Identify Customer Value Drivers – Customer Value Discovery

What do customers actually value? What will they pay for? Where is your pricing negotiation power?

Challenges

  • Customers are no longer a homogenous group of segments
  • They are market segments of one.
  • Simple cost plus pricing structures are less effective to protect margins or identify margin opportunities.
  • What is value for one customer is not relevant for another.
  • Professional negotiators and procurement functions are now employed to tear down sales proposals and pitches.

Insights

Customer value can be the sum of a series of value drivers you provide the customer or it could be that you do one thing really well, better than anyone else, that the customer prizes and values enough to pay a premium or reject competitor offers.

But how do you actually know what customers value?

The reality is that a motivation to buy occurs to either remove pain or eliminate risk of trauma. Many sales calls miss the opportunity to access the customer pain points and hence triggers to buy because the customer does not have a conscious awareness of these pain points.

Eliminating risk of trauma is almost always of relevance when the person has experienced trauma in the past. However, the most painful memories are often repressed or pushed to the sub conscious or unconscious mind and require careful techniques to make the prospect aware of this pain and the need to solve it.

The most successful approach in the complex sale is the challenger sales approach. Customer Value Discovery is a structured way to gain insights into the customer to identify the true value driver set that triggers the desire in the customer to make your solution the one they will select over others.

Risks

The biggest risk to profitability we see when customer value drivers are not well understood include:

  • Reliance on cost plus mark up to set prices
  • Price setting according to competitor tactics regardless of market positioning or the value delivered.
  • Weak negotiating position leading to price concessions
  • Uninformed buyers making purchase decisions based on lowest invoice price not total lifetime value

Slowness to adapt and refine market offer and business model leading to even greater margin pressures or negative profit results

Case Study

One of our clients in the food technology sector had a dominant market share but was being undermined by a competitor who was up to 50% lower in price.

The problem was that the product was an unbranded ingredient that was used to make another finished product. Final consumers at the supermarket would never know what was in the final product they bought.

Naturally, customers began to ask about price reductions to match this competitor pricing. By undertaking a value driver workshop program with the sales force, our client could develop a complete picture of value and understand the negotiation & pricing power.

Initially we undertook a Customer Value discovery workshop program with the sales teams followed up by validation sessions with customers. 50% of the initial value drivers nominated by the sales team were discarded as being not relevant to customer’s perceptions of value.

Once we had identified the most relevant customer value drivers we were able to meet with major accounts to undertake more comprehensive Value Discovery workshops.

A series of workshops was held across the country with major accounts. The impact of these workshops was substantial. We were able to obtain a series of customer “value confessions” not previously unearthed through traditional sales meeting processes.

We obtained acknowledgment from the customer that they received great value and a subsequent 4.5% price increase was accepted in the months following the Customer Value Workshop program.

Importantly, the sales teams now had a toolkit to sell on value, confidence to negotiate on value with the customer and a deeper insight into the sources of pricing power.

This new approach led to substantial margin expansion and earnings growth in what would otherwise be considered a commodity product.

Innovation

Customer Value Discovery is unique because it uses a value pricing framework that aligns to the brain’s architecture and our motivations to act.

It is an iterative process rather than an event, to allow your team to learn and adapt to new market realities as well as develop more innovative ways to communicate and negotiate value to the right customers.

Customer Value Discovery

STEP ONE – Identify market or product segment
Identify a market or product segment that needs to have a more effective exploration of value to unlock pricing power. You could also apply CVD for major account pitch or renegotiation. It is highly effective as a key account retention strategy.

STEP TWO – Nominate the team
Identify the relevant staff who will benefit from training and development. This is typically a combination of staff from sales, marketing, finance and operations functions.

STEP THREE – nominate dates & locations
Nominate dates, locations and durations for the Customer Value Discovery workshop series. CVD is a series of three workshops with 4 weeks in between each one to allow time to test and validate in market and maximise skills and learning outcomes

Criteria

Need a program sponsor – CEO, EGM or Sales & Marketing Director.

It can be run with any major account or product / service type across almost all industries.

Next Steps

To find out more about how Customer Value Discovery will allow your marketing and sales teams to define communicate and capture more value, please email cvd@pricinginsight.com.au   or call + 61 2 8226 8621 with your details and potential times for follow up call.