As part of our ongoing series of blogs on what B2B marketers can learn from B2C, this new article focuses on the heart of strategic marketing: What can we offer our customers that will be perceived as valuable, compelling and worthwhile enough to consider purchasing, or the VALUE PROPOSITION. This article reinforces key principles from earlier blogs on "Building Stronger Customer Loyalty" and "Value Pricing".
Written by: Jay Gronlund
Another area in which B2B marketers can learn from B2C practices is researching and improving their "Value Proposition". This concept has always been a predominant strategic tool for marketing in B2C categories, and is now becoming more ubiquitous in B2B industries. What has driven the importance of this principle recently is the recession and how customers today view and judge "good value". Their biggest concern for the future lies overwhelmingly in the economy. This macroeconomic reality is impacting the behavior of all decision makers, in two critical ways: (1) a reduction in consumption in many categories (e.g. entertainment), delay of major purchases (e.g. home improvements) and/or resorting to cheaper products, and (2) for more essential goods and services, people will trade down to stretch their money, demonstrating higher price sensitivity and decreased usage.
Everyone is simply more sensitive to what they will be getting for their money or the price they pay. The underlying concept of "value" in this context for a value proposition is based on a basic formula: "Value = Benefit/Price". The term "proposition" implies a promise of value, or what can be offered and delivered to the customer to enhance the product/company brand equity (e.g. essentially the perceived value of the brand) and customer loyalty. While there are many definitions of "value proposition", the one I prefer is more customer-driven and very appropriate for B2B companies:
"It is a clear statement about the tangible business results customers can get from using your product, service or solution. Busy decision-makers don't care about what you're selling. They only care about what it does for them." 
In other words, a value proposition defines the primary reason why a customer or prospect should buy from you and not the competition. A company must find a relevant and credible way to differentiate its offer from competitors, and ideally identify at least one key element of value where they need to excel.
Importance of Being Customer Focused
A good value proposition must be customer-driven, not based solely on a product's attributes. In his book "Building Strong Brands", David Aacker refers to the "Product-Attribute Fixation Trap", where the strategic and tactical management of a brand is focused on product attributes, with the assumption that these are the only relevant bases for customer decisions and competitive dynamics.
This is a common challenge for technology companies in particular, who are obsessed with the intricacies of the product functional performance. The key is to focus more on the reasons why your customer could use your offering, or what they really care about when making decisions. Understanding the formulaic definition of value will help. A concerted effort to diligently research customers will help identify new insights and ways to enhance the perceived benefit/solution. This will enable B2B marketers to then establish an optimal price point that will accurately reflect the relevance and importance of the perceived quality of this benefit.
What to Ask Yourself (and Customers) To Identify Opportunities for Improvement
When developing the value proposition to maximize the perceived value of your offering, here are some useful questions that we ask B2B clients internally and/or customers in research.
- Why do people buy from our company in the first place? What value do they seek? Expect? Hope for?
- What are we doing to meet their expectations? What are we not doing?
- What are the customer's true "pain points" or problems?
- What is our "niche/specialization" or area of excellence? Do customers recognize this?
- How do customers actually think and talk about our business? What must they be convinced of to start buying from my company.
- What can I add to my value proposition to cause my customers to say, "I would have to be crazy to do business with someone else"?
How to Overcome Common Issues to Enhance Your Value Proposition
Solutions must begin with smart research that validates typical customer problems or complaints that can adversely impact this balance between the perceived benefit and the price. For example:
1. "The superior benefit is not worth the price premium"
a. Add or enhance an emotional element to the end benefit
b. Leverage the price as a signal of quality
c. Create new copy to elevate the perceived worth
2. "I already have the same benefit with my cheaper choice"
a. Question the cheaper option to shake the customer's complacency
b. Focus on your superiority, perhaps with a credible endorsement
c. Offer an extra reason to support the benefit and to buy it
3. "I can't afford it, - it is way too expensive for me"
a. Reframe the absolute price - e.g. change the unit of measure or perceived price point
b. Emphasize any side savings
c. Highlight the risks of not buying it
4. "Sure it's cheap, but I doubt the quality"
a. Reassure the customer on the quality - e.g. leverage product strengths, brand history or special ingredients/components
b. Use others to sell the quality - e.g. spokesperson who epitomizes value, or how everyone else thinks it's high quality
Creating a relevant and credible value proposition will be meaningful only if it is consistently used to guide all marketing and sales initiatives, from phone calls, emails, voice mails to advertising and actual presentations to customers. The concept of optimizing value is too important for your success to treat lightly when defining the ideal value proposition. We suggest you address 3 fundamental questions which will help you determine whether your current value proposition needs improvement:
1. Have the market conditions, including competition, changed enough during the past 3 years so that your value proposition warrants a new review?
a. Yes, so should consider whether/how to strengthen it
b. Not sure, but it makes sense to re-assess these market dynamics to validate it
c. No, am positive my value proposition is still solid and relevant (if this is your answer, there may be a risk in this assumption?)
