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COMPANY CONFIDENTIAL
Financial Impact of Value-based Pricing
Monthly Webinar Series – February 26, 2014

2. Sponsored by LeveragePoint
the Software Solution for Value-based Pricing
www.leveragepoint.com

3. Today’s Presenter
Dr. Stephan Liozu
Dr. Stephan Liozu is a Pricing Evangelist and Thought-Leader
as well as the Founder of Value Innoruption Advisors. He
specializes in the design of innovative and differentiated
business strategies for B2B firms, and the implementation of
value-based pricing strategies. His acclaimed Customer
Value Modeler (CVM®) certification program trains
professionals in value modelling best practices.
Stephan is co-editor of The ROI of Pricing, Innovation in
Pricing and A User's Guide to Value Modeling as well as
numerous academic papers. He holds a PhD in Management
from The Weatherhead School of Management at Case
Western Reserve University where he is an Adjunct Professor
and a Visiting Scholar. Stephan sits on the board of Advisors
of PPS.
www.leveragepoint.com

4. The Financial Impact of
Value-based Pricing

5. Learning Objectives
 What is the ROI of Value-based Pricing?
 What are the difficulties in executing a Value-based
Pricing strategy?
 How to measure the ROI of Value-based Pricing?
 Examples for best-in-class B2B enterprises

6. Learning Objectives
 What is the ROI of Value-based Pricing?
 What are the difficulties in executing a Value-
based Pricing strategy?
 How to measure the ROI of Value-based Pricing?
 Examples for best-in-class B2B enterprises

7. Value-based Pricing’s Impact on the
Bottom Line
70% of respondents reported a 3% or greater increase in price,
profit margin, and gross margin when using value-based pricing
0%
5%
10%
15%
20%
25%
30%
35%
-6% -2% 1% 4% 7% 10% 14% Greater Than
16%
R
e
s
p
o
n
d
e
n
t
%
Sales Impact
Profit Margin Impact
Gross Margin Impact
Value-based Pricing’s Impact on Sales, Profit Margin, and Gross Margin
Source: 2013 State of Value-based Pricing Survey; n=144

9. Value Management Delivers Results
0.93
0.91
0.8 1.0 1.2
Value Masters (top 5%)
Value Managers (top 25%)
Well-Intentioned
Directionally Challenged
Runaway Trains
The most profitable firms were those that combined
value-based pricing with strong execution capabilities
Operating Profit
1.0 = Industry Average
1.24 X
1.11 X
1.04 X
Source: Monitor Pricing Capability Study; n=204

10. Learning Objectives
 What is the ROI of Value-based Pricing?
 What are the difficulties in executing a Value-
based Pricing strategy?
 How to measure the ROI of Value-based Pricing?
 Examples for best-in-class B2B enterprises

11. • What do you include?
• How do you account for
uncertainty?
• How do you define the scope?
Difficulty in
Making the
Business Case
• Who gets credit for results?
• Who measures what?
• When & what do you measure?
• How do you communicate results?
Difficulty in
Measuring the
Impact
Value-Based Pricing and ROI

12. www.leveragepoint.com
3.83
3.83
4.16
4.21
4.25
4.27
4.28
4.29
3.00 3.20 3.40 3.60 3.80 4.00 4.20 4.40 4.60 4.80 5.00
DEFINING THE SCOPE OF PRICING INITIATIVES
DEFINING ALL RELEVANT COSTS FOR SPECIFIC PRICING
INITIATIVES
EVALUATING SPECIFIC INCREMENTAL PRICING GAINS
CALCULATING THE ACTUAL RETURN ON INVESTMENT (ROI)
ESTIMATING THE SPECIFIC PRICING EFFECT OF INITIATIVES
AGREEING ON A DEFINITION OF PRICING ROI FOR INITIATIVES
SETTING UP THE PROPER REPORTING PROCESS FOR ROI
DEFINING OVERALL INCREMENTAL PRICING EFFECT FOR
INITIATIVES
Difficulties in Measuring The ROI of Specific Pricing
Activities (1 to 7 scale) (n=204)

