What Matters Most to B2B Customers?

If your most valuable customer had the chance to buy from another supplier, would they?

Of course not! You have the best product on the market. You have the best brand recognition. Your prices may not be the lowest around but you have a rock-solid relationship with this customer. You would walk through fire for them. No way would they leave you for a competitor, right?

Now let’s think about the customer’s perspective for a moment. Imagine, for example, that you’re a purchasing manager at a big industrial company. One thing you buy is widgets. In fact, you’ve purchased widgets from the same supplier for the past 15 years. This supplier has worked with you to alter specs when you needed them altered. This supplier has never raised the price of widgets beyond what you deemed reasonable. When you forecasted badly a few years ago, they didn’t up-charge to expedite a couple of shipments. Twice a year, they come out to visit you and take you to your favorite restaurant. In short, you have a great relationship with this supplier.

Now imagine that you get a call from someone you’ve never heard of, in a place 11 time zones away, and this person tells you that his company can supply you with widgets at two percent less than what you currently pay. Do you spend a lot of time investigating that supplier?

Probably not.

Your reasoning is simple: your existing supplier already takes very good care of you and, more important, is a known quantity. Does this other supplier have a support team that speaks your language? Do they understand your definition of quality? Will they ship on time to meet your production schedule?  Will they stand behind their product? Will they still be in business five years from now? With a new supplier, there’s always risk. A two percent savings in price is often not enough to justify that risk, and it probably will not turn a purchasing manager’s head.

Now let’s imagine you get a similar call, from a different supplier. But this time, the supplier says they can offer widgets at a price 20 percent lower than your current price.

Do you spend some time investigating that supplier?

Of course you do.  You’ll probably start with 15 minutes of online to research the company. You might try to find out if they make widgets in your size range or ask if they’d be willing to foot the bill for you to visit them on-site.  If their claims appear to stand up, you might even order samples and run them through your quality control tests.  In short, no purchasing manager worth his calculator can ignore a chance to save 20 percent.

There are lots of situations in the B2B world where brand, relationship, and reputation may stand up to a two percent price saving. But not many will stand up to a 20 percent price savings from a competing supplier, at least without some deeper analysis.

This is why it’s so important to think about value not just in terms of having a great relationship, “best product”, or brand recognition. Think about the sum total of what you offer. That includes all things that go into a customer’s experience: service, pre and post-sale support, technical support, or just knowing you’ll be there when they call with a technical question two years later.

Your value is always defined in relation to each customer’s specific needs, but it’s also defined relative to their next-best alternative. Just because you’re catering to an individual’s preferences (flying out to wine and dine them) doesn’t necessarily mean you’re providing value to their company that will keep your business relationship intact in the face of an aggressive low-cost competitor.

What matters most to your customers? Share your thoughts in the comments section. 

The Value Lifecycle: Justifying the Cost of Your Offering

This is Part V of a five-part series about the lifecycle of value in B2B selling and marketing.

You’ve set your price, shown the customer the cost of his problem, and proven you’re a better option than your competitors. Congratulations, you’ve now made it to Phase 4 of the Value Lifecycle.

This is the point at which you perform a rock solid analysis that convinces your prospect to invest in your offering. If done right, Phase 4 the Value Lifecycle is a lot of fun, because success at this stage means you’ve closed the deal.

The decision maker at Phase 4 is usually someone from the financial team (often the Chief Financial Officer) who will want to see a business case before they free up company funds and allocate them to your project. The challenge here is to create a comparison of results between what your offering can do and what the prospect’s current business state is (aka, what they’re currently doing to solve their problem, which may be nothing).

This is where an ROI tool can be an invaluable asset to you. One of our best examples to illustrate this is a story about a special kind of packaging material developed by one of our clients. The initial trouble with the new packaging material was price — it was 5-10 times more expensive than the existing material customers were using (and customers were already pretty happy with the results they were getting with the existing material). Without a business case to show how the new material was a wise investment, the client’s sales reps were left to sell on price alone. Understandably, they were getting laughed out of the offices of purchasing managers around the world.

