Thursday, 8 October 2020
BOM WEEK 4 NOTES
BOM
Anderson & Narus - Business
Marketing: Understand What
Customers Value
- To persuade customers to focus on total costs rather than simply on ac- quisition price, a
supplier must have an accurate under- standing of what its customers value, and would
value
- These suppliers have developed what we call customer value models, which are data-
driven representations of the worth, in monetary terms, of what the supplier is doing or
could do for its customers.
- De- pending on circumstances, such as availability of data and a customer’s cooperation,
a supplier might build a value model for an individual cus- tomer or for a market segment,
draw- ing on data gathered from several customers in that segment.
- A Common Definition of Value
• Value in business markets is the worth in monetary terms of the technical, eco- nomic,
service, and social benefits a customer company receives in ex- change for the price it
pays for a mar- ket offering.
• Thus raising or lowering the price of a market offering does not change the value that
such an offering provides to a customer. Rather, it changes the customer’s incentive to
purchase that market offering
- Using Customer Focus groups to Assess Value
• At the beginning of each focus group, the moderator demon- strated the service using
a spe- cially arranged prototype and then asked focus-group partici- pants to write
down their first impressions of the service and how much they would be will- ing to pay
for it per month.
- Building Customer Value Models
• Field value assessments (also known by other names, such as value-in-use or cost-in-
use studies) are the most commonly used – and, we believe, the most accurate –
method for building customer value models
• Get Started
- The first step is putting together the right kind of value research team. The team
should include people with product, field engineering, and marketing experience,
and two or three forward-thinking salespeople. Having salespeople involved at the
start is particularly important. They know the customer and how the offering is used;
they also know which customers might be willing to cooperate in value research.
- Selecting the right market segment to target is the next step.
• Generate a comprehensive list of value elements
1
, Thursday, 8 October 2020
- Value elements are anything that affect the costs and benefits of the offering in the
cus- tomer’s business. These elements may be technical, economic, service, or
social in nature and will vary in their tangibility.
- The value research team will have to make trade-offs between relying in a
customer’s perception of what all the relevant elements are and actually observing
firsthand the ways in which the supplier’s offering affects the customer
• Gather Data
- Sometimes, the only way to find the data is for team members to ask around until
they come across the individual who knows where the in- formation is.
- The value research team also needs to be creative in finding other sources of
information. Indepen- dent industry consultants or knowl- edgeable personnel within
the sup- plier company can be good sources of initial estimates
- The value of social elements such as greater peace of mind, for example, is gener-
ally very difficult to express in mon- etary terms.
• Validate the model and understand variance in the estimates
- Conducting further assessments en- ables the supplier to refine its value estimates
and to understand better how the value of its market offering varies across
customers’ applica- tions, capabilities, and usage.
- (In soliciting perceptions, the supplier should re- member that people are generally
better at making comparative judg- ments [more or less than] than ab- solute
judgments [it’s worth X]
- The supplier can then build a database that contains value estimates – and the
individual customer characteris- tics, which we call descriptors, that might affect
those estimates – from all participating companies
• Create value-based sales tools
- Value assessment can also become a service that suppliers offer as part of a
consultative selling approach. For example, a supplier can develop a spreadsheet
software application that salespeople can use on-site with a laptop computer to
evaluate the potential value of the offering to a particular customer.
- Putting an Understanding Of Value to Use
• It can better sustain cus- tomer relationships by documenting its delivery of superior
value over time and by discovering new ways to update and reinvigorate those
relationships.
• Managing Market Offerings
- Doing so entails constructing what we call naked solutions with options. Naked
solutions consist of just those product and service elements that all customers
within a market segment value.
