designing and pricing of advanced service offerings based on on customer value

Designingandpricingofadvancedservicesbasedoncustomervalue

6thInternationalConferenceonBusinessServitization,Barcelona2017

17November2017

DrShaunWest,DominikKujawski,MarioRapaccini

6th InternationalConferenceonBusinessServitization,Barcelona 2017|West,Kujawski,Rapaccini

IntroductionProblemandpurposeofthispresentation

… toprovideaguidetodesignandpriceserviceofferingsbasedoncustomervalue

Thispaperdescribestheprocessofdesigningandsupportingvalue-basedpricingofservicesthroughquantificationofcustomervalue

… todescribetheprocessandtheresultsresultsoftwocasesbasedonthepricinganddesignofadvancedservices

Purposeofthispresentation

…manufacturersshifttowardstheprovisionofintegratedproductservicesolutionssolutions– howcantheypricestheseoffers?

Problem

6th InternationalConferenceonBusinessServitization,Barcelona 2017|West,Kujawski,Rapaccini

Thecustomerperceivespositivenet benefits bysolutionsanditresultsinawillingnesstopay

IntroductionClassificationofvalue

“..manufacturingcompaniesarecurrentlycompetingfortheidentificationofinnovativevaluepropositionstopositionthemselvesinthemarketandthisledtoashiftfromprovidingtraditionaltransaction-basedandtowardstheprovisionof

integratedsolutions”(Pezzotta,etal.2014)

“…companiesfailtoaccountforcollectiveandrelationalgoalsincustomersolutions,a

mismatchcanoccurbetweenfirms’solutionsandthosethatcustomersenvision”

(EppandPrice,2011)

”pricesshouldbecoherenttothe‘valuescope’ofthesolutiontothecustomer’sproblem”

(OsterwalderandPigneur,2014)

6th InternationalConferenceonBusinessServitization,Barcelona 2017|West,Kujawski,Rapaccini

Thismodeldoesnotaddressvalue-basedpricing

IntroductionServicerevenuemodelscanprovideinsightintothepricingonvalue

- Product-relatedservices- Use-relatedservices- Outcome-relatedservices

6th InternationalConferenceonBusinessServitization,Barcelona 2017|West,Kujawski,Rapaccini

InternalinterviewsQualitative

andquantitative

form

ExternalinterviewsUnderstandendtoend

sales

Customersurveys

Collectinsightfromtarget

group

UsecasesInternal

workshops

PricingdesignBuild

prototypeofprocesses

MethodologyAfivestepmethodologywasappliedinthisstudy

Themethodologywasdesignedtoprovidetheinsightintoavalue-basedpricingprocess

6th InternationalConferenceonBusinessServitization,Barcelona 2017|West,Kujawski,Rapaccini

MethodologyThetwofirmsthatwerestudied

Bothusecaseswereusedtodevelopadesigningprocessofserviceofferings

Middle-sizedenterprise,SwissbasedOEMcleanroomequipmentGlobalmarketservicing

Small-sized,DutchbasedDisruptiveentrantinoffshorewindboltingGlobalmarketservicing

6th InternationalConferenceonBusinessServitization,Barcelona 2017|West,Kujawski,Rapaccini

ResultsandinitialanalysisSetofinternalworkshopswasperformedtodeveloptheprocessofdesigningandpricing

- Confirmedthatinputfromdifferentfunctionsisneeded- Highlightedthatdifferentfunctionshaddifferentviewsonthecustomer’spricerelevantdimensions- Buildingprototypeshelpedtoimprovethecommonunderstandingandincreasedthecreativity

basisTheinitialbasisofpricingwereinwardlookingratherthancustomeroriented(costplus)

Identificationofcustomerpersona

PricingdimensionsbasedonCVP

Buildingandprototypingsolutions

6th InternationalConferenceonBusinessServitization,Barcelona 2017|West,Kujawski,Rapaccini

Therewaslackofalignmentbetweenobjectives,strategiesandtools

ResultsandanalysisExternalinterviewsshowtop4pricingobjectives,strategiesandtools

Competition-relatedpricing

Servicequality-relatedpricing

Stabilityinthemarket

Financialobjectives(in general)

