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INSIGHTS

Unlocking the power of Price-Value Maps

Updated: 7 days ago

In today’s competitive market, it is crucial to understand how customers perceive your product’s value in relation to its price and competitors. Within Chronion, we have extensive experience helping our clients optimize their price positioning using methodologies like Price-Value Maps (PVMs, see Figure 1). This visualization is powerful to analyse and compare your price position in relation to competitors, and at the same time to verify if your position is aligned with the strategy. This can trigger corrective actions, probably requiring some more in-depth research, to grow revenue and market share.

Figure 1: Example of a Price-Value Map


What is a PVM?


PVM is a plotting method based on two key dimensions: perceived value and perceived price. The perceived value is all about how customers rate the benefits of the products, where the perceived price indicates what the actual or relative price is, through for example a competitive price index. The ideal position is to be in-between the price value corridor and as close to the Value Equivalence Line (VEL) as possible, which indicates if the perceived value matches the relative price or not. Superior value propositions indicate an upward pricing opportunity or, depending on the company strategy, a possibility to accelerate market share growth. Inferior value propositions require additional customer insights before deciding the right tactical optimizations (innovation, price decrease…).


How to make a PVM


  1. Engage a qualified 3rd party: To avoid response bias and to have specialized people to interview the customer and conduct surveys, an external party is essential. This will lead to unbiased results and the most valuable understandings that closely reflect the truth. Internal expertise can steer to misleading positioning and wrong strategies and eventually to decreasing gross profits.


  1. Decide target audience: Nowadays, customers expect much more than a ‘one-size-fits-all’ solution. Expectations, needs and beliefs may differ significantly per target group. For this reason, it is important to understand your different customer segments and to decide your target customers for the research.


  1. Identify and score attributes: First, we need to identify which attributes are important for the specific product in the market. This can be done with in-house expertise and cross-checked in customer interviews. Next, we have to evaluate the importance of the different attributes within the proposition and the performance of the different players in the market, typically via quantitative research. The result is a value curve visualizing the performance on each attribute versus competition (see Figure 2). Researching the importance & performance on attribute level is in our opinion crucial to make sure your PVM provides the right type of actionable insights.


    Figure 2: Example of attributes and their according importance with a value-curve (on the right)



  2. Map: This step is the visualisation of step two with a corridor on attribute level. Depending on the target group the attributes can have different importance. This allows the proposition to be streamlined with the customer's needs, identifying not only where extra performance is expected, but also where less focus can be placed and thus what can be serviced more efficiently. This is illustrated with ‘Attribute A’ in Figure 3. 


    Figure 3: Competitive analysis of different attributes



  3. PVM finalization: As a final step, the detailed insights on attribute level are consolidated into the price and value dimensions of the PVM at the total proposition level.


The use of Price-Value Maps is a powerful method to gain insights into how customers perceive the value of the products relative to their price and competitors. By adopting a customer-centric approach and collaborating with external experts, you can obtain valuable, unbiased insights that are crucial for optimizing your pricing and product/service propositions.


 

About the author

Bert Vandewiele is partner at Chronion.

Hector Delaey is consultant at Chronion.


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