Creating profitable new products is the foundation for every company's growth strategy. Nevertheless, 3 out of 4 new products fall short of their sales targets because customers don't value the product enough to justify the price. Join us as best-selling author Dr. John Hogan shows how value-based design can dramatically improve new product success rates. He will show how to prioritize new features based on their value creation and value capture potential. He will also share a compelling case study of how one firm used value-based design to re-build their product portfolio. During this 30 minute webinar you will learn: - Why your current development process misses profit creation opportunities - The three value-based metrics that define the "profit zone" for new products - How to prioritize and select new features based on customer value

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COMPANY CONFIDENTIAL
Use Value-Based Design to Drive
New Product Success
Monthly Webinar Series – May 22, 2013

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Sponsored by LeveragePoint
the Software Solution for Value-based Pricing

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Today’s Presenter
Use Value-Based Design to Drive New Product Success
Dr. John Hogan is co-author of The Strategy and
Tactics of Pricing and is a recognized thought leader
and speaker on the topic of strategic pricing and
value-based marketing strategies.
As founder of Value Management Advisors, he works
with clients in a range of industries including
technology, healthcare, and manufacturing.
Previously, John was a Partner at Monitor Group, a
global management consulting firm, and managed
corporate pricing strategies for General Motors.

4. © John E. Hogan 2013
There is Room for Improvement in NPD Processes
5
A 2013 PDMA benchmarking study found that NPD processes are
successful less than 25% of the time.
0
20
40
60
80
100
% of new products that hit
revenue targets
Our development process is
data driven
2012
2010
76% “Failure”
Rate

5. © John E. Hogan 2013
Common Problems with New Product Launches
6
Lack of Value:
Process yields gold-plated products
with high performance that don’t
create enough value to justify the
price
Wrong Pricing:
Cost-plus pricing leaves money on the
table or underprices new product relative
to value
High Development Costs:
The development process, driven by
the wrong metrics, requires additional
development cycles

6. © John E. Hogan 2013
Three Leverage Points for Improving the NPD Process
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Scoping
Gate
1
Business
Case
Gate
2
Develop. Gate
3
Testing &
Validation
Gate
4
Launch
The Stage-Gate Process
Data Analytics Metrics
Do we have the right
data for each stage
of the process?
Are we using the
right tools and
analytics?
Which KPI’s are
driving development
choices?

7. © John E. Hogan 2013
The Three Key NPD Metrics
Value
Potential Feature
Cost
Price
• Customer Value: establish the
revenue potential for a feature
• Price: determined by the ability
to capture a feature’s value
• Tangible vs. Intangible
• New vs. known technology
• Low vs. high risk
• Cost: ultimately determines the
profit potential for feature
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8. © John E. Hogan 2013
The Choice of Metrics Drives the Development Decision
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Selecting features based on value seems like a prudent choice...
The first three features
would be prioritized based
on value

9. © John E. Hogan 2013
Adding a Value-based Price Metric Leads to Different Choices
10
Adding a realistic price
metric uncovers missed
revenue potential

10. © John E. Hogan 2013
Design Choices Must Leverage Value, Price and Cost
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The combination of metrics
reveals feature #3 as a good
development candidate

11. © John E. Hogan 2013
Value-based Design Case Study
12
Situation:
 Tech Co, a a global electronics
firm, was facing market
disruptions caused by new, less
expensive technologies
 Competition was eroding margins
and taking share from new
products
 The management team believed
that the future health of company
was at risk
Objective:
Improve new product profitability with a value-based development process

12. © John E. Hogan 2013
The New Approach was Tested on an Advanced Signal Generator
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$2,100
$1,600
$4,500
$1,100
$2,850
$2,900
$3,100
$1,200
$ 8,200
Integrated
Package
$ 6,850
Faster
Processor
Advanced Signal
Processing
$ 4,300
The new features created
significant value
Less Auxiliary Equipment
Less Down Time
Value Drivers
Faster Set Up

13. © John E. Hogan 2013
Value Drivers Were Evaluated for Value Capture Potential
Less
Auxiliary
Equipment
Less
Down Time
Faster
Setup
Estimated
Value Capture Rationale
Clear savings
from lower
equipment costs
75%
Claim is credible,
but hard to verify
at purchase
50%
Not clear if
savings are fully
realizable
15%
There was much lower
ability to capture some
value for one value driver
14

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The Revenue Analysis Created an Interesting Discussion
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$315
$800
$3,375
$165
$1,425
$2,175
$465
$600
Less Auxiliary Equipment
Less Down Time
$ 4,490
Value Drivers
Integrated
Package
$ 3,765
Faster
Processor
Advanced Signal
Processing
$ 1,065 Faster Set Up
The analysis showed much
lower revenue potential for
software

15. © John E. Hogan 2013
% Price
Increase
B/E
Volume
Expected
Vol. Loss
Profit
Impact
10% - 17% < 7% $8.3 m
15% - 23% < 9% $12.5 m
20% - 25% < 15% $13.1 m
25% - 33% < 18% $15.2 m
30% - 38% < 25% $ 10.8 m
The value and revenue analysis gave the team the confidence to
take a substantial price increase on new product
The Analysis Led to an Aggressive Launch Price
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Results
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• The new analytics gave confidence and
focus to the product managers while
making the process more efficient
• The number of features rejected
increased across products – lowering
development costs
• Sales had a much clearer value story to
support launch pricing – increasing
close rates
• Average margins increased as a result
of better pricing and lower costs

17. © John E. Hogan 2013
Some Key Learnings
 Take a disciplined approach to
analyzing customer value
 Start early in the process and be clear
about your value-based metrics
 Invest time in educating all the
stakeholders – it takes 2-3 times
through the process for it to stick
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18. © John E. Hogan 2013
Our Next Webinar
June 26, 2013 – NOON EDT
 Design to Value: How to Deliver Value-Based Innovations
 Bill Poston, Founder & Managing Partner
 Reed Shelger, CPP, Senior Consultant
 Registration Opens Next Week

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Thanks for Watching!
sales@leveragepoint.com
www.leveragepoint.com
(617) 945-7075
John E. Hogan, PhD
jhogan@valuemanagementadvisors.com
www.ValueImperative.com