Customer Value Management: Cycle, Definition, Process & Framework

The evolution began with Technical Product / Feature Selling decades ago — when there was a relatively

straightforward way to map a product capability to a specific problem.

As problems became more complex, buyers and sellers increasingly relied on Solution Selling to define and scope requirements and design more sophisticated solutions.

As competition stiffened further, a Generic Value Selling framework appeared — where sellers provided buyers with generic examples of the value achieved by other organizations. But these generalized value propositions were not specifically relevant to each organization; they did not always account for industry, geography, size, or use case variations.

This led to Specific Value Selling methodologies that enabled value to be quantified and customized for each opportunity.

Agile Customer Value Management completes this evolution. Specifically, CVM brings organizations to the level of Differentiated Value Selling — where value is quantified for a specific project including differentiation from other alternative uses of budget such as direct competition or alternative uses of capital.

Why is Customer Value Management Important?

Businesses today face great challenges from global competition, mergers and acquisitions, technology advancements, digital transformation, rising consumer expectations, and cybersecurity threats. The need for cost-effective B2B solutions to deal with these challenges has never been greater. As a result, horizontal and vertical competitive B2B solutions continuously enter the marketplace at an astonishing pace, leaving buyers with the tough decisions: “Why buy? Why now? Why from a specific provider?”

However, in a seemingly paradoxical convergence of interests, buyer and seller expectations are precisely the same when it comes to justifying investments in these B2B solutions. Both parties recognize that their key to success is an effective business case to justify investments and the ability to measure and showcase business value after the solution is implemented.

Typical enterprises have a long list of potential projects to fund. So, buyers and sellers need a credible way to “rack and stack” investment priorities. After all, it’s not just a question of convincing decision makers that your problem is worth solving. It’s a question of “hurdling” other projects in the queue and moving up the funding priority list.

In fact, industry analyst research reports that 90 percent of buyers require quantifiable evidence of business benefits before investing. Yet two-thirds of buyers confess that they are poorly equipped with knowledge and tools to create a credible business case, while over four-fifths of buyers look to their suppliers for assistance in quantifying value.

On the seller side, CSOs and CMOs understand that quantifying and selling the business value of their solutions is critical to their success. After all, if only 10-15 percent of deals have a compelling business case, how much money is being left on the table? A lot!

What Does a Great B2B Buyer-Seller Experience Look Like and How Can Customer Value Management Enable That?

Buyers desire to engage in initiatives that will help them achieve their organizational and personal objectives and sellers seek to help buyers buy. However, both parties often find it difficult to overcome the allure of the status quo. So, what does a great seller-buyer experience look like?

The seller experience should seek to achieve four goals: gain the attention and support of a Champion and Economic Buyer; establish credibility with the decision maker and influencers; build a defensible business case, and lock-in a longer-term relationship as a Trusted Advisor.

These goals can be achieved by three key actions:

1. Grab attention with a provocative Value Hypothesis. Based on your account research, internal account team knowledge, and industry benchmarks, a Value Hypothesis provides the Economic Buyer and Champion with a “directional sense” of your solution’s business value. The objectives of a value hypothesis are to: (a) pique the buyer’s curiosity enough to continue a meaningful dialogue and (b) gain agreement to collaborate on refining the value hypothesis into a defensible business case. Consequently, the value hypothesis provides a strawman model to drive a business case working session.
2. Build a credible, transparent business case. The same methodology used to build the value hypothesis is used to engage the buyer’s team with a non-intrusive process leading to a defensible business case. The objectives of the business case modeling exercise should be to: (a) gain buyer team consensus on the metrics required by the Economic Buyer to justify investment; (b) provide complete traceability from the ROI and payback calculations down to individual pain point-value statements pairs that comprise the business case; (c) help quantify the cost of delay, and (d) move the seller solution up the investment priority stack.
3. Lock in an on-going relationship as Trusted Advisor. The final business case model also serves as the baseline for periodically measuring and showcasing value realized following solution implementation. This part of the seller experience is critical to locking in renewals and setting the stage for expanded implementation through cross-sell and up-sell opportunities.

This seller scenario also contributes to a great buyer experience. Specifically, the Economic Buyer and Champion leverage a proven, rigorous methodology to: (a) justify budget and set funding priorities that support their current decision-making process and (b) provide evidence that their current investments are achieving the original ROI expectations.

It’s a win-win situation: the buyer gets the solutions needed to achieve their business objectives and the seller achieves recognition as a Trusted Advisor. Sounds straightforward. But there are some challenges that sellers and buyers must overcome to achieve this great experience.

How Do You Quantify Customer Value?

Value model development and validation is a stage of CVM Program implementation. Specifically, there are two interdependent use cases to consider.

1. Value Model Content Development / Validation.

    

   This stage is about developing the Value Data Model and validating it with customers. It includes precisely defining the universe of benefits associated with a B2B solution — focusing on the underlying “pain point–value statement” pairs and the factors required to quantify them. The initial “strawman” value model should be developed by capturing the collective knowledge of people internal to the B2B solution organization – across the sales, SE, marketing, and product management teams. For this activity, Excel serves as an excellent “rapid prototyping” tool. The result of this stage can then be used to validate the strawman Value Model and outputs with “friendly” customers.

2. User Experience (UX) Validation. The next stage of validation requires assessing the best way to implement the value model and associated assets in the steady state. Can the delivery of the Excel-based Value Model be scaled? Is it easy for the sales teams to use it? Does it support iterative refinement as you move through the sales cycle? Will customers accept the transparency and quality of the resulting deliverables? Can these outputs be quickly and efficiently regenerated during the business case refinement process? Here is where Excel falls short and a CVM platform makes a tremendous difference.

The Solution Value Model is the collection of benefits that constitutes the content foundation for a CVM Program. It is critical to every stage of the CVM journey – creating a value hypothesis with your internal account team; building and refining a defensible business case with the buyer team; measuring value realized post-solution implementation, and creating persona relevant assets along the way.

Sellers often struggle with the challenge of connecting their buyers’ challenges (pain points) to the business value of their B2B solutions. Inability to do this may lead to a credibility gap — providing numbers without context. Overly simplistic ROI Calculators fail to bridge this gap; in fact, they may widen it. While calculators may be a provocative way to open the door and generate leads, they fail to provide the rigor required to justify an investment in a B2B solution.

Thus, the challenge is: how do you build a value model that can both be used to generate interest (with a provocative value hypothesis), then move on to refine the hypothesis into a compelling business case, and finally close the loop by using the baseline model to measure value realized.

The answer is: build a rigorous Value Data Model – a collection of benefits that constitute the baseline financial model to be used and customized by sales reps in building a unique business case for each customer. It provides Economic Buyers with the ability to assess alternative scenarios from worst to best case — performing sensitivity analyses, observing the impact of possible risk factors, answering “What if?” questions, and projecting a variety of financial factors (e.g., ROI, NPV, payback, etc.) for a proposed investment.

What Are the Important Ways That Value Enablement Impacts B2B Businesses?

Over the past few years, books have been written and significant research has been conducted on the

benefits of selling business value.

• The Challenger Sale

   

  by Matthew Dixon and Brent Adamson emphasizes that sales conversations must be

   

  tailored

   

  to align with each buyer’s

   

  economic value drivers.

• Reed K. Holden, in his book,

   

  Negotiating with Backbone,

   

  argues that the “game” of selling is actually a test of sales rep

   

  confidence

   

  in solution price and value.

• Miller Heiman, in its

   

  2018 CSO Insights Study,

   

  reports some eye-opening statistics on the buyer-seller experience as shown in the table below.