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B2B value Proposition toolkit
- 2. WHY VALUE PROPOSITIONS MATTER IN B2B MARKETS ? Value proposition can help the business to cross ‘the chasm’ Lehmann and Winer (2008) highlight the value proposition represents a statement of the enterprise’s core strategy Parnell (2006) and Lusch et al., (2010) consider that firms that develop the most compelling value propositions will have the best organizational performance Effective value propositions lead to competitive advantage and improved financial performance. Value propositions have an important role to play in helping marketing reestablish itself as the enterprise’s core strategy.
- 3. VALUE PROPOSITION CANVAS 1.CUSTOMER PROFILE • Jobs describe the tasks customers want to get done in their work or life * • Customer pain can be anything that annoys your customer before, during and after trying to get a job done or something preventing them to get a job done** • Customer gain describes the outcomes and benefits customer expected or desired and got surprised by Customer Jobs Customer Pains Customer Gains 1.Select customer segment 2.Identify customer jobs 3.Identify customer pains 5.Identify customer gains 5.Prioritize jobs,pains & gains****
- 4. 2.VALUE MAP • Product and services simply list what you offer (Physical/tangible, Intangible, Digital, Financial)* • Pain relievers describe how exactly offered products and services alleviate customer pains** • Gain creators indicates how your offerings (products or services) create customer gains*** Products and services Gain Creators Pain Relievers 1.List all products and services 2. Outline pain relievers 3.Outline gain creators 4.Rank by order of importance
- 5. 3. FIT • Fit is achieved when customers get excited about your value proposition which is attained when important jobs are addressed, alleviating extreme pains and creating essential important customer gains • Fit between what a company offers and what customer requires is most vital requirement of a value proposition* 1.Instructions Evaluate each pain reliever and gain creator to see if they fit a customer job, pain or gain 2. Outcome If a pain reliever or gain creator doesn’t fit anything it may not be creating customer value Value proposition canvas
- 6. VALUE PROPOSITION STATEMENT The value system • It indicates the stakeholder groups, thus depends on the offering Key proposition areas • Value propositions are offered in 6 areas as follows: • Customer relationship mgmt., supply chain mgmt., knowledge mgmt., organisational effectiveness, flexible working and e-business Value statement • The acquisition of industry knowledge, customer knowledge are key inputs • It is developed with a general industry perspective Company specific value proposition • Partner knowledge represent key inputs into this process • It needs to indicate how the offering is differentiated from the competition Value proposition design is an iterative process which involves testing ideas quickly , learn and test again These steps could be followed to develop a convincing value proposition
- 7. CUSTOMER PROFILES- DECISION MAKING UNIT IN B2B Purchase decision Influencer s Recomme nders End Users Decision makers Saboteurs Economic buyers• Value propositions in the B2B markets usually involve several stakeholders in the search, evaluation, purchase and user of product or service • Separate proposition has to be created for each of the important ones • Decision makers usually sit inside the organisation whereas rest can be inside or outside both
- 8. INTERNAL ANALYSIS . Sustainable competitive advantage: VRIN Valuable: Create customer value or provide cost advantage Rare: Customers cannot get the product or offering in sufficient quality or quantity in an open market Imperfectly imitable: It is difficult for competitors to imitate Non-substitutable: No other offering could be able to make this offering less valuable
- 9. PERFA FRAMEWORK PERFA framework Definition Performance Customers way of working to serve best their customers while staying profitable Ease of use Degree to which customers think using the offering to be effort free Reliability The ability of the offering of the company to maintain its performance as per specifications Flexibility Companies’ ability to reconfigure and reallocate its resources, processes and strategies as per environmental changes Affectivity Feeling or experience associated with using the offering of a company or working with it
- 10. WHO NEEDS TO BE INVOLVED? Considering the execution focus all internal stakeholders like marketing, design, operations, production, sales, product mgmt. need to be involved. However, it highly depends on the industry and the offering. Depending on the impact, involvement by higher management and finance and legal teams may be desired. Apart from it the adoption chain and co- innovation stakeholders also need to be considered as they strongly influence the outcome of the implementation of any offering Fig.1.The wide lens perspective of innovation strategy
- 11. ECOSYSTEM MAP
- 12. MAPPING THE ECOSYSTEM TIMELINE
- 13. ELEMENT ANALYSIS TO EXAMINE AND IMPROVE VALUE PROPOSITION AND BASIS TO SECURE BUY IN To determine how to enhance your offering, follow the below steps*: Benchmark Talk with customers Imagine ways to increase value Refine, test, and learn Apply the acid test Further it is worth to evaluate below questions: How does our value proposition compare with competitors’? How do we bridge the gaps and seize opportunities to differentiate in the market? Can we launch a minimum viable product without breaking the bank?