Marketbased

Costplus

Customervalue

Willingnesstopay

Costbuildup

Tradediscounts

Customervalue

Willingnesstopay

Objectives Strategies Tools

6th InternationalConferenceonBusinessServitization,Barcelona 2017|West,Kujawski,Rapaccini

ResultsandinitialanalysisCustomersurveysprovidedinsightaboutcustomerperspective

Customerarenotthesameandtheyshouldnotbetreatedwiththesameapproach

“Wewouldbekeentopaytwicemoretonothavecurrentproblemswiththeproduct”

“Idealcaseiswhentheproductruns6monthscorrectlyuntilthenextplannedmaintenance”

“Theofferingfromyourfirmdoesnotchangeovertime,wecouldpaymore…ifyoucouldguarantee

ustheperformance”

6th InternationalConferenceonBusinessServitization,Barcelona 2017|West,Kujawski,Rapaccini

DiscussionThethreestepmodeldevelopedfromtheanalysis

Themodelhelpsfirmstounderstandandimprovedesignandpricingofservices

Customerandvalueidentification

Buildingandprototypingsolutions

Serviceofferingvaluequantification

andpricing

6th InternationalConferenceonBusinessServitization,Barcelona 2017|West,Kujawski,Rapaccini

DiscussionStep1– Customerandvalueidentification

Createcustomervaluepropositionforeachkeyactorintheecosystem

- Ecosystemmappingtoidentifycustomers

- Createadetailedunderstandingofvalue

- Customervaluepropositionshelptounderstandvalue

Weneedtohaveacommonunderstandingofoutcomes– ’needfinding’isnotsufficient

6th InternationalConferenceonBusinessServitization,Barcelona 2017|West,Kujawski,Rapaccini

DiscussionStep2– Buildingandprototypingsolutions

Eachproposedsolutionshouldaddressthebusinessproblem

- Clearproblemdefinitionisrequired

- Threesolutionsatleasthelptoidentifycustomervalue

- Comparewithcurrentasareference

Thisshouldbedoneinagroupandconfirmedwiththecustomer

6th InternationalConferenceonBusinessServitization,Barcelona 2017|West,Kujawski,Rapaccini

DiscussionStep3– Serviceofferingvaluequantificationandpricing

Thefinalstageofserviceofferingvaluequantificationusingvalue-basedpricingframework

- Differentmethodsareneededtohomeinonthevalue

- Willingnesstopayisabestguess- Fairpricemustreflectvalue

Themarginiswhatisleftafterallofthecostshavebeenspent

6th InternationalConferenceonBusinessServitization,Barcelona 2017|West,Kujawski,Rapaccini

ConclusionsThebusinessmustunderstandcustomer’svalueimportancepricing

Itreinforcestheneedtounderstandkeyactorsintheecosystem

Itshowstheimportanceofvalueexchangeandpricingdimensions

Confirmstherelationofscope,priceanddeliveredvalue

Quantificationofcustomervaluehelpstodesignpricingofservices

Theprocesshelpstoconvertdiscoveredcustomervalueintoserviceofferingspricedaccordingtoquantifiedcustomervalue

6th InternationalConferenceonBusinessServitization,Barcelona 2017|West,Kujawski,Rapaccini

RecommendationsFurtherresearchandapplicationoftheprocessshouldbeundertaken

Moreresearchisneededinthisareaifindustrialfirmsaretotakeadvantageofdesigningandpricingofserviceofferings

Howtousevisuals(orothertools)toimproveunderstanding

Waystocreatedesign/pricingprototypes

Waystotestdesign/pricingprototypestoimproveunderstanding

Thelessonsneedtobetranslatedsomanagerscanusethem

6th InternationalConferenceonBusinessServitization,Barcelona 2017|West,Kujawski,Rapaccini

Postscript…Wehavesincefurtherrefinedthemodelandhaveavalue-scope-pricemodel

Step1– Value

Step2– Scope

Step3– Price

6th InternationalConferenceonBusinessServitization,Barcelona 2017|West,Kujawski,Rapaccini

Thanksforyourtime!