Develop Value in Products

I was involved over a period of several months with a major consulting firm to develop Value Equivalence Line charts for all of our products.  The company I was at spent well over six figures for these consultants to research what we already knew about our products and markets then present that data in an easy-to-understand format, the VEL.

Value Equivalence Line charts show price on the X-axis of the chart with some form of value on the Y-axis.  There are a number of key lessons you can quickly learn about your products and markets from the VEL:

  • a straight line tells you that the value measured on the Y-axis is the value your customers associate with price
  • products above the line indicate where you are either pricing too high for the value, confirmed by low sales, or where you are capturing some other type of value, confirmed by high sales
  • products below the line indicate you are pricing below market
  • below the market products bring the entire market down, the line drops and existing products and then priced too high for the market
  • below market price for a set value can be either a strategy or an unintended consequence

Managing your product lines using VELs is key to being the market leader while capturing full value for your product...

...but it does not have to be a quarter million dollar project.

Recently AditNW helped a major equipment manufacture use VEL charts to understand their existing markets and then exactly spec (value) and price a new product for a market hole.  We did this during a two half-day workshops where we tapped the brains of the team's best sales, product, engineering, and business leaders then did the VEL on butcher paper with Post-It notes.

The client walked away with a spec and price that would exactly match the hole in their market.  Product development started the next week.