2. Do your primary customers recognize, appreciate and are still motivated by the promise in your value proposition?
a. Yes, because we get feedback from them all the time that confirms its viability
b. Not sure, because we don't spend enough time or resources getting objective, comprehensive feedback
c. No, doubt it, because we have been getting mixed signals and more pressure on our pricing from them
3. Do your marketing and sales teams consistently and convincingly communicate the same message, based on your current value proposition?
a. Yes, at least that is what my senior managers convey to me
b. Not sure, as we don't always monitor their messages carefully
c. No, don't think so because the coordination and communications between our marketing and sales personnel can be improved
If any of your answers introduce a hint that improvements are needed, we would be happy to talk with you. Please refer to our Marketing Team Effectiveness programs.
 Konrath, Jill. Selling to Big Companies. Chicago: Dearborn Trade Pub., 2005. Print.
Image credit: existentialist
Written by: Jay Gronlund
Many of our B2B clients and marketing colleagues are now admitting that there is a lot that they can learn and transfer from B2C practices. In light of this trend, we are introducing a series of short articles on specific B2C principles and disciplines that will improve the marketing effectiveness of B2B companies.
This is the first of our series on "What B2B Can Learn from B2C Marketers":
Any conversation on adapting B2C marketing principles will raise the issue of how the B2B customer is so different. The immediate inference is that sophisticated B2C marketing is not relevant or helpful for any B2B company trying to improve the effectiveness of its marketing team.
The idea that B2C primarily involves mass marketing is no longer true. Our society has become highly fragmented. Media technology and the internet have enabled greater focus, reach and customization of our marketing efforts to appeal to specific segments in the market, each with different characteristics and needs.
Yet marketing to the typical customer in a B2B situation remains unique in many ways - fewer customers, more complicated decision making, higher pricing implications, pressure internally on the buyer to justify and prove his/her purchase decision, longer lead times for actual purchase, greater scrutiny of the product offer, etc. These customer differences sustain the
unfortunate, cavalier belief that B2B marketing still cannot learn from B2C marketing.
The underlying principle of more deeply understanding the target customer in order to design an optimal brand positioning and marketing initiatives is, in fact, more relevant and critical for B2B endeavors, because of these important differences:
- More Complex Purchasing Decision - the task of comprehensively examining and approving a purchase in B2B situations is anything but spontaneous. Many people are involved, a variety of different and sometimes conflicting criteria play a key role, and often an attitude of parochial thinking by the customer (e.g. "only we really understand our business...") can become an enormous challenge for the B2B marketer (and sales person). The answer simply requires a more concerted effort to learn everything possible about the customer - i.e. the people, procedures and special insights behind the purchase decision, the main business drivers for your customer's success, and importantly how build a connection of trust and comfort with the buyer.
- Customer Trust and Respect are More Important - the discipline of segmenting the market to identify and prioritize the ideal target customers can be even more crucial for B2B marketing because it forces one to better understand the customer's needs, issues and the specific context for decision making in his/her immediate business category - e.g. who their competition is, how different, how/why a product offer can be better customized, etc. This intense evaluation will ultimately facilitate a more productive dialogue with the customer and create a convincing knowledge base that would impress him/her and foster a more respectful, loyal relationship.
- Offering More Than Product Expertise - Most B2B companies, especially in hi-tech, tend to be relentlessly product focused, not brand or customer oriented. Yes, their products are more complicated and so the resulting emphasis is on what these products do. However, not enough attention is focused on what these products/services can do for the customer, and especially how the customer should feel about an offer. True product differentiation is scant in the B2C world, which forces marketers to rely more on special brand positioning to create a strategic leverage and a special perception. B2B marketers can improve their effectiveness by similarly adding an emotional element to their value proposition, one that is based on customer insights and resonates with the actual user experience.
A good example of a B2B company that has transitioned to a more user-sensitive marketing approach is Microsoft. Long known for its difficult-to-understand, over-engineered Windows programs (e.g. Vista), it has since rebounded with a more simplified and personalized brand positioning aimed to build more meaningful relationships with their customers. Their "I'm a PC and Windows 7 was My Idea" campaign reflects this new positioning, which has become the fastest selling operating system in history.
