What if you knew exactly how much money you helped your consumer deposit into their bank account?
Instead of utilizing anecdotes to determine where your company's money should be invested, what if you used quantifiable data from your customers? What if you could use that data to create basic strategies that not only helped your clients earn more money but also helped you make more money?
Finally, what if you could forecast both your own and your customer's profit growth? Do you believe you'd be successful in the marketplace?
This is the promise of this B2B playbook, Winning with Customers, made by Jerry Alderman and D. Keith Pigues.
If this interests you, I hope you'll join us for a 10-minute trip today. You should have the rest of the week to get you started applying these ideas in your business. Let's get this party started!
This route consists of six steps:
- Discover, where you'll realize what value you contribute to your customer's business;
- Analyze, where you'll bring all the information together and rank the opportunities;
- Execute, in which you'll devise a strategy for capturing that value for both yourself and your consumer;
- Measure, where you'll develop a dashboard to track the progress you've made;
- Certify, where you'll develop this capability throughout your entire company;
- CVC Management System, where you'll take things to the next level by merging people, processes, and technology to create a long-term competitive advantage.
We'll concentrate on the first three steps of the journey.
So what is the metric?
One of the firms that have gone through this procedure is Owens Corning. Here's what Bob Harlan, their Director of Business Insights, has to say about it:
"When we look at loyalty programs, and we've done them as well, it is our operating theory that the thing that drives loyalty as strong as or stronger than anything else is the ability for us to help our customers make money.
“Where there are many schemes for measuring loyalty, we rather think the most powerful way to engage our customers in this kind of conversation is better served by talking to them about their ability to make money."
The problem with most, if not all, businesses that don't execute this level of rigor is that they either believe it's too difficult or don't know how to quantify it.
The authors devised a new metric known as the Differential Value Proposition to address the second issue. There are two key aspects to this measure:
- Your Differential Value Attributes are the investments you make that produce value for a client unparalleled by the competition.
- The impact of such investments on customer profitability (your DVP percent)
In essence, this compares how much money you put into your customer's bank account against your competitors. For that reason, it's much more than a number; it indicates the strength of your competitive edge in financial terms. Powerful stuff indeed.
The measure is the difference between your customer's earnings and the cost of your items.
"How the hell am I expected to know this differential profit stuff?" you're presumably wondering. That is an excellent question. Simply said, you will ask your client.
We need to conduct some preparation work before we chat with our customers. Before we step foot in the client's door, we want to understand two things:
- our DVP hypothesis for both our value characteristics
- the amount of profit you make the customer
For the qualities component, you will have a stacked bar graph that adds up to 100. They will feature the elements that YOU believe are your most distinguishing characteristics.
If you're a manufacturer, you may have added items like product line, packaging, customer service, and product differentiation. You may mention things like depth of knowledge, experience, and speed of service if you're a service company. Be certain that it will make you stand out from the competition, whatever it is.
For the DVP percentage, you could conduct all sorts of financial analyses using internal statistics, or you could just make a guess. Remember that the aim is to eventually get the truth from your consumers, so knowing this amount isn't crucial right now.
It's now time to go out into the field and chat with your customers. That appears to be simple enough. But who do you talk to? You should obviously speak with the individuals you sell directly.
Still, you should also talk with those involved in the value chain. You could sell, but you should also speak with your customer's marketing team, general management, operations, and possibly others.
If you are a small business, you might simply want to bring one person to the interview: you. But if you are a medium to large business, you might want to have two employees at the interview.
Suppose the only person present during the interview is the account manager. In that case, the statistics and opinions you receive are likely to be biased.
Here are the 4 easy criteria for the interview.
- Pose the query. "We have put our hypothesis together on how we feel we create differentiated value for you," you can remark at the outset of the discussion. Go on to describe the elements you've put out and how you feel it affects their bottom line. Then ask, "What's your point of view?""
- Listen. And, for the love of God, no selling. Your role is to listen to what the customer says and probe as much as possible.
- There will be no solution. You are likely to hear some of the areas where there is a need and opportunity for improvement. In that interview, your sole purpose is to find such opportunities, not fix them. Later on, there will be plenty more opportunities to be Superman.
