Customer Value Discovery
Increase profitability through understanding your value to customers
- Understand the psychology of what motivates customers to buy
- Unlock the full value of each product or service
- Develop effective messaging to communicate your value to customers. Realise margin improvements of at least 2-3% over total revenues that flow directly to the EBIT line.
The #1 problem most companies have that stop them from making more money
The number one issue facing most companies is that they fail to understand what value they represent to their customers.
This means they don’t know how to charge or negotiate adequate prices for their products and services and the result is sub-optimal profits.
- Customers are becoming increasingly sophisticated
- Supply chains are becoming more complex
- The risk to the supply chain and the opportunity cost of supply chain failure have increased substantially
- Product or service costs as they appear in the ERP system are not reflective of fair value to the customers who purchase these products or services
- Similarly, what presents value for one customer may not be perceived as value for another. How can these variables be factored in?
The hard reality is traditional sales training is no longer effective to address the needs of high-value buyers.
The pain you will experience when you don’t understand market and sell value
In today’s progressive environment professional negotiators and procurement teams are employed to circumvent and crush sales proposals and pitches.
In this case, sales teams become vulnerable because they’re not tactically equipped with a narrative that’s derived from a deep understanding of the value of the business. Instead, they learn to believe they can’t charge price premiums and that customers don’t value the product or service they are selling. Thus, a vicious cycle of discounting is perpetuated as these salespeople strive to make a sale that then reinforces the idea that the products or services are overpriced.
Additional risks to margins and earnings
When customer value drivers are not well understood, profitability is weakened. Teams rely on reactive pricing in response to competitor tactics.
Without a language around the value being delivered, the negotiating position is weak and this leads to pricing concessions.
Buyers are more likely to make purchasing decisions based on lowest invoice price rather than total lifetime value.
Without a value based approach you could end up going through a one way door
Without a strategic framework to define value, sales teams become confused about customers actually value. This leads to sales teams to become vulnerable to procurement tactics that seek to obtain more value at lower prices.
Executive management revert to ineffective methods to manage pricing with inflexible policies and commercially ineffective rules in an attempt to protect margins and communicate value.
Over time, product margins decline and it can become impossible to obtain price increases or move away from discounting in order to make a sale.
The costly or painful process to rehabilitate the situation
In this climate competitors gain market share. Teams waste valuable time and money attempting to deal with a weakened business position.
The business will often go through an expensive strategic restructure or redistribution of territories and responsibilities. In many cases, this is a deckchair rearranging exercise that masks the fundamental problems of failing to identify, price and sell value.
When you market and sell value your world becomes more profitable
Ideally, you want to be able to identify value for your customer. In turn, you want your customer to demand your product or service because they perceive you to represent the best source of value. It’s this solution that leads to a more commercially effective pricing architecture and profitable revenue growth.
Customer Value Discovery is a systematic way you can identify what customers want and also what they want to avoid.
It helps you understand the value drivers you have in your armoury to help them solve their problems. You can then understand what you can do to charge appropriately for those value outcomes.
In short, Customer Value Discovery gives your team pricing power.
How this can access even greater profits outcomes
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.
Many sales activities miss the opportunity to access the customer pain points and purchase triggers because oftentimes the customer isn’t even consciously aware of these pain points.
Once you start charging optimised prices, you will then be in a position to invest in the business to drive enhanced value outcomes and increase customer loyalty and retention rates.
Customer Value Discovery – a solution to improving profitability
How does the Customer Value Discovery process help you?
- Understand that a motivation to buy is primarily driven by the need to remove pain or eliminate the risk of trauma.
- It is a structure and repeatable framework that can be scaled easily across the business.
- You will be able to identify value drivers that will inform your pricing strategy, pricing architecture, and marketing, sales and negotiation techniques.
Pricing Insight can help you discover your unique value to your customers. Our clear and definitive framework is unparalleled, particularly in the b2b environment. It uses a value pricing framework that aligns to the brain’s architecture and our human motivations to act.
It is an iterative process rather than an event, to allow your team to learn and adapt to new market realities.
We work with your marketing team to build their capability to write more effective marketing communications.
Generic marketing communications fail to connect with customer’s real pain points. These messages don’t resonate and therefore customers aren’t inspired to contact you with inquiries.
For sales teams, the customer discovery program will allow them to identify and ask the right questions.
You can then build out a strategy to ensure that you don’t lose margin when negotiating with your customers.
The program is suitable for Fortune 500 companies, a listed company or any business where there’s a buyer and seller negotiation.
The key output is a toolkit and a framework that allows you to calculate your economic value versus a competitor. Using the toolkit you will be equipped to look at your products and services and identify that you are 5%, 10%, 15%, or 20% better value than a competitor. If your prices are only 3% to 5% more expensive than your competitor, you know that there’s an opportunity to charge more.
The Pricing Insight process
- Briefing Session
To discuss your sales and marketing processes and what customer problems you solve. We will then advise if the Customer Value Discovery program is suitable for your business.
- 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 Customer Value Discovery for major account pitches or renegotiations. It is highly effective as a key account retention strategy.
- Nominate the team
Identify the relevant staff who will benefit from training and development. Typically a combination of sales, marketing, finance, and operations staff.
- Choose dates and locations
A series of 3 workshops will be held, with 4 weeks in between each. This allows sufficient time to test and validate in market whilst simultaneously maximising learning outcomes.
Pricing Insight worked with a food technology company that was experiencing a vast amount of margin pressure. They had a 70% market share, however their main competitor was 50% cheaper. Our client was concerned they were going to be undercut and lose a lot of volume, which would have impacted their factories, demand and profitability.
We identified a range of services that were valued by their clients. These included their local domestic production, quality control, service delivery and technical support innovation processes. Further, we calculated which of those things mattered to which client, and were able to set the pricing accordingly. Messaging was also developed to communicate this value to clients.
As a result, the customer gained a new appreciation of the depth of value delivered by this company. Furthermore, the food technology company retained its strong market share and eliminated the threat from competitors.
Customer Value Discovery is an effective way to enable your marketing and sales teams to define and communicate the value of your products and services to improve profitability.
How much money are you leaving on the table right now with ineffective cost plus mark-up pricing methods?
In terms of your business, how much money are you leaving on the table right now because of ineffective cost plus mark-up pricing methods?
Connect with us today to arrange a confidential discussion