We worked with the client and walked them through the four phases of the Value Lifecycle. We also performed a full ROI analysis to compare total costs of the new material versus the existing material and made some very interesting discoveries. For one thing, we discovered that the new packaging material would allow the client’s customer to fit two to three times more of its product into each package. For another, we found that it would use far less energy, produce less waste, and be less labor intensive. In fact, in almost every aspect of the comparison, the new packaging material almost always yielded a lower total cost of packaging than the current material.

We built an ROI tool to clearly illustrate that value and turned it over to our client to use on their sales calls. In the end, our client went from getting laughed out of meetings to becoming the standard provider of packaging material for eight of the top 10 companies in their industry in just a few years. The ROI tool was the game changer that helped them convince their customers that there was greater value to be had from the new packaging material, even with a significantly higher purchase price than that of the existing packaging material.

Again, a cost-justified business case is key to convince a financially minded approver that an investment in your solution is in their economic best interest. That’s why it’s so important to understand how CFOs think. According to IDC research, an IT investment of one million dollars is typically associated with a decision cycle that lasts for 18 months. When a customer is able to measure the business impact of the investment, however, research shows that 65% of such purchases occur in 6 months or less.

So if a CFO has a million dollars to invest, you want to make sure you’re able to make a convincing case for why it’s worthwhile to spend the money with you as opposed to funding other areas of the business or simply putting off a decision indefinitely. If you can show them the money, your sales team should have very little problem closing the deal.

Interested in learning more about ROI tools? See an example here

The Value Lifecycle: Differentiating from Your Competition

This is Part IV of a five-part series about the life-cycle of value in B2B selling and marketing. This post explores Phase 3: Differentiating from your competition.

So far we’ve learned two important points about the value life-cycle.

1) In Phase 1, the maximum price you can charge for your product/solution is the value you create minus the value of the next best alternative, plus the price of the next best alternative.

2) In Phase 2, your job is to show not only how much the customer’s problems are costing them (both in terms of actual cost but also lost revenue), but also how much your solution can help them overcome that cost.

After you’ve established your price and gotten the prospect concerned about their business challenges, it’s time to turn your attention to Phase 3: differentiating against your competition. Obviously, this issue tends to be a popular topic with sellers and marketers. Everyone wants to win. However, the reality is that not every product or solution has the right level of value to be a worthwhile investment for prospects. (The good news is that a thorough analysis can uncover those gaps and you can then work on a way to create more value.)

In this phase of the Value Lifecycle, you are showing that the total value your solution creates is higher than the total value created by the next-best alternative (aka, a competitor). This is often referred to as TCO, or Total Cost of Ownership. A formal TCO analysis is a very effective and airtight way to show your value versus the competition’s value, and it takes into account the features and benefits of your solution. Unfortunately, features, functions, and benefits are where the conversation starts and ends for a lot of sales and marketing professionals.

Features and benefits are all well and good, but they don’t tell the whole story (and sometimes they actually tell a false story, as you’ll see below). When you’re in a competitive situation, you’re not just talking about the things you do well, or that you’re priced 10 percent lower than the competition, or that you have bells and whistles that your competitor lacks. You want to engage the customer in a discussion about the relative value you create compared to a competitive offering. Your net value needs to be higher than that of the competition, and it needs to include more than your price and/or the cost required to deploy and maintain your solution. It must reflect an analysis of the total value you create, which would include price, cost to deploy and maintain, reduced costs in other areas, and even increases in revenue..

This chart illustrates the point.









