Before your sales reps start hunting for new customers to present your product, I suggest preparing a clear, clean, and quantified value proposition slide. This slide is based on your product’s “claim to fame” and translates customers’ benefits into measurable units that eventually are monetized. Here are the reasons why:
Product Improvement:
- Internal Collaboration – once the company’s mindset is customer-oriented, a collaboration between product, R&D, and customer success domains, is essential for efficiency. It allows all parties involved to be on the same page for effective execution. Furthermore, that slide becomes an arrow in your sales reps’ quiver as they pursue & pitch new customers.
Performance measurers - once a customer’s value is quantified, it becomes a yardstick for performance to ensure that your startup delivers as promised: did you continuously reach the promissed target? That paves the way for successfully scaling up your product (i.e. upsell or cross-sell), or might become a red flag (i.e. leading indicator) for potential attrition.
Pricing Rationale & Boundaries:
Sales reps should have enough “artillery” under their belt to defend their pricing, especially on their first deals. Quantifying your product’s added value provides customers with the rationale behind your pricing.
Example: an AI startup’s product is based on AI solutions over IoT of manufacturing equipment. Following their value propositions (see table):
- $80K Electricity and Maintenance cost reduction (annually) – can be measured and validated in less than three months from installation.
- $150K Emission reduction (annually) – can be validated through A/B testing after one year from installation.
- $350K Manufacturing Shut-Down Prevention (annual based on averages)– those are hard to quantify (i.e. industry-related loss of revenues). Thus, it can be justified in the long run.
For young startups, I advise taking inspiration from a layered cake on pricing steps:
- Start with the apparent short-term value proposition (in this example: electricity and maintenance cost reduction). Expect your early adopters to focus on the first layer. Your annual price should not exceed 25%-30% of the proposed yearly value, which would be your “foot in the door”.
- As for the hard to quantify value propositions, you should include their pricing in your price list, but classify them as “Premium”. That’s your upsell opportunity.
- Add a mechanism to quantify future value (i.e. medium and long-term layers) in methods such as A/B testing that will be shared in advance with your customer. That will allow you to turn upsell possibilities into actual invoiced revenue.
This approach will help you explain your pricing policy to investors as well!, and ultimately you will taste the glazing on the cake too.
