At Ibbaka, we begin our pricing work by understanding the value of your product or service from the perspective of your customer. Our approach is to research, validate and quantify the economic (monetary) and emotional value your offer creates for the market (customers and non-customers). By understanding your differentiation relative to the customer’s next best competitive alternative, we can design a pricing model built that communicates and even amplifies your differentiation.
Our data-driven approach to understanding Value to the Customer (V2C), allows you to focus your marketing and sales efforts by positioning your offer for the most attractive target customers. These are the customers where you have a high V2C that will support the greatest long-term value or Customer Lifetime Value (LTV) at a reasonable Cost to Serve. It is these customers on which you can build a compelling and sustainable business.
Data-driven market segmentation research is foundational to our pricing work and it starts with crafting value surveys.
Probing value through surveys
Our value surveys are crafted to look for patterns in sentiment and buying behaviour. The focus of these surveys is to uncover economic and emotional value drivers, and the potential for creating a differentiated offer. At this stage, we are not looking to validate the existing features and functionality of an offer. We are finding out how customers see value.
Once we have collected data, through design thinking seminars, interviews, surveys and by parsing data from the CRM including win/loss reports, we apply our proprietary data clustering algorithms. These discover the nuanced patterns within the data that would otherwise be easy to miss. We apply multiple algorithms to the data to bring the differentiation into focus and understand:
How customer sentiments are meaningfully distinct
How customer sentiments are meaningfully similar
The difference between correlation and causation within the data
We validate the analysis with in-depth customer interviews to deepen understanding of the distinct customer segments. A meaningful segment is one that derives value from your offer in the same way and that can be marketed and sold to the same way.
Segmentation and risk
Once we have identified distinct customer segments for your offer, we fortify that understanding with further analysis of firmographic data (company size, location, industry, business model and so on) that can help determine segment scale and to sort companies into segments.
At Ibbaka, we understand that the decision to change prices is not to be taken lightly and has far-reaching implications within an organization. That is why we strive to ensure our data-driven insights and pricing recommendations are actionable and take into account the inherent risks associated with any price change. We are now complementing our approach with sophisticated risk management tools including Monte Carlo modelling. More on this in our next post.
Starting our pricing work with value surveys is not only value added for our clients. We make sure that it is value added for our client’s customers. A well-crafted value survey can help the survey participant understand their own business needs better and is often the first opportunity they are given to articulate how they experience value or any unmet needs. We cast a wide net and survey participants are a mix of your current customers, lost prospects/customers and a wider audience that is unaware of your brand or offer. This provides a well-rounded understanding of value to the customer (V2C) as well as mitigating any confirmation bias specific to existing customers. In our endeavours to capture the voice of the market through value surveys to inform pricing strategy, we also create a market presence for your offer, establish value for your offer within the market and even generate leads for you.