Language is powerful. It is even more critical in the world of business. There are various definitions of what language is. One definition sees language as “a system of communication that enables humans to cooperate. This definition stresses the social functions of language and the fact that humans use it to express themselves and to manipulate objects in their environment” (Wikipedia, 2012).
Now put yourself in a situation of a strategic negotiation between an Account Manager and a Strategic Sourcing Manager. One is talking about product benefits, company reputation and experience, global product and customer references. The other is thinking in terms of benefits (i.e. what have you done for me lately and I mean really lately), achieving savings targets, differential costs, supply chain stability. In other words, they are both using a different language. The languages of selling and buying are quite different. Without a common language, the chances of reaching a level of cooperation leading to consensus are minimal. In a recent paper relating to complexity and pricing management, I represented this duality in language which get even more complex with you factor in trade channels and end users.
Even though transactions are at the center of exchanges, multiple breakdowns in communication systems may affect interactions. I have experienced many occasions when people used specific terms when they actually meant something else. For example, the confusion between cost and price is a common thing. Many times, I need to clarify with my communication partners whether they are referring to price to the customers, cost of our products in the customer’s process, or our internal cost. The same happens during negotiations with products; features are pushed by commercial folks while the customer thinks in terms of perceived worth or benefits. Value also means different things for different people. Here lies the overall complexity of language in pricing and value management. Do not treat this lightly. Definitions, languages and meanings are important success factors in a successful transformation towards value-based strategies.
The meaning of value and price in this context is critical. Suppliers must be able to recode their language in terms that customers need and expect to hear. Their sales force must adopt a different language based not on product features and attributes, but on customer benefits and emotional attractors. The multiple interactive loops in the system require a strong alignment of language to avoid giving birth to multiple and conflicting interpretations among actors. Ultimately, pricing and value functions must focus more on languages and meanings than on actual price levels and conditions. Articulating pricing offerings based on the customer’s meaning leads to augmented customer experiences and more connected customer interactions.
There is therefore a need to have an internal consensus on what the key definitions are focusing on the customer language. The LeveragePoint value-based platform helps in achieving this necessary exercise. When building value models, pricing and marketing professionals are forced to clearly define the right language by focusing on customer benefits. Because value drivers are built on savings or revenues that the customer will reap by using their products, they have no choice but to converge towards the use of customers’ language. In the end, it does not matter how, internally, various people define value. What matters is how customers define value and how that value will be treated and shared with the suppliers.
Be bold! Join the value-based revolution.
Stephan Liozu is President & CEO of Ardex America Inc (www.stephanliozu.com), an innovative and high-performance building-materials company located in Pittsburgh, PA. He is also a PhD candidate in Management at Case Western Reserve University and can be reached at firstname.lastname@example.org.