Blog, Pricing

Customer Value Has Never Been More Important

By Stephan Liozu
April 23, 2020

Over the past decade, I have spent quite a bit of my professional and personal life learning, researching, and writing about customer value. My view is that customer value management is a process that needs to be formally managed in organizations. Someone needs to oversee and be accountable to the whole process, including value creation, value quantification, and value delivery.

This message resonates well within industries that are very competitive or very regulated such as chemicals, health care, and med-tech. Most companies within those markets have value management teams. Today, I posit that every organization must focus on customer value within the context of this current economic earthquake.

The sense of urgency has never been so high. With shrinking CapEx budgets, depressed demand levels, and shifting customer value perceptions, vendors must consider competing more professionally in front of buyers who now have new directives. Sales teams need to revise their playbook and focus much more on the financial value they can deliver to their customers and prospects.

To quickly shift to a customer value mindset that can be executed in a few weeks, here are 7 recommendations.

  1. Adopt the value quantification methods and be trained on them. There are several well-known methods: total cost of ownership (TCO), return on investment (ROI), and economic value estimation (EVE®) models. There are others of course. Get started learning about these and ask for help from experts to put together a quick training module for your marketers and sellers.
  2. Create a strong quantified business case for capturing your share of CapEx budgets. The reality is you will be competing for a smaller pie until things get back to normal. So, it is essential to focus on creating a very strong business case. If you seek a premium, you will have to justify that premium and make sure you deliver the lion share of the value to your customers. It is the new normal.
  3. Understand your differentiation in terms of economic and financial benefits versus your competition. Part of the modeling of differentiation value is to know your competitors and anticipate their re-entry strategies once recovery happens. Will they come back to pre-crash pricing levels? Will they become more aggressive? This is part of the pricing war room preparation that needs to be worked on in collaboration with your business intelligence group.
  4. Focus on tracking delivered value that can measure jointly with customers. Measuring your financial contribution to your customer is part of the selling process. Often, vendors forget that the value needs to be delivered, tracked, and benchmarked against the promises you made. There are tools and methods you can acquire quickly to put this process in place such as Six Sigma, value audits, and value dashboards. There is software you can deploy to professionalize this step and I recommend against trying to do this manually. (Consider DecisionLink)
  5. Create a value consulting group that can work closely with your sellers. This might be difficult to do in the next few weeks but it’s important. Vendavo recently announced the creation of their Value Consulting Group and I applaud them. Value Consultants have the mission to make sure financial and economic benefits are delivered to customers. Software companies are pioneers in this area. There is no reason why product and solutions vendors cannot adopt the principles of successful value consulting programs.
  6. Integrate customer and financial value in your key account plan. When you have done 1 through 5, make sure all the relevant data is tracked and added to the key account plan template and in your CRM system. Your sellers need to become value merchants. They need to sell and negotiate on value. You do not have the luxury of waiting six months to put this in place. Now is the time to become a trusted partner in your space.
  7. Train your front lines in customer value messaging and value selling. Similar to point 1, you must train your sellers on the art and science of value selling and negotiating for value. That cannot be a six month stretch goal. It needs to be done in a matter of weeks. You might rely on off-the-shelf training programs and/or consultants who might be eager to help in these tough times.

Now is a good time to make the case for a fast and furious investment in customer value. I suspect you can do this with idle marketing and sales resources and it requires very little cash. You can get started virtually as well. Your customer will be responsive to a more professional selling approach. They need more trusted partners.

Consider setting a 60-day program and then get ready for the rebound. I know you will find this very bold but you know me by now. We are being disrupted right now and it is time to disrupt your sales and marketing approach.

For more suggestions on elevating your commercial excellence, particularly though today’s economic downturn, join any of our series of virtual events scheduled in May – Commercial Excellence Month. 

  • CapEx , customer value , ROI , TCO , value management

    Stephan Liozu

    Stephan M. Liozu, Ph.D. is the Chief Value Officer of Thales Group and is the Founder of Value Innoruption Advisors, a consulting boutique specializing in pricing, value, and change management. Stephan holds a Ph.D. in Management from Case Western Reserve University where he researched the topic of transformational change and leadership in pricing.