For example, do you have a serious discussion about customers’ next best alternatives? What do we know about these alternatives, how do we know this to be true, how do customers measure their satisfaction, and how is our new product design stacking up? Without such insight, you’ll have to guess at your new-product pricing.
Consider four steps: 1. Understand value, learning which important outcomes customer lack. 2. Quantify value, estimating the potential value beyond customers’ next best alternative. 3. Build value, by developing a new offering. 4. Communicate value, with a dynamic launch. Most companies can get much better at steps 1, 2, and 4.
You want differentiated new products that will induce enthusiastic customers to open their wallets wider. Differentiated products must be… different. But different from what, in what ways, and to what extent? 100% of this information can be learned from B2B customers… but only if you engage them in specific discussions. Very few suppliers do this correctly.
Customers only pay a higher price for your innovation if it is important, measurable, and distinctive. The customer must a) care about the outcome being improved, b) observe the improvement so you get credit for it, and c) be unable to get the same improvement from your competitors. Sorry, but you need all three.
Ever watch stage-gate reviews or entire workshops wrestling with The Value Proposition? It’s not pretty. In my experience, good B2B customer interviews yield potential value propositions like so many ripe apples falling from a tree. You just need to pick which to pursue. If you have to dream them up, you’re climbing the wrong tree.
You have to deliver important value that customers cannot get anywhere else to command a higher price. If customers can get this same value from just one other supplier, they’ll use it as leverage for lower pricing. So the difference between delivering new value and matching existing value is the difference between raising and lowering market pricing.
Download our Free white paper to discover how the Innovation Wave will differ from earlier Quality and Productivity Waves. Catch the Innovation Wave (page 8).
If you don’t ask customers the right questions, you can’t quantitatively assess their next best alternative. So you’ll have to guess at pricing. Guess too high and customers won’t buy. Guess too low and… well, customers will let it go this time. And you leave money on the table, perhaps for a decade or more.
Read more in this free white paper, Catch the Innovation Wave (page 12), which details how your company can improve customer value and experience a significant increase in sustainable organic growth.
When you give customers a value calculator with hard numbers, you are much more credible and you build their confidence in your new product. And you boost customer “internal selling.” If your unit price is higher than competitors’, you can help your customer purchasing agent prove he’s a hero, not a goat.
Read more in article, Getting Top Price for Your New Product (Originally published in B2B Organic Growth) Resist the temptation to ask a customer, “What would you pay for this?” There’s a little alarm that sounds in the customer’s head saying you’ve stopped trying to help him, and are now trying to help yourself.
Sure, you can develop products that you find exciting. But unless these products address something customers find important and unsatisfied, don’t expect them to buy them. And if customers do buy your product, they certainly won’t pay a premium. If you’re not happy about this, you’ll have to complain to Adam Smith.
More in white paper, Catch the Innovation Wave (page 8).
There are many forces dragging your products toward commoditization: competitors trying to imitate your products… purchasing agents trying to standardize your products… new technologies trying to obsolete your products. In your quest toward specialty products, you’ll get no outside help. You own this one, baby.