- 14. USAGE OF VALUE PROPOSITION Value proposition can be used by all the stakeholders of an offering. Starting with the obvious marketing team, operations, key account managers and sales team to the higher level mgmt. to base the strategies and finally to the customer. Value proposition is designed to provide value to a number of elements. Thus, it could be used by each of them for respective relevant purposes. Table stakes: all the departments in the organisation dealing with creating a product to meet certain specifications at an acceptable price meeting compliance and ensuring ethical standards in getting a clear vision of what is they want to achieve and they can use it as a basis to guide their design. Functional value: departments dealing with economic and performance measures to ensure various productivity measures in line with what is required by the customer. They can use it to guide their product quality and innovation against competitors, checking scalability and also providing cost reduction in line with value provided. Ease of doing business value: It includes a wide variety of people from operations, strategy, production, relationship mgmt. to accessibility.*
- 15. ADDITIONAL RESOURCES TO IMPLEMENT VALUE PROPOSITION Apart from understanding the usage of value proposition it is very important to be ready to implement the resulting change. Appropriate training is required for the same. This will entirely depend on the department and the nature of involvement and impact of the value proposition iteration. For instance, key account managers, sales and service people need to be thorough how the new proposition will benefit their customers and thus should undergo training for analysing the impact of the same for their client and how to present the added value they would be getting over choosing their competitors offering. Similarly, for production, technical planners, designers and engineers need to trained to develop associated new tacit and non-tacit knowledge to be able to deliver the product as per committed value. For supply chain changes associated, buyers and procurement along with finance and legal team should be trained on the impact on current supplier base and what new capabilities need to be acquired.
- 17. FROM ECOSYSTEM STRUCTURE TO ECOSYSTEM STRATEGY Value propositions that depend on ecosystem shifts need to examine what elements need to realigned This means defining how this alignment will occur: who will be the leader and follower, designing the alignment structure and formulating the strategy to get other actors in place, what competitors need to be managed within and across the ecosystems? Ecosystem strategy is defined by the way through which focal firm does the alignment of its partners while securing its role in competitive ecosystem A focal firm approaches: Every ecosystem is composed of several firms with their own ecosystem strategy which includes view on ecosystem structure, roles and risks. The higher the consistency in strategy the chances of their actions being convergent are higher, but they can also be contradictory. There is also a possibility that firms apply a certain strategy under misconception of their partners applying the same and with similar pace.
- 18. The alignment of partners: with context of a firms ecosystem strategy, partners alignment is viewed as a relative capability of a firm to bring its partners into the positions and roles as per its strategy. This includes*: i. Recognising gaps ii. Closing these gaps Secures its role: Assigning of roles depend on the focal firms aspiration and also on the agreement of actors on which value proposition depends. As clear from the term, leader is the firm whose vision of structure and roles others defer and thus it enforces the same and could be the major beneficiary after alignment is over. However, leadership is upon decision of all the elements and even followership could be the same over times. In a competitive ecosystem it is guided by competitiveness of an ecosystem and its participants. However, competitions exists within the ecosystems and across constellations as well. The heart of ecosystem strategy lies in alignment where sustainable competitive advantage is defined by multilateral partnerships and relationships.
