Greater Insight: Why adding value should not be confined to the margins

Providing true value to clients wins out over lower prices when it comes to competing successfully in the B2B world, so finding out exactly what form this value should take is a vital part of differentiating your offer

Over the past 10 years, globalisation and the internet have resulted in greater transparency of prices and competition, which has put margins under increased pressure. In response to this, many businesses have started to rely on price as a means of competing.

Business buyers and decision-makers are increasingly knowledgeable and discerning and, while some certainly do focus on price, far more place importance on value, meaning there’s a greater opportunity than ever for sophisticated businesses to differentiate themselves through value-marketing and value-selling.

The definition of value is, in this context, fulfilling customer needs. Therefore, the first action for any organisation looking to value-sell is to speak to and understand the needs of its customers.
When gathering knowledge about what your customers consider to be important or beneficial, you won’t go far wrong if you remember these five points:

1    Consider the entire decision-making unit (DMU). In B2B markets you are not selling just to one person; rather, it’s a multifaceted DMU – in other words, procurement, technical, logistics, operations, marketing, sales and C-suite. You must touch the ‘hot buttons’ of all decision-makers in
a company, as any product or service will deliver different value, depending on what their individual needs are.

2    Don’t have a ‘one-size-fits-all’ proposition. Different sets of customers have different needs, and remember: for most B2B buyers, it is not all about price. In any B2B market, companies that buy solely on price are never the biggest segment (even with a commoditised product). So, segment your market and decide where you want to com­pete and who you don’t want to do business with.

3    Sell outcomes and solutions, not products. Consumer marketers have long recognised that selling outcomes and tapping into the emotions of customers results in higher margins. Savvy B2B marketers should ask themselves: "What is it we are really selling?", and construct their sales and marketing programmes around these outcomes. While product features can substantiate the outcome on offer, they should not form the sole message.

4    Be clear on what the customer will pay for. Many B2B companies still fall into the trap of thinking product quality and price are all that matter. In any market, accessing the right product at the right price, when you want it, are not differentiating factors; they are merely ‘hygiene factors’ and all competing businesses in your market will be providing the same. Through speaking to your customers, you will be able to find out what value they additionally place on factors such as technical support, emergency deliveries, consignment of stock or even a branded offering.

5    Communicate the ROI of your proposition. Key to value-marketing and selling – as well as highlighting the benefits and outcomes of the offer – is talking about return on investment. For example, if your industrial pump is more expensive than the one your competitor is selling, explain to the customer what yours will save them in reduced downtime. How much extra revenue can your offering bring them? ROI is front-of-mind for most B2B purchasers, so communicate your offer in quantifiable units and, wherever possible, in credible financial terms.

So, the three key principles to remember in selling on value, rather than price, are:

n    Is your proposition or commitment to customers providing real value that they want?

n    Is the customer-value commitment profitable for you? It has to be a win-win situation.

n    Is the customer-value commitment superior to that of your competitors? If not, it’s back to the drawing board to develop your proposition, so that it is truly different, and enables you to charge a premium.

Nick Hague, Director, B2B International
www.b2binternational.com
nickh@b2binternational.com