Another kind of value proposition

The term “value proposition” has been in vogue in business-to-business sales for twenty years or more. In short, it means that a product for sale must, in essence, create more money (in increased revenue or reduced costs) that it costs to purchase. “If you buy my widget for $x, you’ll get $5x back over the next 10 years,” or something like that.

Countless sales training programs have taught companies how to create compelling, defensible and measurable value propositions. But how often has a product with a superior value equation lost out to one with a poorer one (or one with no concrete value proposition at all)?

The value proposition is a very logical concept. That is its beauty and its limitation.

Every salesperson knows that for buyers, even B2B buyers, emotion is a significant component of the sale. Jeff Thull taught me that most of the emotions swirling around B2B buyers are negative; e.g., “If I screw up this purchase, I’ll lose my job.”

I’ve been thinking about this a lot recently. I’ve been working with tech companies as a sort of customer anthropologist, interviewing customers to gather stories the companies can use to demonstrate the value their product brings. I work with the companies to find patterns that illustrate the things that customers value. These stories, the companies know, are very compelling sales tools because they are authentic statements the customers themselves volunteer.

Surprisingly, during these interviews, I haven’t heard one customer say, “I would recommend Company Y because we were able to increase our inventory turns and thereby reduce working capital requirements.” Instead, they say things like, “I really like that they are easy to reach and work hard to solve my problems when I have them.” Or: “They could have nickeled-and-dimed me when I had to make some changes during implementation, but they didn’t do that.” In other words, what sticks with customers, and makes them recommenders, are things like “reliability,” “caring about my business,” “saving me time,” “making me smarter.” In other words, the deeper, emotional, fuzzy stuff. [The best salespeople I've met know this intuitively, and are highly focused on customer satisfaction, intervening whenever they feel it's necessary to ensure a customer situation is handled properly.]

Economic value is no longer a differentiator. It’s a hurdle that every purchase has to surmount. To capture customers’ loyalty, and positive references, successful suppliers also provide this emotional value that customers prize so highly.

If you have satisfied, happy customers, you are providing emotional value too. Do you know what it is?

(Photo by Jamesdcawl via stock.xchng)

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  • http://www.retailsmart.com.au/ Dennis

    It's not in a book, but this is what I teach:
    Product x Price = Offer
    Offer X Brand = (Value) Proposition
    - which means your proposition must include the the soft & fluffy stuff that you 'promise'

  • http://caddellinsightgroup.com jmcaddell

    Dennis, I agree with you. “Brand” in the B2B space includes all the things you do that customers value (and the things they value negatively as well). If you are really responsive, and customers value that, it accrues to your brand. Funny, though. It seems to me that most initial purchases are dominated by economic value, with “fuzzy” value down the list, or at least not formally considered. But for keeping the business, renewing the contracts, the fuzzy stuff takes precedence (and can even compensate for technical inferiority to an extent).

    Thanks for weighing in.

    John Caddell

    Original Message
    —————-
    Subject: [caddellinsightgroupblog] Re: Another kind of value proposition

  • http://www.rocketwatcher.com April

    You make some good points here about both pricing and risk.
    In this economy, I'm finding that value statements like “improved productivity” just don't cut it. Customers (particularly IT departments) are getting squeezed so badly that helping them reduce costs is top of mind.
    I also like the point you make about helping customers reduce risk. Statements like “reliability”, “caring about my business”, “helping me solve my problem” are really getting at the potential risk in bringing in a new solution. As an incumbent vendor you have a real advantage when you can show that you are meeting a customer's needs because any new vendor might not and that's a risk that companies are afraid of, particularly right now.
    April

  • http://www.deniseleeyohn.com/bites Denise Lee Yohn

    john — thanks for affirming something i've frequently argued with b2b clients — that is, b2b customers make purchase decisions based on emotional (as well as rational) considerations — often b2b companies ignore the role of their brand because they think their customers only care about rational rfp processes and quantitative purchase criteria and they fail to recognize their customers are human beings. d

  • camaurer

    I agree with your view if we take the value proposition as simply monetary. It is not sufficient but necessary to get to a buying decision. It is though necessary but not sufficient as in B2B people have to usually rationally justify their gut decision.

    Furthermore only few people distinguish between value hypothesis (usually what marketing claims the value is to a targeted customer segment) and a value proposition (what counts for the individual customer). If one takes the hypothesis for the proposition it probably will not work. The danger for confusing the two terms is actually increasing with the use of sales enablement tools wrongly applied. This is why I spend considerable time to help people understand the difference in a sales and marketing alignment workshop I teach with a Swiss Business school..

    If you open the concept to perceived value, then you can factor in all this soft elements which probably count more than the economic rationale for making the initial (gut) buying decision. Needless to say that this works only if you apply it to the right person. professional buyers are usually immune to this approach.

  • Pingback: Customers Are Talking » Blog Archive » Customers are talking: the weird, alchemic process of distilling insight from stories

  • http://www.netvaluebook.com/ Turner DeVaughn

    Value is what a customers get in return for their money and time. Some things can be quantified – and should be. Other things that are intangible cannot easily be quantified. Emotional value is in that realm.

    However, the problem is often that the sales staff use a value proposition as a lever to stimulate a transaction by overcoming the financial objections prospective customers have. Many companies don't look beyond the sale and consider the burden of adoption costs placed on customers. They also don't look at the pricing structure and business model as an integral part of the customer experience.

    Value creation is really everything a company does for its customers. Part of that value how how customers feel and their willingness to refer other prospects to that brand. Business is not simply built on numbers, but momentum (like the stock market) is built on feelings.