Let’s say you create $20,000 of net value and your competitor (Alternative 1) is creating $25,000. That probably doesn’t make you very happy. But as we pointed out in Phase 1, value is always specific to each customer. In other words, if your offering comes up short, you can try to adjust to suit this particular prospect. If you lower your price so that you create $30,000 in net value, for example, then you create more value and can convince the prospect to buy from you versus Alternative 1. If you didn’t want to lower your price, you could add to the Total Benefit category instead — going from $80,000 to $100,000 would help you create $40,000 in net value. Another option would be to lower deployment and maintenance so that costs fall below $20,000.

No matter what you do, remember that a good TCO analysis always takes into account all possible factors: price, benefits, and cost. As you can see from this example, if you stopped evaluating purchasing options at benefits, then Alternative 2 would look like the clear winner (when, in fact, it provides the least value to the prospect).

There are only two things you can’t do. One is to remain ignorant of the total value you create. If you’re in sales or marketing, it’s simply part of your job to know your total value, and also to know how that value compares to a competitor’s value. The second thing you can’t do is tweak your messaging to try to get around the fact that your competitor creates more value than you. If that’s the case, you’re essentially lying to customers and adding to the perception that marketers and sellers are just trying to make a sale at any cost. Your job is never to convince customers to buy independent of the truth.

Next week we’ll dive into the final phase of the Value Lifecycle: justifying the cost of your investment.

Five Reasons Hosted ROI Calculators Trump Excel Spreadsheets

When prospects come to your website, do you make it easy for them to see how much money you can save them? Do you have ways of clearly showing on your website how much more revenue you can help them generate?

Moreover, when your sales reps actually get to interact with prospects, are they well equipped to show the value of your solution in dollars and cents?

Whether for lead generation or closing deals, many sales and marketing teams have generated spreadsheets using Excel to illustrate the value of their solution or product. However, spreadsheets pose a number of problems — in the worst cases, these problems result in prospective buyers moving on to the next vendor’s website or dropping out of deals altogether.

An online ROI calculator built using a dedicated platform can help you avoid these challenges. Consider the following reasons spreadsheets fail and why hosted ROI tools are typically superior.

1. Salespeople dislike overly complex marketing assets. Whenever sales reps think a spreadsheet looks too complicated or dense, they usually opt to leave it by the wayside rather than incorporate it into their selling process. This is a waste of marketing dollars and needlessly leaves reps unable to illustrate your solution’s value. Consider the complexities in the image below, which is from an internally-created ROI calculator shared with me by one of my clients, a $1.2 billion technology company. One of the reasons they came to me is they were looking for a simple, attractive user interface to overcome sales resistance, an example of which is also shown below.

Spreadsheet SummaryROI Tool Summary2. It is difficult to create compelling summary reports within spreadsheets. Again, from my same client, the images below show the difference in presentation. Prospects today expect reports that not only look professional but also are easy to share with colleagues.

Spreadsheet ReportROI Tool Report3. Spreadsheets are notoriously error prone and difficult to maintain. This is one of the biggest reasons spreadsheets tend to fall into disuse. By contrast, ROI platforms are centrally managed and maintained, and thereby eliminate version control issues, outdated data, field modifications, and unauthorized usage.

4. Prospective buyers question the credibility of spreadsheets created by vendors. Generally speaking, ROI calculators created by third parties are viewed as more trustworthy than homegrown spreadsheets.

5. Spreadsheets are not mobile-friendly. Mobile devices limit the user’s ability to access and easily view spreadsheets. Contemporary ROI tools are designed to accommodate all types of devices.

Changes in B2B buyers’ behavior and the ubiquity of mobile devices have converged to make spreadsheet-based ROI tools passé. What’s a savvy B2B marketing and sales organization to do then? Many companies decide they’ll build a tool on their own. However, based on my experience, this usually incurs internal costs that can be far higher than simply contracting with an established vendor that creates ROI tools. My recommendation is to find a vendor with an ROI platform that can easily deploy, maintain, and update your ROI tools. This will allow you to drive the most incremental revenue and to do so with a cost effective budget.

What are you doing today to show prospects the value of your solution? What are the pros and cons of your approach? Please share your experience below.