What it Takes to Win with Customers
Friday, May 3, 2019
Posted by: Keith Pigues - Luminas Strategy
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 by using a new form of Competitive Intelligence (CI). This new form of CI, the Differential Value Proposition or DVP, provides customer insight that measures what matters most: how much money customers make doing business with your company versus the next best competitor. The result is a qualitative and quantitative assessment of your true competitive advantage (from the customer's perspective) that produces tangible and actionable results to improve your organization's value proposition in both the short term and long term.
How can you tell if your organization is focused on winning with customers? Ask yourself: Do our customers make more money doing business with us? Consider these four statements that describe a company on the right path. How many describe your organization?
- We know specifically how we help customers make more money.
- We measure and track how much money customers make doing business with us over time.
- We understand how we will make our customers more money in the future.
- We measure and track how much more money our customers make doing business with us compared to our competitors.
At a recent SCIP conference, less than 5% of the 300+ attendees could say that these statements applied to their companies. I consider this a wake-up call for the CI community, as well as an unprecedented opportunity to bring the CI discussion into the C-Suite of your organization.
At the heart of this approach is the DVP – a new metric being used by large companies such as GE and Owens Corning, as well as smaller companies such as J.A King and Buckman Chemical to gain competitive intelligence that fuels strategy development and investment decisions for the future success of their companies. This new data helps companies better manage the value exchange with their customers and suppliers. In all business transactions a value exchange is at work. Companies seek products and services that address their business needs and (most importantly) help them improve profits.
In most value exchanges, neither party has a good way to measure how much value is exchanged or how it is shared. The DVP helps companies identify the specific areas where they can create more value for customers than competitors, measure the financial impact, and create plans to deliver the value to customers while capturing their fare share in return.
What does it take to win with customers?
1. Help customers make more money by having a different conversation – one that focuses on the "measurable" financial value you create for customers today and the specific opportunities to create more value in the future. The DVP is a tool that engages decision makers and influencers throughout the customer organization in a conversation about their business.
It answers questions like: Are you helping the customer make money? Are you helping the customer make more money than your competitors? What can you do (from the customer’s perspective) to help them make even more money in the future? This new approach to gaining customer input represents significant improvements over more traditional approaches like customer satisfaction or customer loyalty metrics. It provides a current rather than retrospective assessment and changes the conversation of value propositions from purely qualitative aspects. This is a new conversation with customers that places customer value metrics at the center of the dialogue.
2. Inject measurable, "outside-in" competitive intelligence regarding what customers value into your company’s decision-making. (Yes, sometimes we don’t know as much about our customers as we think.) This approach measures a company’s performance in delivering value to customers versus competitors through the incremental operating income a customer earns by doing business with you versus your competitors. The incremental value is delivered by specific things your company does that contribute to additional cost reduction or revenue increase versus the next best competitor - this may be the most valuable competitive information to drive your business decision making and investments. Each source of additional value is directly associated with a beneficiary in the customer's organization (by name and title) and is validated by the beneficiary, as well as other key decision makers for your offerings. This quantitative measure of differential value connects your value proposition and the customers’ P&L statement and has produced some surprising results for the companies that are using it.
3. Develop and execute plans with customers that deliver value and clearly outline what is expected in return. A critical part of this approach is a list of the top 3-5 opportunities identified during the customer discovery that represent value for both parties. To uncover these opportunities, we begin by asking the customer: "If we gave you the next $500K, $1M, or $10M of investment we plan to make in our business on your behalf, where would you invest it to make more money for your business?" The results of this discussion yield incredibly valuable customer insight about the drivers of competitive advantage to further develop or build for the future - future growth and profitability with the customer. Pursuing the most attractive opportunities on THE LIST builds and continually improves the differential value provided to the customer, improves your competitive advantage and strengthens the customer relationship. Our work has shown that while customer relationships are important, long-lasting and mutually beneficial financial relationships are what truly matter. These relationships provide the fertile ground for true co-creation with customers that result in sustained profitable growth for both parties over time. Now, that is winning!
4. Predict future profit growth for you and your customers by aligning your investments with their impact on customers’ profits. One of the most exciting areas within this approach is measuring the customer’s actual performance against the predicted incremental operating income earned by doing business with you. One company that has been using this approach over a 10-year period has produced very interesting results showing the relationship between their investments, improvements in their value propositions and predictable future financial performance. This is only possible with the innovation in Competitive Intelligence and Customer Insight provided by the Differential Value Proposition (DVP).
About the Author
Keith Pigues is a data-driven creative. As founder and CEO of the consulting firm Luminas Strategy, he assists companies in developing, quantifying and improving their customer value propositions – helping clients to accelerate profitable growth strategies. Keith founded Luminas Strategy in 2015 after serving as a partner in Keen Strategy. He is also a nationally recognized speaker, business advisor, and co-author of Winning with Customers: A Playbook for B2B (Pigues and Alderman, Wiley & Sons, 2010). He is a former chief marketing officer for companies ranging from the Fortune 500 to private-equity sponsored middle market companies. He also served as a tenured professor of management and Dean of the School of Business at North Carolina Central University, as well as an adjunct professor of Leadership at the University of North Carolina Kenan-Flagler Business School.