Drive Growth Using Customer Value to Shape Your Product Roadmap

Blog 20231102 - Value Driven Product Roadmap

I was very intrigued when our client declared they would also be using their value selling tool to evaluate and prioritize their product development roadmap. Although we specifically designed the tool for marketing and sales, the more I thought about it, the more this strategy made sense.

We constantly preach that you should sell based on the value you create, but if your product development isn’t continuously focused on creating more value, your success will diminish over time.

Using Customer Value to Prioritize Your Roadmap

The goal of your product roadmap should be to continuously improve your offering in ways that attract new customers and encourage existing customers to continue using your offering. The best way to do this is to continually find ways to create more business value.

In two recent blog posts, Five Requirements to Being a Value Pricing Champion and The Important Distinctions Between Value Pricing and Value Selling, I discuss how to incorporate value pricing and value selling into your processes. However, if your offering doesn’t create customer value, neither approach will work.

Even market leaders must invest some product development time in “keeping up” with the new features their competitors are offering. If that’s all you do, though, over time your product will become a “me too” at best, and maybe worse. You need to do more.

Among all of the improvements you could make, which are the best strategic choices? The key is to focus on those that customers in your target segments are most likely to pay for. In many cases, what your competitors are working on may not be what your target customers will care about or pay for. Likewise, some customer enhancement requests may not create value either.

The best way to determine how much a customer is willing to pay is to estimate, in dollars and cents, how much value the enhancements will create for their business.

How to Use Value to Prioritize Your Roadmap

Use these steps in your evaluation process for both brand new and competitive response feature sets.

Step 1 | Determine if the feature is something that your target customers even care about. We have a customer whose offering is intended for B2B companies. There are offerings similar to theirs that are designed for B2C companies. Their first challenge is to not respond to features designed for B2C companies that may not be relevant or important to B2B companies.
Step 2 | Estimate, in currency, the size of the problem that the feature set will address. Will it reduce costs, improve labor efficiency, or increase sales revenue? If so, by how much? Where will it impact financial statements? If you don’t know, your customer probably doesn’t know either.
Step 3 | Determine the number of customers in your target segments that actually have the problem you’re solving. Even if it’s a problem for one customer, are there enough other customers to make it worth developing the feature set? This will help you evaluate the total market potential for the new capability.
Step 4 | Estimate your cost to develop and maintain the feature set. Even if the market potential is five million dollars, it isn’t worth doing if it will cost more than a million dollars to deliver it.
Step 5 | Prioritize all possible feature sets based on the investment pool available and the potential return on investment that your company could achieve for each initiative.

Tools to Help with Your Analysis

We recommend using these tools to improve the business impact of your product development pipeline. They are listed in order of effectiveness, from least to optimal.

Spreadsheet Analysis of Each New Feature Set
Although you can, and many do use spreadsheets to analyze more significant feature sets, it is a lot of work and it is likely that the analyses are not complete.
Value Calculator for External Use
If you have a value calculator that your customers use to estimate the business value of your offering, you can also use it to estimate the value of new ideas. Before you do, carefully evaluate whether each value dimension in the existing calculator is applicable to the new feature set. Conversely, estimate the magnitude of impact the new feature set will have on each value dimension.
Value Calculator for Internal Use
You can use an existing value calculator that was developed for external use, or create a purpose-built calculator to estimate the value of new ideas. With this type of tool, you can explicitly choose which value dimensions will apply and to what magnitude.
Internal Product Enhancement ROI Tool
An excellent approach is to take the value calculator framework described in option 3 and turn it into an ROI tool to evaluate new product ideas. In addition to providing the insights obtained in Step 4, you will better understand market potential in terms of the number of customers with the You can also evaluate potential pricing and estimate potential sales. This would then be evaluated against the investment required to develop and maintain the feature set. This approach evaluates the entire business case for the feature set.
Roadmap Portfolio Prioritization Tool
The optimal approach is to evaluate each of the business cases developed in the Internal Product Enhancement ROI Tool against each other as a portfolio view. You can then do “what if” scenario planning on different feature sets within the budget available to determine the optimal roadmap.

Conclusion

Prioritizing your product development roadmap using customer value is the best way to optimize your business performance. Leveraging tools to estimate and prioritize product development initiatives is a great way to enable your team to achieve that.