Value-based Approach in B2B markets
Value-based selling focuses on the prospect and their needs rather than the solution you're trying to sell. Value-based selling in B2B entails delving into the distinct requirements and preferences of the business customer and illustrating how your product or service can deliver concrete value while meeting those needs. In contrast to fixating solely on features and pricing, value-based selling accentuates the advantages and results that the customer can anticipate from embracing your solution. Through customizing your presentation to emphasize the unparalleled value proposition for each client, you can forge more robust connections, set yourself apart from rivals, and bolster your likelihood of finalizing the transaction. The process below from Cuvama outlines the value-based selling approach very well.
The recent article, “Three Ways to Sell Value in B2B Markets,” which was published in issue 63 of the MIT Sloan Management Review, sheds much-needed light on this underexplored area. Quantifying and effectively communicating value in business-to-business (B2B) sales is increasingly crucial. Customers are under pressure to cut costs while staying profitable, and with more competitors digitizing and expanding their offerings, value-based selling (VBS) has become essential in B2B markets.
Many companies struggle to effectively implement value-based selling (VBS). The challenge often lies in aligning the sales approach with the customer’s perception of value. Effective VBS involves not only understanding the inherent value of the offering but also clearly communicating and aligning this value with the customer’s priorities and needs. 3 different VBS approaches are outlined:
Product-Centric VBS: This approach focuses on selling the benefits of products rather than just their features, emphasizing what the product can do for the customer.
Customer Process-Centric VBS: This strategy revolves around understanding and improving the customer’s business processes to deliver tangible financial benefits, positioning the seller as a partner in the customer’s business success.
Performance-Centric VBS: This approach involves guaranteeing specific performance outcomes, requiring a high level of confidence in the product or service and an in-depth understanding of the customer’s industry and needs.
The next challenge is the how-to. How to identify the value of each of those scenarios? To derive these values, you can either apply a Value Chain Analysis or leverage a Value Driver Tree.
Helpful Tools for Value Analysis - Value Chain Analysis
Applying Value Chain Analysis involves examining each activity within the chain to understand how value is created for customers. This analysis can help companies identify areas of strength and weakness, leading to improved efficiencies, cost savings, and competitive advantage.
The process to apply Value Chain Analysis in B2B markets involves the following steps.
Identify Primary Activities: Begin by identifying the primary activities in your B2B value chain, such as inbound logistics, operations, outbound logistics, marketing and sales, and service.
Examine Support Activities: Evaluate the support activities that enable the primary activities to function smoothly, including procurement, technology development, human resource management, and infrastructure.
Assess Value Creation: Analyse each activity to determine how it contributes to value creation for your B2B customers. Consider aspects such as cost savings, quality improvement, differentiation, and speed of delivery.
Cost Analysis: Conduct a cost analysis for each activity to understand the cost drivers and identify opportunities for cost reduction without compromising value.
Competitive Benchmarking: Compare your value chain activities with those of key competitors to identify gaps and areas where you can outperform competitors.
Collaborate with Partners: Engage with suppliers, distributors, and other partners in the value chain to enhance collaboration and streamline processes for mutual benefit.
Continuous Improvement: Continuously monitor and reassess your value chain activities to identify areas for improvement, innovation, and adaptation to market changes.
By applying Value Chain Analysis in B2B markets, you can gain valuable insights into your customer’s operations, and likely identify major blockers or obstacles; which the proposed solution can help to address.
Let’s look at an example: in the global technological arena, Google is renowned for its diverse and dynamic portfolio of digital products. This Google Value Chain Analysis provides a detailed overview of the business activities that contribute to Google's unrivalled success. Google's success as a global technology leader is not by chance. It is the outcome of closely coordinated primary and support activities working together smoothly. These activities have been refined over time to maximize their contribution to value creation. This analysis of Google's value chain demonstrates how effective management of different business activities can help in establishing a strong global brand. A detailed breakdown is provided in this article by Boardmix. Or have a look at our standardized Template for Value Chain Analysis.
Value chain analysis is a valuable tool for understanding your customer's market and competitive positioning. It will help you with your overall value-based selling approach and more specifically enable you to identify pain points that your solution can address to enhance client value, efficiency, and customer relationships. Businesses typically align their value propositions with the value chain to communicate unique selling points and drive revenue growth.