13. www.leveragepoint.com
2.37
3.11
3.16
3.25
3.34
3.48
3.60
3.67
4.02
4.23
2.00 2.50 3.00 3.50 4.00 4.50 5.00
QUANTIFYING DIFFERENTIAL VALUE FOR INTANGIBLE DRIVERS
QUANTIFYING DIFFERENTIAL VALUE FOR DRIVERS
ESTIMATING TOTAL ECONOMIC VALUE
DESIGNING THE FORMULA FOR EACH VALUE DRIVER
COMMUNICATING VALUE MESSAGES TO CUSTOMERS
SHARING OF THE VALUE POOL WITH CUSTOMERS
IDENTIFYING COMPETITIVE REFERENCE VALUE
FINDING COMPETITIVE PRICING LEVELS
SEGMENTING THE MARKET & CUSTOMERS
IDENTIFYING VALUE DRIVERS
Declared Difficulties in Value-based Pricing Activities
(1 to 7 Scale - n=144)

14. Learning Objectives
 What is the ROI of Value-based Pricing?
 What are the difficulties in executing a Value-
based Pricing strategy?
 How to measure the ROI of Value-based Pricing?
 Examples for best-in-class B2B enterprises

15. www.leveragepoint.com
18%
11%
15%
18%
24%
27%
29%
29%
29%
32%
39%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45%
NONE OF THESE
HIRING OF NEW PRICING PROFESSIONALS
IMPACT OF OVERALL PRICING TEAM
PRICING AND VALUE TRAINING PROGRAMS
DEPLOYMENT OF VALUE-BASED PRICING STRATEGIES
PRICING-RELATED CONSULTING PROJECTS
DIVISIONAL PRICING PROGRAMS
INVESTMENTS IN PRICING SOFTWARE
CUSTOMER-SPECIFIC PRICING PROGRAMS
COMPREHENSIVE CORPORATE PRICING PROGRAM
PILOT PROJECTS FOR PRICING PROGRAMS
What Do You Measure ROI For? (n=204)

16. Starting Tomorrow: Design Experiments
Designing a Controlled “Before/After”
Experiment for an Innovative Product.
Key Learning:
Measure carefully the before and after.
Track scientifically the contribution in Pricing & Innovation Councils.
Communicate the quick win up/down & sideways (top management!).
Celebrate the win & repeat to gain confidence (from sales & product devpt).
Cost-based Pricing
• $61K in incremental
GP$ over 12 months
Value-based Pricing
• $250K in incremental
GP$ over 12 months

17. Learning Objectives
 What is the ROI of Value-based Pricing?
 What are the difficulties in executing a Value-
based Pricing strategy?
 How to measure the ROI of Value-based Pricing?
 Examples for best-in-class B2B enterprises

18. What Do They Have in Common?

19. Value-focused Companies
Source: Publically available Annual Reports

20. Available On Amazon: The ROI of Pricing
Get Your Copy Today
Value-based Pricing Chapters
 Value-based Pricing ROI (by Roger Best)
 Making the Business Case for Value-
based Pricing (by Dr. Stephan Liozu)
 Making the Case for Value-based Pricing
Software (by Ed Arnold)

21. ROI of a Cloud Solution for
Value-based Pricing
Source: Arnold, E (2014) Making the case for
organizational collaboration, The ROI of
Pricing, New York, NY: Routledge
Confidential

22. March Webinar
Winning with the New Buyer: Smart
Strategies to Sell and Defend Your Value
March 19, 2014
Presented by: Chris Provines
CEO, Value Vantage Partners
Author, Healthcare Value Selling
To Register visit:
www.leveragepoint.com/resources/webinars

23. Thanks for Watching!
sales@leveragepoint.com
www.leveragepoint.com
(617) 945-7075
Dr. Stephan M. Liozu, Ph.D.
Value Innoruption Advisors
sliozu@case.edu
www.stephanliozu.com
@StephanLiozu
Let us know your thoughts and enter to win a copy of The ROI of Pricing:
Please complete our two question survey
which will appear when you leave the webinar.

24. Attendee Feedback
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Take the Survey
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