Business: Information Services
Industry: Background checking
Product: New to the market background checking process
Result: Segmented value quantification and messaging
THE SITUATION
The background-checking industry is highly competitive as players seek to provide a quick and accurate response based on employer criteria. All competing firms in this space must overcome the same data access and regulatory barriers at the federal, state, and regional levels. One of the most challenging barriers is the extreme variability in regional jurisdictions. Each jurisdiction is subject to different regulations regarding what data elements can be shared and vary in the level of technological sophistication with which they share information. This situation leads to expensive and manual workarounds for companies doing background checks.
Our client developed a new offering using existing data sets configured in a new way that could help firms speed up the background-checking process. They saw an opportunity to drastically reduce processing costs and wanted to verify and quantify that value as they prepared a go-to-market strategy. Determining the right entry price was critical as this would provide the basis for both the lifetime profitability of the offering and future price adjustments.
This is a critical junction to identify the quantified value of a product. When priced too high, adoption can be constrained as sellers try to justify the cost and receive friction from potential buyers. If the price is set too low, the profits suffer and the product becomes unviable. Once a price is set, drastically updating that price can send an undesirable message and lead to an uphill battle with customers and potential buyers.
CHALLENGES AND OUR APPROACH
In our initial discussions, confidence in the product was clearly high. The client was under the impression that the offering needed one price point for entering the market. While simple, this approach can lead to missed opportunities for an ideal fit with product-to-buyer.
Challenge 1: Identifying unique segments
We began with internal interviews to uncover the benefits of the offering – and then spoke with potential customers. As is typical, the customer interviews revealed more than the clients speculated on their own. Surprisingly, customer reactions naturally clustered into one of three conversation patterns that allowed us to segment them.
Each cluster would find value in different features, and therefore different packaging. This pointed us to an optimal price structure, not one optimal price.
Challenge 2: Quantifying value by segment
For some customers, cost reductions were the main driver. For others, it was greater accuracy which reduced liability concerns. Depending on the type of value driver a potential customer emphasized, we could utilize a different capture rate to estimate what a customer might be willing to pay for the differential value created.
In the end, we observed not only the total amount of incremental value different for each segment but also which combination of factors led to this valuation. Based on these discrete value quantifications, we provided price guidance for the next phase of product development and the formation of a go-to-market strategy.
Challenge 3: Connecting messaging to value
Since the value composition was different for each segment, we needed to position the product differently as well. We developed messaging to describe the benefits of the new offering based on each type of customer: for example, X segment focused on Y type of message while A focused more on B. With tailored messaging, sales representatives will be more effective and efficient in speaking to customer pain points.
KEY TAKEAWAYS
Bringing any new offering to market requires substantial risk. Set the wrong price and you’re in an uphill battle for months or years. Successful firms mitigate this risk by getting out of a one-size-fits-all frame. Rather, they perform research to discover and act upon the unique value profiles of each segment:
- Identify segments. Conducting customer interviews can illuminate differences in how they buy and how your offering delivers value. Key drivers include cost reductions, risk mitigations, or opportunities for increased revenue.
- Determine value. Once you know the segments, you need to determine the value of your offering for each specific segment. An optimal price structure beats an optimal price every time.
- Arm the sales force. Sales teams need qualification criteria so as they approach prospects, they can more quickly ascertain which segment the prospect is likely to fall in, and therefore which value drivers will hold the most appeal (or if the offering is a poor fit to even bring up). If the prospect is qualified, your sales team needs messaging points that maximize appeal given the value profile of the customer. If they value cost savings, lead with cost savings. If they value risk reduction, lead with risk reduction. Setting up the sales team for success is the ultimate in pricing and sales alignment – and commercial success in go-to-market.
