Three Unique Strengths of Customer Value Management
Thursday, April 16th, 2009Customer value management has three unique strengths: superior conceptualization of value, a progressive approach to assessing value in practice, and proven concepts and tools for translating knowledge of customer value into superior business performance.
1) Superior conceptualization of customer value.
To achieve success, senior managers need a conceptualization of customer value that they and their managers, salespeople, and business customers can readily grasp and find reasonable. Despite all the writing and talk about customer value in business markets, there has not been a reasoned, understandable conceptualization. As a result, there is substantial variation in what is meant by “customer value” in business markets, which has hindered implementing assessments of it.
It expresses customer value in the same metric as we ask customers to make purchase decisions (monetary terms, not importance ratings). It specifies what is and what is not value (e.g., price). Finally, the expression of the fundamental value equation especially lends itself to assessment in practice and reflects how customers decide between competing offerings.
2) Progressive approach to assessing value in practice.
Approaches to assessing customer value that are cumbersome in practice or that require statistics experts will be met with resistance, especially from the
sales force and customers. Total cost of ownership, for example, is hard to argue with as a concept. The problem is that it proves to be unworkable in
practice. Customers have limited patience in cooperating with suppliers because customer managers have greater responsibility and increasing demands on their time. Where once a manager at a particular level might have had responsibility for $10 million in business, he may now have responsibility for $50 million. Customers also have a limited willingness to share their data with suppliers. Each of these facts works against the meticulous, time-consuming process of gathering data to estimate the total cost or, better still, total value of ownership in practice. As a result, efforts devolve into compromising shortcuts—such as filling out forms, guessing, and recycling opinions—in place of actually gathering data.
In contrast, each aspect of the approach to assessing customer value has been developed and refined in working with suppliers across a diverse array of industries. The approach to customer value assessment focuses the supplier’s and customers’ limited resources on the value elements—that is, the specific ways the offerings reduce customer costs or enable the customer to earn additional revenue and profit—that matter most and assessing them in the way that matters most. We take a measurement approach that precisely defines the value elements, stating the data needed to estimate each one. We emphasize data gathering and minimize the role perception plays. The guiding principle is to generate new knowledge, not recycle opinion. Thus, a litmus test for our approach is this: are the supplier and the customers that participate in the research more knowledgeable about how the supplier’s offering adds value or reduces cost in the customer’s business than what they were before the research? This approach enables marketing and sales to significantly contribute to competing on analytics and evidencebased management.
3) Proven concepts and tools for achieving superior business performance.
We are able to discover, devise, and refine concepts and tools that, when implemented with integrity, lead to superior business performance—like devising customer value propositions that resonate with target customers; constructing and deploying value-based sales tools that the sales force is able to use and wants to use; and pursuing new knowledge with the intent of better understanding what will lead to superior business performance. We want to make it clear that there is no trickery, deception, or sleight of hand in customer value management. Rather, it is fundamental thinking proven in practice to significantly improve business performance.
