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How B2B Enterprises Drive Profitability with Customer Value: Where to Start?

October 6, 2014

Posted by Peyton Marshall

Posted in Empower Sales Conversations, Improve New Product Launch, Increase B2B Sales, Presales, Pricing, Product Management, Product Marketing, Quantify Customer Value, Sales, Why LeveragePoint?

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The best B2B enterprises win by selling differentiated products and offerings.  They win profitably by realizing prices that reflect the customer value of their differentiation.   They win profitably and consistently by understanding, quantifying and communicating the value of their products to their customers.

Embedding customer value in a B2B organization has tangible benefits quantified in a number of studies. The evidence indicates that implementing a value based-pricing strategy improves EBITDA by an average of 8%1.   Estimates of the ROI of investing in value based strategies range from 130% to 900%2.   Making an organization fluent in the language of customer value using a common framework can be transformative.</p

How Customer Value Helps  

Strategies based on customer economic value are deployed in a number of ways in B2B companies.  They are used in product planning and decision-making for new product launches.  They are used to improve the performance of existing products.  Understanding quantified customer 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-based strategies help marketing and sales teams execute by making marketing material 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 generates trust and focuses attention on how a product is differentiated.  Capturing value becomes a clear organizational objective.  Closing more deals at reduced average discounts and increased average prices becomes a clear organizational result.

Implementing Value Based Strategies Rapidly

Value-based strategies can be implemented quickly, but fast results require a practical, flexible approach to roll-out. Some organizations view every initiative, including value strategy initiatives, as massive, complex, global deployments. This general approach is not surprising as it is often the way that new products are launched and that new IT systems are rolled out.  Frequently new CEOs or new CMOs want to put their stamp on an organization.  This tendency toward grand design can work if staged and prioritized appropriately but it can also bog things down, resulting in plans for value deployment that try to boil the ocean.  Examples of grand value strategy blueprints or directives typical of this approach include the following:

    • a requirement to build out value propositions for all products before starting to deploy any of them in sales
    • a plan to launch a value strategy to all customer facing personnel simultaneously
    • a strategy that initiates value communication with complex value propositions designed to discuss all possible bundles of a business unit’s product line
    • a requirement that all possible customer segments and all possible competitors have a value proposition before starting to deploy any in sales.
1See John Hogan, “Building a World-Class Pricing Capability: Where Does Your Company Stack Up?” Monitor Group Perspectives, 2008.
2See 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.”

Photo Credit: pobre.ch via Compfight cc

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