- Suppli- ers should strive to sell naked solu- tions at the lowest possible price that
will yield a profit
• Guiding the Development of New or Improved Products and Services
- “If we do X, what is it worth to that customer?” Knowing that an improvement in
some func- tionality is important does not tell a supplier if the customer is willing to
pay for it
2
BOM WEEK 4 NOTES
BOM
Anderson & Narus - Business
Marketing: Understand What
Customers Value
- To persuade customers to focus on total costs rather than simply on ac- quisition price, a
supplier must have an accurate under- standing of what its customers value, and would
value
- These suppliers have developed what we call customer value models, which are data-
driven representations of the worth, in monetary terms, of what the supplier is doing or
could do for its customers.
- De- pending on circumstances, such as availability of data and a customer’s cooperation,
a supplier might build a value model for an individual cus- tomer or for a market segment,
draw- ing on data gathered from several customers in that segment.
- A Common Definition of Value
• Value in business markets is the worth in monetary terms of the technical, eco- nomic,
service, and social benefits a customer company receives in ex- change for the price it
pays for a mar- ket offering.
• Thus raising or lowering the price of a market offering does not change the value that
such an offering provides to a customer. Rather, it changes the customer’s incentive to
purchase that market offering
- Using Customer Focus groups to Assess Value
• At the beginning of each focus group, the moderator demon- strated the service using
a spe- cially arranged prototype and then asked focus-group partici- pants to write
down their first impressions of the service and how much they would be will- ing to pay
for it per month.
- Building Customer Value Models
• Field value assessments (also known by other names, such as value-in-use or cost-in-
use studies) are the most commonly used – and, we believe, the most accurate –
method for building customer value models
• Get Started
- The first step is putting together the right kind of value research team. The team
should include people with product, field engineering, and marketing experience,
and two or three forward-thinking salespeople. Having salespeople involved at the
start is particularly important. They know the customer and how the offering is used;
they also know which customers might be willing to cooperate in value research.
- Selecting the right market segment to target is the next step.
• Generate a comprehensive list of value elements
1
, Thursday, 8 October 2020
- Value elements are anything that affect the costs and benefits of the offering in the
cus- tomer’s business. These elements may be technical, economic, service, or
social in nature and will vary in their tangibility.
- The value research team will have to make trade-offs between relying in a
customer’s perception of what all the relevant elements are and actually observing
firsthand the ways in which the supplier’s offering affects the customer
• Gather Data
- Sometimes, the only way to find the data is for team members to ask around until
they come across the individual who knows where the in- formation is.
- The value research team also needs to be creative in finding other sources of
information. Indepen- dent industry consultants or knowl- edgeable personnel within
the sup- plier company can be good sources of initial estimates
- The value of social elements such as greater peace of mind, for example, is gener-
ally very difficult to express in mon- etary terms.
• Validate the model and understand variance in the estimates
- Conducting further assessments en- ables the supplier to refine its value estimates
and to understand better how the value of its market offering varies across
customers’ applica- tions, capabilities, and usage.
- (In soliciting perceptions, the supplier should re- member that people are generally
better at making comparative judg- ments [more or less than] than ab- solute
judgments [it’s worth X]
- The supplier can then build a database that contains value estimates – and the
individual customer characteris- tics, which we call descriptors, that might affect
those estimates – from all participating companies
• Create value-based sales tools
- Value assessment can also become a service that suppliers offer as part of a
consultative selling approach. For example, a supplier can develop a spreadsheet
software application that salespeople can use on-site with a laptop computer to
evaluate the potential value of the offering to a particular customer.
- Putting an Understanding Of Value to Use
• It can better sustain cus- tomer relationships by documenting its delivery of superior
value over time and by discovering new ways to update and reinvigorate those
relationships.
• Managing Market Offerings
- Doing so entails constructing what we call naked solutions with options. Naked
solutions consist of just those product and service elements that all customers
within a market segment value.
- Suppli- ers should strive to sell naked solu- tions at the lowest possible price that
will yield a profit
• Guiding the Development of New or Improved Products and Services
- “If we do X, what is it worth to that customer?” Knowing that an improvement in
some func- tionality is important does not tell a supplier if the customer is willing to
pay for it
2
