Harry Macdivitt
Director
Axia Value Solutions Ltd
Harry Macdivitt is Director of Axia Value Solutions Ltd, United Kingdom. In his early career, Harry worked as a research chemist. He has 25 years’ experience in independent strategic management and marketing advising, and specialises in strategic marketing, product management and sales.
Harry has chaired and presented at pricing conference across the world and has delivered training seminars to corporates in over 35 countries. He is a member of faculty at Strathclyde Business
School and a regular contributor to Master level programmes in other universities.
He is a specialist in value and value based pricing and, together with his co-director Mike Wilkinson, wrote Value-Based Pricing: Drive Sales and Boost Your Bottom Line by Creating, Communicating and
Capturing Customer Value, McGraw-Hill Companies, Inc.- 2012. They co-wrote the book The
Challenge of Value, Abramis Publishing - 2010. Harry has also contributed to Innovation in Pricing:
Contemporary Theories and Best Practices , Routledge - 2012.
He is a Fellow of the Chartered Institute of Marketing and of the Institute of Consultancy, is a Certified
Management Consultant and a Certified Member of the Market Research Society.

by
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SAVE
£££s
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Source: Mack Hanan & Peter Karp
Source: Harry Macdivitt, 2004
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©
REVENUE GAIN (RG)
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VALUE TO THE
CUSTOMER
EMOTIONAL
CONTRIBUTION (EC)
COST
REDUCTION(CR)
Source: Macdivitt, H., and Wilkinson, M. Value Based Pricing, McGraw Hill (2012)

Customers want to know how we can help them…
Examples of Value Drivers
Get to market faster
Eliminate “hassle”
Eliminate costs
Nature of driver
Economic , Emotional
Emotional , Economic
Economic , Emotional
Emotional , Economic Reduce their anxiety
Enhance operational efficiency
Remove conflict
Improve customer retention
Achieve greater peace of mind
Economic , Emotional
Emotional , Economic
Economic , Emotional
Emotional , Economic
…and they will select us if we can demonstrate convincingly how we can do these things for them
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• Some of the time Emotional Drivers are more important.
• Some of the time Economic Drivers are more important.
• But Emotional Drivers and Economic Drivers are important all of the time…and we must search for both!
• The Value Triad © framework helps us to do this.
• We use the “So what?” question to drill down to the key issues.
• All the analyses are from the customer’s perspective – not the seller’s!
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Identify every atom of value that the customer is seeking
Identify every attribute of the product that you can that contributes to
Customer Value
Use the Value Triad until you have identified everything that matters.
It is hard work but vitally important.
Link them using
Customer Impact
Analysis
Keep asking yourself “So
What?” until you have squeezed out every bit of juice you can – and you are really sure you have captured everything
Quantify them using the Value
Calculator
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Reprographic
Equipment (EMEA)
Professional Services
(Western Europe)
Business Services
(Western Europe)*
Industry
Power Generation
(Global)
Surveying Instruments
(Germany)*
Lubricants (UK)
Medical Devices (ii)
(UK/Ireland)
Medical Devices (i)
(Italy/Germany)*
Hotel Furniture (UK)*
Function
Value Based
Pricing (VBP)
Marketing
Value Based
Selling (VBS)/ VBP
Product
Management (PM)
Business Unit
Management/PM
VBS
Corporate
Management
VBP
VBP/Marketing
Outcome
Creation of both Value Proposition and detailed competitive Value Based Price.
More comprehensive arguments and promotional content.
Sales team re-focused on real value and solid basis for price negotiation.
Re-constructing ineffective marketing collateral and refining Value Proposition.
Precise identification of comparative benefits and new Value Proposition. Reorient Bus Unit on Value
Building sales arguments and moving sales team away from transactional selling.
Recognised focus was on product spec rather than value. Reorganised UK business unit on value.
Compelling arguments, much more effective selling and very profitable VBP.
Identification of value impact of hi-tech innovation, value proposition and VBP.
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Assessing Value - Telco B2B market
Theft of copper wire from electricity pylons is a serious crime in many parts of Africa.
• Installations are usually remote
• Often protected by armed guards – who may be murdered by thieves
• Power supplied to municipalities, other utilities and factories
• Lucrative black market for stolen wire
• Wire theft costs $’000,000s and causes severe disruption
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The mobile operator provides network infrastructure and software to capture all images at good resolution and transmit them back to security team
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Customer Impact Analysis ©
IP Security Camera Service via Telco Operator
Attribute
No human guard
So What?
Do not need to maintain force of security guards on site
(So What?) n
Electricity Utility pov
• Eliminates corruption
• No personal risk to guard
• No salary/cost payments needed
Customer Impact
Continuous System operation (EC, RG)
No guard to injure/murder (EC)
Eliminates salary/employment costs (CR)
Supply continuity
Minimises or eliminates service interruption
Reliable visual record
Data collected by satellite and fed back to
NOC
System alerts security or police
Wireless alert
•
•
No service down-time
Avoids need to engineer troubleshooting or intervention
Saves cost of reinstatement of service supply (CR)
Saves cost of new copper ($3.45/lb) (CR)
Avoids hazardous visits by staff (CR, EC)
• Creates electronic record
• Visual evidence of attempted theft
• Solid evidence in prosecutions
• Video streamed via satellite to NOC and then recorded on hard disk.
Deters theft (EC)
Easier/cheaper to prosecute (CR, EC)
Happens automatically so creates peace of mind (EC)
Permanent record (EC, CR)
No human engagement (EC, CR)
These can all be prioritised in line with our understanding of a customer’s needs.
They allow us to create good questions to ask the customer in sales discussion
The answer the customer’s “So What?” and give us an audit trail to explain in whatever detail we need to.
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Value Driver
Increased revenues
Faster time to market
Improved customer retention levels
Improved operational efficiency
Improved aesthetics
Greater peace of mind/less worry
Friendliness/absence of conflict
Improved comfort
Possible Metric
By customer, segment, salesperson, product tangible
Development time, time to first sales, time to money tangible
Time since first sign-up, customer lifetime value, link to revenue metrics, peace of mind measures – tangible and intangible
Revenue per head, revenue per machine, revenue per unit cost, operational costs tangible
Conjoint Analysis, perceptual map, opinion research intangible
Opinion research, Likert Scale, Semantic Differential,
Management assessment intangible
Employee survey, Likert Scale intangible
Stress and back/other employment pain related absences, productivity measures – intangible and intangible
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Harry Macdivitt & Mike Wilkinson – “Value Based Pricing – A Practitioner’s Guide”

