May 26

Economic value estimation is a framework to determine pricing for products and services. EVE framework helps to gain maximum price for your products and hence not leave money on the table. According to the framework the total economic value of your product is equal to the sum of competitive reference value(competitors price) plus positive differentiation value minus the negative differentiation value.

Three Steps for Economic Value Estimation

  1. Understand Customer Economics: this step centers on the discovery process used to understand customer business models and to establish the main value drivers and develop hypotheses about which drivers are most important for product offering.
  2. Quantify Value Drivers: this step centers quantifying the financial worth of the hypothesized value drivers in order to test the hypotheses and provide a key input to the EVE®

Estimate Differential Value: this step centers on developing the algorithms for calculating quantifying value and combining customer economics, competitive reference, and differential performance data to develop quantified value estimate

Source:
The Strategy and Tactics of Pricing

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