I wrote, The Arrogance Of Creating Value For The Customer. Most of the time when sales and marketing people speak about value, we think of what we “inflict” on the customer. We tell them our value propositions, then letting them figure out whether it means anything to them.
Perhaps we take the time to understand what they value, then presenting our value in the context of what they value.
In the article, I suggested that value creation is really a collaborative effort, a journey we and the customer embark on, creating value together. It’s a journey of learning, discovery, challenging each other, understanding differing points of views, and determining a path to help the customer achieve their goals.
As sales people, we tend to think of the the value the customer is getting from this process–using this to get them to buy from us.
Which gets us to the concept of Value Exchange. Most simplistically, the customer gets value out of the process and we have to get value out of the process. For this to work we have to get value out of the process, as well.
The value each of us gets has to be roughly in balance, if it isn’t the relationship can never survive. (Revisit your physics books, looking at laws around static and dynamic equilibrium.)
When we understand the concepts of Value Exchange and balance in the relationship, we start to see more about how value creation must be with rather than for the customer. It’s also in this that we see the concept of value add is really meaningless.
The value the customer ultimately provides us at the end of the buying process is a PO. Certainly, we enter into the relationship with some risk/uncertainty. We may invest in creating value with the customer, only to see they choose to do nothing or, worse, to select a competitor.
We do everything we can to mitigate that risk in our qualification process. And we are constantly re-qualifying the customer throughout their buying process.
The customer is always looking at getting the best price possible for the value they need in the relationship. But sometimes, we go through the whole process of creating value with the customer–only at the end to have procurement get in to say, “Thank you for all the value you’ve created, but now you have to reduce your price by X%.”
This creates imbalance in the Value Exchanged in the relationship. In a single transaction, perhaps that’s something we can live with, but continued imbalance in Value Exchanged puts us out of business!
Our ability to create value with the customer, particularly over the long term is based on our ability to get a fair margin/profit out of the relationship we have with the customer–and with all customers. What we invest in creating value with the customer has a cost to us. If we aren’t getting fair value in exchange, we can no longer afford to invest in that relationship, or if we can’t get fair value from all our customers, we go out of business.
Clearly, from our point of view that’s a bad thing (somewhat of an understatement), but it’s also tragic for our customers.
Think about it for a moment, if there is no balance in the Value Exchanged, we have to find ways to reduce our costs to get things back into balance.
We might cut back on quality, reducing the costs of our products—but that adversely impacts our customers and their relationships with their customers.
We might cut back on new product development and innovation—but that also impacts our customers. We can’t afford to invest in new solutions to help them grow and improve. We can’t be investing in looking at the future trends with their customer and markets to develop new products to help them serve their own customers.
We might cut back in customer service and support—but this impacts them, they may not achieve their goals, or they may have to invest more on their own part to make things work as expected.
We might cut back on sales people—but then we have less time to work with our customers, creating value for them.
Systems always seek equilibrium (sorry, I just can’t escape my physics roots). If there isn’t fair Value Exchange in our value creation with the customer, we have to adjust things on our side to achieve equilibrium. But then, that causes the customer to adjust on their side, because what we were providing has to come from somewhere else.
You can see the death spiral this creates.
As sales people, we are obligated to make sure our customers understand the concept of Value Exchange and equilibrium—and why it’s important for them to value as part of the relationship.
One of the best examples I’ve ever seen of a vendor explaining this concept to a customer was with the COO of a great company. He took his company’s latest earnings report and used that to show they customer how maintaining their pricing and margins was critical to the customer’s future success. He outlined how the profits enabled the company to continue to re-invest in innovative/world class products that helped customers grow and performed. He gave examples how they could invest in continuing to improve the product, it’s quality and overall manufacturing process–at the same time expanding capacity to meet growing customer needs. He spoke to investing in customer service, marketing and sales—continuing to increase their ability to co-create value with their customers.
We create value with our customers. In that process, there is an exchange of value. If that exchange is not balanced, the laws of physics and finance force us to get it into balance.
There is no magic. There is no free lunch.
We have to create value with our customers. Are they pulling their own weight?