

I vacuum every day at 9am. I have to

control my husband’s allergies

The less I have to do myself the better!

My cat leaves its hair everywhere.... It never seems to be

really clean...


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RESEARCH FOCUS

1.It vacuums places I can not easily access

NEEDS & DESIRED BENEFITSvalue to customers

2. Easy to use

3. Works fast

....

It was lost

I found it under bed

I had to get it withmy broom

Feature: stops when battery is empty (wherever it is)

• Smart navigation (knows where it has been)

• Powerful sucking (1 x & done)

• Charges fast (1.5 h max)• ....

Focus on needs and benefits.Validate features – to what extent do they satisfy the need of your customers.Evaluation & measurement of value perception can happen in the context of potential feature.


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ESSENTIALS OF DECISIONSTrade offs Pleasers

• automatic charging

• bagless• ....

Size or performanceSmall size & it can get under all my furnitureORBigger & with more suction power & dust container

• remote - over internet - control

• auto dust emtying• ...

Non-negotiables

Noise or powerSilent vs powerful suction

Understanding the ranking of decision criteria & logics of decision making for each segment already in product concept phase will increase your chances for value added pricing.


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OVERALL VALUE PERCEPTIONCost perceived value analysis.Is the price justified in the eyes of your customer?

http://pricingwiki.org/Value_map

Tota

l cos

t of o

wner

ship

Aggregates score on the key buying factors & relative importance

What is your product really worth?What for are your customers ready to pay more?How much more?

Developing and pricing new,

premium performance product

Developing & pricing new, low

cost, lesser performing

product


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PROGRAMMATIC APPROACH

Value add pricing requires a value driven product design &

to be part of theentire product planning approach

DREAM PERCEPTION OF YOUR CUSTOMERS

I will recommend it to all my friends.

Wow! so much better than other products!

Definitely worth the price!

Key rules1. Treat price is a design variable.2. Focus on features that raise value in the eyes of

customers3. Link product planning to customer needs, value

driven design& competitive strategy

4. Set max price that customers are willing to pay for it

Opportunity

analysis

Product/Portfolio strategy

Product concept design

Business case& plan

Product development

Product go2mark

et &

marketing

Resarching customer needs(opportunities for added value)

Validating customer needs & variables of benefits...

Needs based segmentation

Research product market space (competition, price points, value perception...)

Product strategy including desired price points

Competetive differentiation strategy

Value Driven product design exploration

Customer validation (features options <-> value perception, preferences)Customer validation

(Alternative product designs (value perception, preferences, willingness to pay...)

Added value validation

Go2 market & pricing strategy to capture the added value


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Best sellers are not always the cheapest

IT REALLY WORKS...

TOP 1

... not the ones with the most features... not the ones that are the most technologically performing


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CONCLUSIONSPricing should not be driven only by costs, competition and past sales patterns. It should be customer value centric.

Understand the perceived value and set a justified price point.

Push the perceived value up by investing in customer research and value investigation during the FFE in NPD. It will push up also your “fair price” level and confidence about your new product and the price you can charge for it.


KruibekeBelgiumVerhaert New Products & Services Hogenakkerhoekstraat 21B-9150 KruibekeT +32 3 250 19 00E [email protected]

NivellesBelgium

NoordwijkNetherlands

Lambda-XAvenue Robert Schuman 102B-1400 NivellesT +32 67 47 57 10E [email protected]

www.lambda-x.com

Verhaert NetherlandsKapteynstraat 12201 BB NoordwijkT +31 71 760 05 50E [email protected]

connect.verhaert.com

INDUSTRYFMCGCONNECTMEDICAL TECHXFER

MEDICALAEROSPACETECHXFER

FMCGCONNECTTECHXFER

AveiroPortugalLoad InteractiveAv. Dr. Lourenço Peixinho 153800-159 AveiroT +351 234 604 088E [email protected]

www.load-interactive.com

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