Charles Gold, an experienced tech marketer for over 20 years, recently wrote in an article "Getting Sophisticated: What B2B Tech Marketers Must Learn from B2C", saying that tech marketers are relatively unsophisticated, and rely on blunt instruments not precision tools. A key driver for this needed transition is the emergence of the younger "Z" Generation, that has grown up with expectations about products based on "elegant user experiences"- plain spoken communications and pervasive social networks. And these younger, savvy and demanding people will also be tomorrow's B2B customer.
Marketing for both B2B and B2C should always start with the target customer, but there is still ample room for improvement in the B2B world by studying and adapting other approaches to strengthen customer loyalty.
What can you learn from B2C marketing that would help rejuvenate your business?
Written By: Jay Gronlund
The digital revolution has transformed business models in many ways, but perhaps the biggest impact has been on the preoccupation of "value" (or simply getting the "best price") by customers everywhere. A recent survey by IBM among 1,730 CMOs around the world underscored the perplexing effects of accessible data on this search for "best value". The survey results show that the biggest challenges CMOs face today are driven by this new digital age:
- Data explosion (71%)
- Social media (68%)
- Growth of channel and device choices (65%)
With the internet, people can easily learn more about the cost of any product or service these days. An increasingly common challenge for B2B companies is to combat the tendency of buyers from applying intense pressure to lower their prices. It is basically a fight against "commoditization". When there is little convincing difference from competition (i.e. including a perception of low value), purchasers will exert their influence to drive this commoditization. After all, squeezing down the price is often how they are judged and rewarded, and the only rational way to differentiate commodities is the price, which favors the buyer, not the seller. And often the purchaser has a good idea of the seller's cost these days.
The full impact of this data explosion has even affected sales at retail. A recent article in the NY Times, "Knowing Cost, the Customer Sets the Price", described how the shopper can today haggle down prices due to the internet and shopping comparison apps. If the retailer balks, some shoppers will walk, going to Amazon and eBay instead.
How to Fight Commoditization with Value Pricing
B2B marketers can learn a lot from B2C on how to enhance the perceived value of their products or services. Instead of being overly focused on product details and capabilities as so many B2B marketers are, they should become more customer focused and learn more what can be done to satisfy their needs, even delight them. The insights from a more intense scrutiny of the customer will become the basis for more creative, prudent and relevant value pricing.
Wikipedia defines value pricing (or really "value based pricing") as a "business strategy that sets prices primarily on the perceived value to the customer, rather than on the actual cost of the product, the market price, competitor's prices, or the historical price". In both B2C and B2B, the perception of value is based on how the customer views the benefit or solution offered - its quality, worthiness, distinctiveness and relevance to the customer's needs. The goal of value pricing should be to align the price with this perceived value (i.e. the benefit, ideally with an indication of the quantitative measurement of its impact) promised and delivered to the customer.
This IBM survey also found that the most proactive CMOs are responding to these digital challenges by trying to understand the customers as individuals, not as markets. They are focusing on relationships (the basis for successful branding), not transactions. This includes a commitment to developing a more clear "corporate character" as well.
The vast majority of CMOs in this survey identified three key areas for improvement which will all help marketers fight this problem of commoditization:
- Deliver Value to Empowered Customers - B2B marketers must not only learn what customers need or want, but also identify individual insights on what they value most and how they behave. This will be accomplished by going beyond traditional research, too. 80% of the CMOs said they plan to use customer analytics, CRM (customer relationship management), social media and mobile apps more extensively to identify these underlying insights and "hidden wishes".
- Foster Lasting Connections - in today's age of digital technology, it is easy for customers to learn about the seller and competitive offers, and then go elsewhere. This is why a top priority is to cultivate strong customer loyalty. In B2B, this includes building the corporate character or brand image, for both external customers and internal employees, and across all touch points and experiences. Today, what an organization stands for is as important as what it sells. 75% of these CMOs believe marketing must manage brand reputation within and beyond the enterprise.
- Capture Value, Measure Results - there is increasing pressure to justify marketing expenditures and maximize the marketing ROI. A disconcerting trend, especially in B2B circles, is a disproportionate emphasis on selling tactics and using data to manage the transaction, not on sustaining the relationship with the customer. Of the 4 Ps (promotion, products, place and price), CMOs feel they should play a greater role shaping the latter three Ps. This will help marketers develop more meaningful, customized programs, offers and special services to enhance the perception of the "benefit/solution" promised, and thus improve their value pricing effectiveness.
Customers will continue to become more proficient in learning about a seller's costs and competitive alternatives. The real challenge for B2B marketers is to improve their research to better understand individual buyers' value desires and behavior, to be more innovative creating new ideas for a better offer, and to allocate more resources for managing their relationship with buyers going forward.
image credit: Robert Scoble