- There is no need to justify yourself. You also don't need to justify your prior acts. In fact, doing so would almost certainly derail the entire discussion, as they'll quickly realize you're there to protect your own backside, not to gain clarity on how you might help your company. That is not something you should do.
All of this may appear overly basic, but here's the thing: dialogue is the most effective element of the whole process.
In all my years in a company, I've yet to have a vendor come in to see me and ask me how they can help understand the method we earn our money so they can help us make more?
What would you do if something occurred to you? Would you feel more driven to do business with them if they thought that way? What if they followed through on their promise?
Here are the things you should be recording while listening to your customer:
Compared to what you believed it was, how does your consumer perceive your differential value offer today? What would the consumer modify in the ranking characteristics, specifically? Do they appreciate your service level higher than you did? Less? Are there any qualities that they would like to add?
What are the chances of the current scenario improving in the next 18-24 months? This is where you'll keep track of your road plan for the following two years, as well as the areas where you can improve in the value development department.
Finally, what are the top two or three possibilities to increase differential value? At this point, you're ready to take the information back to your firm and devise a strategy for going forward.
You could accomplish a lot with the information you gathered via the interviews. You could perform regression studies or look over the data for trends, or you could do what the world's most successful individuals do: compile a list.
You're going to make a list, that's for sure. This list will include the top money-making possibilities recognized by your consumers. It will consist of the value attribute that needs to be improved, a brief description of the improvement's nature, and the possible financial impact on the customer's bottom line.
The reality of this data is that it could be the first actual data you've ever had on what effect you have on your customer's bottom line, and therefore how significant your real competitive advantage (or lack thereof!!!).
Almost every business has its own version of "how we compete," which frequently includes phrases like "best-in-class customer service," "innovative products," and "international distribution." These are commonly backed up by no data at all.
Worse, you'll almost certainly be making investment decisions based on such platitudes because "that's how we compete around here," as someone determined one day.
To put this in context, imagine you're ready to make a big gamble on a new inventive product that's going to change the industry, and you're "confident" your consumers will gobble it up. However, you now know that if you enhanced the speed with which your present items are delivered, your clients would buy twice as much.
With all of the information in front of you, you can now make informed financial selections. To wrap up this part, the list will allow you to respond to three really strong questions:
- What does the customer's bottom-line value the Value Creation Opportunity?
- What are the top ten investments you can make to improve your competitiveness?
- How may clients be categorized according to their requirements?
As we've heard repeatedly, execution is the difference between winning and losing. The authors provide a road map for developing an action plan to complete these initiatives.
The Customer Value Creation Plan is divided into five parts.
What you mentioned was correct. You should repeat everything the consumer mentioned throughout the interview to them. Have you ever had someone ask for your advice and then never followed up with what they said they were going to do?
Fortunately, most people don't do anything about it, so even if you simply take this initial step, you'll start to appear like a superhero.
What you'll do and how much it'll cost the consumer in dollars and cents. This is an important aspect of the discussion. You want the consumer to know that you listened to them and that you'll take their recommendations into consideration.
Other efforts you've chosen to carry out. You'll see that you started with the customer's recommendations. However, you've had positive feedback from other customers, and you feel those goods will be of great value to this consumer as well. This is an excellent conversation to have since you will be presenting them with new ideas that will increase company profits.
What it is that you are not doing. It's also vital to note that there will be some things you won't be doing. You should still confirm that the input was received.
You'll also explain why you didn't follow through on the proposal, so they know you thought about it. Suppose you have the confidence to explain why you are not implementing something. In that case, you will be astonished at how much respect people will show you.
The current state of your activities. This one is straightforward, yet it delivers two messages. First and foremost, it informs the customer of your progress on the project. Second, it tells them that you will continue to contact them as time passes, which is precisely what you should do.
There's so much fantastic information in this book that we just don't have time to go over it all, but this will give you a good start.
If you DO want to take these concepts further, I strongly advise you to purchase the book and visit www.winningwithcustomers.com for further help and information. You'll learn how to track your progress, certify your team, and put the CVC Management System into action in your firm.