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September 19, 2017

Customer Value: Why Organizations Fail to Get It Right

Importance_of_Value_Berggren_Podcast

GUEST: Eric Berggren, Professor of Marketing from Kellogg School of Management at Northwestern and Managing Director of Axios Partners

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Every successful business needs to sell something at a price where they can make enough money. If they can’t, they’re going to go out of business.

If that’s the fundamental challenge, we’ve got to understand how customers decide to buy. Everybody talks about value, but nobody really tells you how to do it.

That’s what we addressed in a recent interview with Eric Berggren, Professor of Marketing from Kellogg School of Management at Northwestern and Managing Director of Axios Partners. In Eric’s words, “Customers decide to buy based on the value they get from one product versus another. Whatever nets out to be the best value, that’s where they’re going to go.”

 

"I think customers decide to buy based on the value they get from one product versus another."
 
Eric Berggren,
Managing Director of Axios Partners Inc.



This post is a selection of Eric’s exploration of customer value.

Value Looks Different Depending on Your Role

The value that someone sees varies depending on their role in an organization.

That’s what makes B2B marketing so interesting. There’s value that accrues to the organization, and then there are people within that organization who may see only part of that value or are more of an influencer in the purchase and won’t personally see any of the value. They’re performing their corporate duty to point the company in the best direction.

“Value has to apply at both the individual and the company level,” Eric says.

4 Things That Customer Value Leaders Do Really Well

To provide a little more context, here are four things that leaders focused on customer value tend to do an excellent job of:

  1. They choose value - They make value a conscious choice. So much of the value that we deliver to customers today is a series of incremental decisions that may have made sense at one point, but don’t anymore. We muddle through. We don’t step back and take a holistic look frequently enough, making a conscious choice and commitment to a winning value proposition.
  2. They create value - They think of both their organization and all partner organizations in their supply chain or value-delivery network as one entity. They consider: If we were all one big organization, what would be the best way to deliver on our promise of value? They think about how to create not only the incentives for the customer to buy but the incentives for all of the moving parts—some of which they don’t have direct authority over—to behave the way they need them to in order to fulfill that promise to the end customer.
  3. They communicate value - If you ask for the value proposition for a product, they don’t give you a list of seven benefits. They clearly state two, maybe three things that are the highest impact sources of value for that target customer. They’re also good at offering the customer a reason to believe that they will get that value.
  4. They convert value - Eric uses the term “converting” instead of “capturing” value. Capturing value has a zero-sum game feel to him, as if there’s only a certain amount of value and it’s an adversarial relationship with the customer to figure out who’s going to capture it. “Convert,” on the other hand, is less of a zero-sum game. There may be pricing mechanisms we can do that cost us almost nothing and deliver more value to the customer, so we’re pricing in a way that gives us a share of that value, but we’re also growing the pie in the process of managing our pricing.

Why do organizations have a tendency to fall into the rut of products and features?

"The starting question should be, 'What is the customer trying to accomplish, and what role could we play in enabling that?'"
 
Eric Berggren,
Managing Director of Axios Partners Inc.



Because we start with the wrong question. If we start by asking how we’re better than the competition, then features are the natural response. We’re going to list the ways we’re better than the competition.

But the starting question should be, “What is the customer trying to accomplish, and what role could we play in enabling that?”

What is most effective when someone is trying to sell to you?

We like to ask all of our podcast guests this question. Here’s how Eric responded:

“You’ve got to link it to my top priorities or concerns. There are a lot of things that I could be doing right now more efficiently that would save me time and money, but that’s not my primary objective right now. There’s no way I’m going to save my way to prosperity. I have to also view the offering therefore as kind of a strategic purchase. If it’s not strategic to me, it’s a more efficient use of my time to just repurchase what I’ve already been doing and not have to learn something new.

 

"There's no way I'm going to save my way to prosperity.'"
 
ERIC BERGGREN,
MANAGING DIRECTOR OF AXIOS PARTNERS INC.



“I’m leaving tons of positive ROI products on the table, because I don’t have the time to implement them. It’s not a major focus for me. Then if you linked it to that priority or concern that’s driving my behavior right now, then the main thing is, I need some kind of proof that the performance is superior and that I could reliably expect to experience that from you.”

Acceleration Insight

In each episode of the B2B Revenue Executive Experience, we ask our guests for one nugget of wisdom they would impart to a sales professional. Here’s this one:

“Don’t cut short the understanding and communicating of customer value. All the forces in business tend to push you the other way: to be quick and superficial about it. But you have to resist that temptation, because when you understand and demonstrate superior value, you get dramatic and immediate results.”

 

This post is based on a podcast interview with Eric Berggren from Axios Partners and Northwestern University. To hear this episode, and many more like it, you can subscribe to the B2B Revenue Executive Experience.

If you don’t use iTunes, you can listen to every episode here.