Improving the B2B value proposition

In today's market, the lines between business-to-business and consumer decisions are blurring. B2B sellers must optimize prices, meet specifications, comply with regulations, and follow ethical practices. Procurement teams rigorously evaluate vendors and run total cost-of-ownership models to ensure that rational, quantifiable criteria around price and performance shape their analyses. But meeting those criteria is the minimum investment.

"As B2B offerings become ever more commoditized, the subjective, sometimes personal concerns that business customers bring to the purchase process are increasingly important."

Our research shows that with some purchases, considerations such as whether a product can enhance the buyer’s reputation or reduce anxiety play a large role. Recognizing the full range of both rational and emotional factors behind business purchases—and tailoring the value proposition accordingly—is critical to avoiding the commodity trap.

The B2B Elements of Value

As discussed earlier, considerations such as meeting specifications, pricing, compliance and abiding by ethical standards are expected. Additionally you have functional elements, which address companies’ economic or product performance needs, such as cost reduction and scalability. Delivering on those has long been a priority in old-line industries such as manufacturing. As both buyers and sellers, B2B companies still focus most of their energy on functional elements.

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Elements of value at a slightly deeper level make it easier to do business; some provide purely objective types of value, by, say, increasing a customer’s productivity (time savings, reduced effort) or improving its operational performance (simplification, organization). Here we encounter the first set of elements that involve subjective judgments from buyers. They include things that enhance relationships between parties, such as a good cultural fit and a seller’s commitment to the customer organization.

Other elements of value provide additional types of subjective value, addressing individual buyers’ priorities, whether they are personal (reduced anxiety, appealing design and aesthetics) or career related (increased marketability or network expansion.) Here the elements of value can address highly emotional concerns. A fear of failure often nags at buyers who spend large amounts of money and make decisions that may affect revenues or many employees. 

Then there are inspirational elements: Elements of value that improve the customer’s vision of the future (helping a firm anticipate changes in its markets), provide hope for the future of the organization or the individual buyers (for instance, that they can move to the next generation of technology easily and affordably), or enhance a company’s social responsibility.

Foundational elements have long been easy to measure, and competing on them has been straightforward. The more emotional elements at the middle and upper levels have traditionally been difficult to isolate and quantify and, therefore, harder to implement.

"The battle for differentiation is shifting toward less transactional aspects."

For a strategist or a product manager, mastering the intangibles of the customer’s total experience—all the service, support, interactions, and communications wrapped around an offering—is much harder than making an offering faster, cheaper, or more durable.

Companies using modern survey techniques and statistical analysis to quantify all the elements on a consistent basis can learn what customers truly value and which aspects of an offering merit investment. Executives can bring scientific rigor to a previously visceral area of decision making. 

Putting the Elements to Work

Improving on the elements that are the source of their offerings’ core benefits will enable vendors to better meet customer needs. They can also judiciously add elements to expand their value proposition without overhauling the products or services themselves. Doing either requires taking the customer’s point of view, not an inside-out, operational perspective. A product or service might function just fine, but if customers find the purchasing, order tracking, or technical support process terrible, many will seek out other suppliers.

When B2B companies conduct a full elements analysis, they are often surprised to find big gaps between their self-assessments and customer opinions of the overall experience of buying and using their offerings. 

Getting started 

Any B2B company can use an elements analysis to examine and improve its value proposition. To identify the elements your customers prize most and determine how best to enhance your offerings, follow these five steps:

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Benchmark your company’s value proposition against your competitors’ by surveying your customers on how your products and services perform relative to rival offerings on the elements of value. A quantitative survey with a sample large enough to produce reliable results can reveal dramatic insights.

Talk with customers to understand their experience. Conduct follow-up interviews to explore their needs and sources of satisfaction and frustration, and the compromises they make in using your products and services. Since many people can be involved in buying decisions, especially at larger organizations, it’s worth mapping who is on the buying team, who has influence on it, and the different priorities and sources of value for each. Make sure to conduct interviews in a spectrum of customer organizations, especially those at the leading edge of growth in their industries. Avoid using an existing customer panel or user group, whose members might say what they think you want to hear. And consider conducting the interviews through a neutral third party, because customers are more likely to provide honest feedback to an intermediary.

Imagine ways to increase value for customers. Once you have identified a set of elements warranting attention, hold daylong ideation sessions to determine which core elements to focus on first. The participants might include product planners, pricing experts, salespeople, service representatives, and other customer-facing staff, and even customers themselves. Typically, a good way to prepare for such sessions is by developing advance reading materials, such as the competitive benchmark surveys and interviews; giving homework (for example, “Come with five ideas”); and talking to devoted customers of competitors.

"Map who is on the buying team and the different sources of value for each."

Refine, test, and learn. Assess the best ideas from the ideation session by discussing their appeal with customers and your firm’s ability to deliver on them. That will allow you to revise value concepts before further development, understand how they fit into the overall customer experience, and identify the tangible results that customers would expect from any enhancements. Those insights can inform rapid, successive improvements to the concepts prior to a market test or a broader rollout.

Evaluate and measure. After introducing enhancements, reevaluate how you stack up against competitors, ideally by rerunning the original research. Especially in fast-moving markets, your competitors will probably have carried out their own innovations while you redesigned your value proposition. Objective follow-up analysis is important to ensure that your initiatives have actually delivered the value customers are seeking.

Consider the following three questions to determine where your company should invest:

  1. How does our value proposition compare with competitors?

  2. How do we bridge the gaps and seize opportunities to differentiate in the market?

  3. Can we launch a minimum viable product without breaking the bank?

B2B sellers face a variety of options when trying to decide where to allocate resources to improve and market their products and services. The mix of objective and subjective priorities, and the often conflicting viewpoints within a single business customer, can be challenging to determine. The elements of value allow managers to identify what matters most to each set of important stakeholders and how the company can stand out from the competitive pack.

To learn how you can improve your B2B value proposition, contact us at info@dais-x.com