Editor’s note: At LeveragePoint, the concept of value-based pricing is important to every member of the company. In this blog post, one of LeveragePoint’s software developers, Aaron Williams, provides insights on value-based pricing for start-ups based on his experience as a CEO of start-up.
In previous posts in this series, we have examined why startups should create value propositions. We also looked at the offer selection, and target customer and competitor identification pieces of the value proposition creation process. In this post we will continue building a value proposition in under an hour by comparing and contrasting our offering versus the next best competitive alternative. To help illustrate the points, we will look at this process from the perspective of a new file sharing tool versus traditional email attachments.
Comparing and Contrasting with the Next Best Competitive Alternative
Now that the customer and best competitor have been identified, the next step is to compare and contrast your offering with the next best competitive alternative. This process is a two step process: creating a list of differentiated features and creating a list of customer benefits. The list of features describes your offering and the customer from the product or service perspective. The list of benefits is a conversion of the feature list into the customer’s point of view. Five minutes should be used to build each list.
Step 1 – Creating a List of Differentiated Features (5 minutes)
Comparing and contrasting your offering versus the next best competitive alternative begins by creating a differentiated list of features. The differentiated list of features contains all features unique to your offering or the competitor. Features common to your offering and the competitor are excluded because their value to the customer cancels out.
To create a list of differentiated features:
1. Create two list headings, one for your offering and one for the competitor.
2. List the features unique to your product or service and the competitor.
3. If it is easier, you can either list all features for both your offering and the competitor. Then you can cross out the common features leaving a differentiated feature list.
4. Do not forget to list the competitor’s features that your offering does not have.
Here is what the differentiated feature list looks like for our file sharing tool versus email attachments example. (Notice the common features are crossed out.)
File Sharing Tool:
● One copy of the file
● Version control
● Cross platform support
● Unlimited file size
● Integrates with file system
● Share permissions
● File encryption
Email Attachment:
● Cross platform support
● Can send messages with the attachment
● Recipients already have email accounts
Step 2 – Create a List of Customer Benefits (5 minutes)
The next step is to take the list of differentiated features and convert them to benefits for the customer. The list of benefits is different from the list of features because they focus on the customer perspective.
To create a list of benefits:
1. Create two list headings, one for your offering and one for the competitor.
2. For each item in the differentiated feature list write down all of the benefits to the customer from the customer’s perspective. Remember, customers don’t care about your features, they care about how the features make their lives better.
3. In parentheses after the benefit you should note which features create this benefit. This helps keep track of which features are important to the customer. Multiple features can apply to a benefit.
Here is what the customer benefit list looks like for our file sharing tool versus email attachments example. Notice the features that create the benefit are included in parentheses.
File Sharing Tool:
● Easier to collaboratively write a document with a group (One copy of the file)
● Can roll back changes (Version control)
● Can see differences added by people (Version control)
● Protection from accidentally deleting document (Version control)
● Can use large files (Unlimited file size)
● Can keep groups of related files together (Unlimited file size)
● Better organization of files (One copy of the file, Unlimited file size, Integrates with the file system)
● Prevent unauthorized access to sensitive documents (Share permissions)
● Prevent changes to finalized documents (Share permissions)
● Prevents reading of the document on unauthorized computers (File encryption)
Email Attachment:
● Integrates easily with existing email workflow (Can send messages with the attachment, Recipients already have email accounts)
● No need to sign up for new account (Recipients already have email accounts)
● No need to administer new accounts (Recipients already have email accounts)
What’s Next
In this blog post we compared and contrasted our offering versus the next best competitive alnternative. You should now have a list of differentiated features and a list of customer benefits. This gives us a good understanding of how we are different from the competition and how we benefit the customer. In the next post we will calculate the monetary value to the customer using our list of customer benefits.
About the Author:
Aaron Williams is a software developer for LeveragePoint. Previously he was the CEO and co-founder of a ride-sharing startup, Rootless, Inc and a software engineer for Cisco Systems. He is passionate about new technology, startups, and traveling. Mr. Williams holds a BS in Electrical and Computer Engineering from The Ohio State University.
