CEOs often look for a way to make Customers the focal point of their organization. Customer-centricity can take an enterprise to the next level. As a mindset, it can improve the performance of teams no longer in touch with, or aligned with, their most important audience. The clearest way to focus on B2B customers is to speak the language of Customer Value.
Tangible results can be delivered by driving an organization to understand, quantify and communicate the value of its differentiated products to its customers1. Speaking the common language of customer success helps B2B enterprises win consistently. In focusing an enterprise on quantified Customer Economic Value, it is important to identify and target initial aims and priorities that deliver early results from among the ways that value based strategies can be deployed.
Customer Value can be used in product planning and decision-making both for effective new product launches and to improve the performance of key existing products. Understanding quantified value helps B2B product teams design products that customers will value, make go-no go development decisions, set value based prices, devise approaches to market segmentation and design offering and bundling strategies. Value communication helps marketing and sales teams execute by making marketing collateral more impactful and by providing pre-sales and sales teams with specific, tailored value propositions for individual customers. Communicating value and engaging customers in conversations about their business helps to close more deals at higher prices.
A C-suite can drive an organization’s transition to a focus on Customer Value. The most effective way to do this is by implementing a few ideas and disciplines that get the CEO, CFO and others speaking Customer Value on a regular basis. The right tone from the top can be powerful in accelerating fluency in Customer Value and realigning teams to be customer-centric.
Here are a few approaches to Customer Value used successfully by CEOs and others in the C-Suite to drive profit growth at leading B2B enterprises:
1. Speak Customer Value to Customers. In priority C-level meetings with senior executives at strategic accounts, Customer Value can be a great focal point. Customer Value elevates the conversation above the scrum of day-to-day tactical interaction, negotiations and operations. Customer Value is a natural springboard for discussing new opportunities. Good preparation for a C-level meeting with a large account should include several value-oriented questions to the team:
- What are the account’s primary business challenges? Our teams need to read customer 10-Ks, annual reports, websites and investor presentations to transcribe our value propositions into language that will resonate with the customer’s priorities.
- What business are we currently doing with the account? Understanding the business snapshot is necessary to articulating the value we bring to the account.
- How are we creating value for the account? Strong strategic relationships are based on differentiation, value creation and mutual benefit.
- How much value are we creating? With our individual products? With our platform? Quantified value helps crystallize and focus thought on what our organization is doing to make the customer successful.
- What additional value could we be creating for them, given our role today? The best business development conversations are based on identifying new areas of mutual benefit for further exploration.
Understanding and communicating Customer Economic Value at the right point in an executive level discussion highlights the alignment present in a strategic relationship. It provides a way to transform a conversation from one about price into one about value.
2. Speak Customer Value to the Street. Many public company CEOs and CFOs routinely speak to Wall Street about the value their company’s products create for customers. Value is peppered through shareholder letters, SEC filings and analyst presentations. It is important to make sure that “Customer Value” has real substance in investor conversations as Wall Street’s radar for empty rhetoric operates effectively. It is natural for a CEO or a CFO, focused on sources of revenue growth for an analyst session or an earnings call, to bring Customer Economic Value into the discussion. In preparing, several steps are worth considering:
- Emphasize how selected products are better than the competition and what those benefits are worth to the customer. Qualitative descriptions are a distant second best to quantified value in catching the Street’s attention and in building credibility.
- Show a slide for a key product about to launch with the product’s quantified value proposition. The Street usually sees a well presented value proposition as evidence of a well-organized product launch and a management team that understands its target market.
Customers are not the only external audience for good value propositions. If the CEO and the CFO don’t identify and quantify Customer Value for B2B products, hedge fund managers are almost certain to ask.
3. Speak Customer Value Internally, as Part of Regular Management Process. Customer Economic Value provides a discipline when it is effectively interwoven into company processes and decision-making. It forces internal conversations to become customer-centric. A few examples illustrate the point:
- A CFO, sitting in on the quarterly portfolio review of products in development, has the opportunity to ask regular questions: (1) what do we see as the target market? (2) what is our competition (direct competitors & status quo)? (3) how is our product differentiated versus the competition? (4) have we quantified what that differentiation is worth? (5) what pricing is possible given the value we create?
- An EVP of Sales, kicking off an annual sales meeting, has an opportunity to recount success stories to set the tone. One approach is to choose anecdotes highlighting a customer with identified problems where a sales person, supported by the team, effectively engages in customer conversations about product value. Concluding the story with a tangible result of closing a big deal at a high price associates a sales audience’s understanding of Customer Value with their vision of commissions.
