Here’s a concise framework to implement this model effectively:
Identify the Value Vectors: Determine how your product adds value through one or more of these three key areas:
Increase in Revenue
Decrease in Costs
Decrease in Risk
Calculate the Value Contribution: Once you understand where your product adds value, quantify the amount your product creates annually.
Apply the Value-to-Price Multiple: Set your pricing based on the value created. Products aiding in revenue generation can command a higher price, followed by those reducing costs and then risk.