- 19. A model of co-creation practices and capabilities
- 20. Fig,3:Practises of collaboration for value creation in B2B systems
- 22. REFERENCES Osterwalder, A., Pigneur, Y., Bernarda, G., Smith, A. (2014). Value Proposition Design. Hoboken: Wiley Adner, R. (2006). Match your innovation strategy to your innovation ecosystem. Harvard Business Review, 84(4), 98–107. Adner, R. (2017). Ecosystem as Structure: An Actionable Construct for Strategy. Journal of Management, 43(1), 39–58. https://doi.org/10.1177/0149206316678451 Almquist, E., Cleghorn, J., & Sherer, L. (2018). The B2B Elements of Value. Harvard Business Review, 96(2), 72–81. Anderson, J. C., Narus, J. A., & Wouters, M. (2006). Customer Value Propositions in Business Markets. Harvard Business Review, 84(3), 90–99. Anderson, J. C., Narus, J. A., Adner, R. (2006). Match your innovation strategy to your innovation ecosystem. Harvard Business Review, 84(4), 98–107. Adner, R. (2017). Ecosystem as Structure: An Actionable Construct for Strategy. Journal of Management, 43(1), 39–58. https://doi.org/10.1177/0149206316678451 Almquist, E., Cleghorn, J., & Sherer, L. (2018). The B2B Elements of Value. Harvard Business Review, 96(2), 72–81. Anderson, J. C., Narus, J. A., & Wouters, M. (2006). Customer Value Propositions in Business Markets. Harvard Business Review, 84(3), 90–99. Anderson, J. C., Narus, J. A., & Wouters, M. (2014). Tiebreaker Selling. Harvard Business Review, 92(3), 90–96. Kohtamäki, M., & Rajala, R. (2016). Theory and practice of value co-creation in B2B systems. Industrial Marketing Management, 56, 4–13. https://doi.org/10.1016/j.indmarman.2016.05.027
- 23. Lindic, J., & Silva, C. M. Da. (2011). Value proposition as a catalyst for a customer focused innovation. Management Decision, 49(10), 1694–1708. doi:10.1108/00251741111183834 Payne, A., & Frow, P. (2013). Deconstructing the value proposition of an innovation exemplar. European Journal of Marketing, 48(1), 237–270. doi:10.1108/EJM-09-2011-0504 Payne, A., & Frow, P. (2014). Developing superior value propositions: a strategic marketing imperative. Journal of Service Management, 25(2), 213–227. doi:10.1108/JOSM-01-2014-0036 Tellis, G. J., Chandy, R. K., & Prabhu, J. C. (2011). Key questions on innovation in the B2B context. In Handbook of Business to Business Marketing (pp. 582–595). Cheltenham: Edward Elgar & Wouters, M. (2014). Tiebreaker Selling. Harvard Business Review, 92(3), 90–96. Kohtamäki, M., & Rajala, R. (2016). Theory and practice of value co-creation in B2B systems. Industrial Marketing Management, 56, 4–13. https://doi.org/10.1016/j.indmarman.2016.05.027 Lindic, J., & Silva, C. M. Da. (2011). Value proposition as a catalyst for a customer focused innovation. Management Decision, 49(10), 1694–1708. doi:10.1108/00251741111183834 Payne, A., & Frow, P. (2013). Deconstructing the value proposition of an innovation exemplar. European Journal of Marketing, 48(1), 237–270. doi:10.1108/EJM-09-2011-0504 Payne, A., & Frow, P. (2014). Developing superior value propositions: a strategic marketing imperative. Journal of Service Management, 25(2), 213–227. doi:10.1108/JOSM-01-2014-0036 Tellis, G. J., Chandy, R. K., & Prabhu, J. C. (2011). Key questions on innovation in the B2B context. In Handbook of Business to Business Marketing (pp. 582–595). Cheltenham: Edward Elgar
- 24. APPENDIX 1: Verifying the value proposition against this could be useful for analysis
- 25. APPENDIX 2:
Editor's Notes
- Value propositions highlight the few elements that matter the most to their customers, demonstrate the importance of their better performance and communicate it in a manner that conveys customers business priorities clearly.