Structuring the VBP using the Value Triad ©
Price
Reference
Price
Emotional
Contribution
Cost
Reduction
Added
Value
Revenue
Gain
We want to capture our fair share of this!
Value Based
Price
Reference
Price
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Maximum VBP
 Understand as fully as possible the customer/client context
 Collect evidence to support revenue and productivity improvements
 Collect evidence to support cost reduction claims
 Think through which intangible benefits are relevant
 Use Value Triad © elements to support important assertions
Reference Price

Attributes
Simple design
Natural watering process
Customer Value Calculator
Business Services (Product Management)
So What?
Net Revenue
Gain
Impact £
Net Cost
Reduction
Impact £
Emotional
Contribution
Impact £
• Easy to install
• Efficiency of maintenance
• Less risk of spillage
Return trips
Avoided
Reduced insurance
• Low maintenance
• Avoid plant destruction
• Plants maintained in good health
• Feel good factor
• Minimise plant replacement
Avoidance of guilt
No replacement costs
14K
Doing good for environment 30K
Fewer visits per site • Easier, more flexible scheduling
• Efficient hi-tech approach
• Fewer parking fines
• Low technician visibility
Total Amounts
Massive productivity gain
260K
260K 14K
Hassle removed
30K

Structuring the VBP
Business Services
Price
RP: £0.00
EC: £30K
NCR: £14K
NRG: £260K
Maximum
VBP
In this case the scenario is a 12-month
Business Development option for the operator.
• Novel technology permitted doubling or trebling of unit coverage (1500 per 10 weeks to 3000 or even 4500.
• Rental price per unit to operator’s customer - £175 per annum (£3.40 per week).
• Revenue gain £260,000 (doubling scenario)
• VBP = (£260K + £14K + £30K)/1500
• Max Unit VBP on this schedule ≈ £200, negotiable on corridor.
• EC of £30k accepted by major operator because of reduced hassle, more flexibility and “natural plants”.
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• How the Value Triad © helps us understand Customer
Value;
• How the framework was used to analyse various sales, marketing and product management scenarios;
• Defining and quantifying customer value using
• Building a Value Based Price from the Value Triad © framework.
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You can contact Harry in any of the following ways.
Go ahead – make my day!
T: +44 ((0)141 337 6004
M: +44 (0)781 298 1651
E: hm@axiavalue.com
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0044 781 298 1651 hm@axiavalue.com
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