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!
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