- A CMO parachuting into a product launch meeting can drive the team’s orientation toward Customer Value by asking: (1) what are our messages about differentiation? (2) have we quantified the value of our differentiation to the customer? (3) what does Customer Value mean for different customer segments? (4) are there launch offerings that can help us price better to different segments? (5) how are we planning to communicate our quantified value proposition at launch?
- A CFO can volunteer to introduce the first five minutes of a sales training call by reaffirming how important value is in the company’s approach to its customers. If there is one way that finance people can prove that they understand the top line as well as they understand cost-cutting, it is by highlighting Customer Economic Value.
4. Consider Specific, Value-Oriented, Organizational Actions. Whether or not C-Suite personalities are driven to put their personal stamp on an organization, taking specific steps can accelerate a broad transformation toward Customer-Value-Centricity. Here are a few suggestions:
- Create a Value Council or Embed Value in a Pricing Council. A Value Council can serve several roles: (1) as a center of excellence where best practices and tools can be compared and disseminated collaboratively, (2) as a means to change the corporate mindset toward Customer Value, (3) as a way to manage value through new product development in a Stage-Gate® process.
- Create a Customer Value Office. A specialized team focused on Customer Value can: (1) support customer conversations directly as subject matter experts in Customer Value at critical points in key deals, (2) provide leverage to the broader team in their value conversations by disseminating strong value propositions, best practices, sales & marketing collateral and data, (3) design, improve and maintain collaborative enterprise platforms for Customer Value using the best technology.
- Appoint and Empower a Chief Value Officer. Creating a CVO role filled by a leader with the right experience and support is one way that companies elevate the Customer Value discussion to the C-suite. The CVO’s primary responsibility is to put Customer Value at the center of the organization’s existence by making sure that the proper tools and programs are in place to manage and communicate value systematically.
- Embed Customer Value into performance review and compensation processes. An HR performance review form with a question like “How has the employee contributed to Customer Value this year?” drives a focus on customers and customer value creation into every manager’s vocabulary, every employee’s self-assessment and every bonus conversation. Customer Value as a component of individual goal-setting helps team members focus on the right objectives.
Organizational initiatives should not be viewed as replacing broad fluency in Customer Economic Value with a few specialists who do all the value thinking for everyone else. Siloed excellence in value misses the point. CVOs, Value Councils and Value Offices should be designed as lighthouses that provide subject matter expertise in Customer Value that can be leveraged by the broader enterprise.
With all the Wall Street talk by CEOs and CFOs about customer value, with all the shareholder letters and speeches where “value to our customers” appears, it is often surprising how few mid-level product, marketing and pricing managers in some companies are aware that “value” is part of their C-suite’s public vocabulary. This disconnect can be a curse and it can be an opportunity. Sometimes it is a sign that the CEO and the CFO haven’t understood the company’s products and its customers well enough to be internally fluent or articulate in Customer Value. An executive’s insecurity, an unwillingness to reveal ignorance of customers or products, can make the executive risk averse enough that they avoid asking and speaking about Customer Value.
But sometimes a disconnect between executives and middle management is a sign of hidden potential for the C-suite to drive fast organizational excellence. By speaking Customer Value fluently and by making it a focal point for communication and collaboration, the C-suite can provide leadership in transforming an organization into one that outperforms its competition. A customer-centric enterprise, spotlighting the differentiated value it creates and articulates, positions itself to make better decisions and to close more deals at a higher price.
To access Dr. Thomas Nagle’s Emerging from the Great Recession: 8 Keys to Driving Profit Growth and Customer Value from the C-Suite, click here.
About the Author:
Peyton Marshall is CEO of LeveragePoint. Previously, he served as CFO and Acting CEO at PanacosPharmaceuticals, Inc., CFO of EPIX Pharmaceuticals, Inc. and as CFO of The Medicines Company through their initial public offering and the commercial launch of Angiomax®. Previously, he was an investment banker in London at Union Bank of Switzerland, and at Goldman Sachs where he was head of European product development. He has served on the faculty in the Economics Department at Vanderbilt University. Dr. Marshall holds an AB in Economics from Davidson College and a PhD in Economics from the Massachusetts Institute of Technology.
1. See John Hogan, “Building a World-Class Pricing Capability: Where Does Your Company Stack Up?” Monitor Group Perspectives, 2008, and Stephan Liozu and Andreas Hinterhuber, eds., The RoI of Pricing, Measuring the Impact and Making the Business Case (Routledge, 2014), especially the chapter by Stephan Liozu, “RoI and the impact of pricing: the state of the profession.”