by D. Keith Pigues, Author, Speaker, Business Advisor
Amazing things happen when an organization begins to think first about how it can make its customers better off. Really. The days of defining winning by only considering your own P&L are over. Leading B2B companies are focused on making their customers more money than their competitors and getting their fair share.
How can you tell if your organization is focused on winning with customers? Ask yourself these questions: Do your customers make more money doing business with you? Consider these four statements that describe a company on the right path. How many describe the current state of your organization?
- We know specifically how we help customers make more money.
- We understand how we will make our customers more money in the future.
- We measure and track how much money customers make doing business with us over time.
- We measure and track how much more money our customers make doing business with us compared to our competitors.
At a recent marketing conference, only 5 out of 600+ (less than 1%) of attendees could say that these statements applied to their companies.
At the heart of this approach to win with customers is the Differential Value Proposition (DVP). This three-step business management system helps companies better manage the customer value proposition.
First, it helps the organization take the internal temperature of its current value proposition with customers. Cross-functional teams gather and collectively identify the things that deliver real and measurable differential value to your customers (those things like product quality, knowledgeable sales force, supply chain capabilities, or brand strength that help customers increase their sales or reduce their costs more than is possible by doing business with your competitors). The DVP differs greatly from more traditional qualitative approaches by including a quantitative measurement of the differential value delivered to customers. After all, companies seek products and services that address their business needs and (most importantly) help them improve profits.
Secondly, the DVP includes the critical validation step. Many organizations make investment decisions to fund new or improved products and services without a validation of the true differential value delivered versus the next best competitive offering. The result – lackluster products, disappointing margins, a rebellious sales force, or worst – all of these undesirable and unintended consequences stem from the lack of a real differential value proposition. When the customer is asked to evaluate each part of the value proposition and its financial impact on the business, the discussion produces more in-depth and actionable insight than most organizations have ever received from traditional market research projects. This “moment of truth” helps organizations to identify what’s adding value and should be continued, as well as what is not adding value and should be discontinued or improved. The DVP removes blind spots that otherwise prevent companies from knowing exactly where they stand with their customers, and fosters a new level of open dialogue with customers. The elusive collaborative customer relationship is developed over and over again with the DVP serving as a catalyst.
The third critical element of the DVP is the identification of opportunities to grow with the customer into the future. We encourage you to ask your customer a question that may scare the living daylights out of your organization: “If we gave you our company’s checkbook and you were able to invest our money in areas of our business that would most greatly impact your business’s profits, where would you invest?” We call this the “checkbook question” and it has resulted in companies gaining more valuable insight and more robust innovation pipelines than other approaches. When you understand the specific investments in areas such as new technology, customer service, or marketing support and how they will directly impact the customer’s profits, this changes the way you think about managing the business for growth and profitability. The DVP is a chief contributor to an organization’s transition to become a more “outside in” organization, as opposed to an “inside out” organization that makes key investment decisions without the benefit of this critical unfiltered customer insight.
What does it take to win? Helping your customers make more money by doing business with you (versus your competitor) and getting your fair share of the money your customer makes in return is indeed the winning formula.