- *Jobs could be the tasks to be completed, problems to be solved or needs to be satisfied for the customer. Differentiate between three main type of jobs: Functional jobs, social jobs, personal/emotional jobs , supporting jobs. **Pains also indicates risks or potential bad results of getting a job done poorly or not at all. Identify 3 types of customer pains and their severity: 1.Undesired outcomes, problems and characteristics 2.Obstacles 3.Risks(undesirable potential outcomes) ***Gains can be functional, utility, social gains, positive emotions and monetary savings. Try to identify them as follows: 1.Required gains 2.Expected gains 3.Desired gains 4.Unexpected gains **** Rank Jobs according to their importance to customers Rank Pain severity according to how extreme customer thinks it is Rank gain relevance as how essential it is to customer.
- *These products & services intend to help customer fulfil their social, functional or emotional needs. They create value only in relationship with particular customer segment and their jobs, pains and gains. ** Focus only on few pains that the offering alleviate really well and matter to customers. *** They explicitly outline how the firm intend to produce results and benefits that the customer expects, desires or would be delighted by including social gains, positive emotions, financial savings and functional utility. Focus on only those gains that are relevant to the customers.
- *Fit occurs in 3 stages: Problem-solution fit: It happens when you have evidence that customer actually cares about certain jobs, pains & gains and the designed value proposition addresses these jobs, pains and gains Product-Market fit: It happens when you have evidence that your products, markets and services, pain relievers and gain creators are actually aimed at creating value and getting motion in the market Business model fit: It takes place when you have the evidence that the value proposition can be integrated in a profitable and scalable business model
- Value proposition template: Target customer Key problem faced How (the company) can resolve this problem With what product(s) Why we are differentiated from competition
- *
- Evaluating the developed value proposition by checking the impact on VRIN analysis could be a useful tool to check internal affect
- This framework could be utilised for analysis of value proposition and understand the impact of the product/service novelty. It can also be used to evaluate the impact of competitors competitive advantage in the market. By understanding which of the five elements has the greatest impact on sustainable competitive advantage, consultant could suggest more appropriate strategic solutions to overcome competition. Also, it can be used to identify most important measure of competition in the industry and current innovations trends to be considered for framing value proposition.
- Checking for alignment in adoption chain: Develop an Outline of the following as it addresses the product: • Key customer need(s): does Value Proposition meets needs • What part will your firm deliver? •key financial and executional risks • Key suppliers, intermediaries and channels • The key facilitating factors for each • Identify external ecosystem risks – Co-innovation risks – Adoption chain risks For validating your B2B Value Proposition • Use “Green Light,” “Yellow Light,” and “Red Light” to identify alignment, agreement and incentive to participate with you in the ecosystem map •All Yellow and Red Lights – know that you must work to find an alternative, viable solution WITH them
- It is the best way to check whether the expectations from innovation strategy are achievable or not. Following steps can help to detect the possible delays and thus unveil pitfalls: Identify all partners that must also adopt your innovation before it could penetrate to the customers. Identify all other associated components which also need to evolve for your innovation to be effective Estimate the delays occurred due to your interdependence on your complementors of ecosystem partners. Estimate the delays caused by adoption processes and the time it will take for each intermediary to integrate your innovation into its operations Estimate the nested delays caused by intermediaries own complementors and several integration issues that may occur. On estimating these delays, finalise a time to launch your innovation in the market. Now iterate the process in case of any mismatch in expectations in performance and initial strategy.
- *1. Benchmark your value proposition against your competitors by surveying your customers for gaining insights on the relative performance of your offering with that of your competitors. A quantitative survey with sufficiently large customer response could be highly valuable for analysis. 2. Talk with customers to get their opinions and experiences. Try to evaluate against the grievances they have using the product. Also, getting to know the buying team , who has influences on it and their respective priorities and sources of value. Conduct interviews in a wide variety of organisations and consider conducting interviews through a third party to get unbiased opinion. 3.Imagine ways to increase value for your customers. On receipt of areas of focus, hold meetings to prioritize areas to be focussed first. The participants may I include pricing experts, product planning team, service and sales people and even some customers. 4. Refine,test and learn: Analyse the best ideas generated from the session by evaluating their value for the customers and also your company ability to deliver. This will facilitate you to reiterate the value concepts before proceeding for development, understand how they fit into and enhance overall customer experience. 5. After Introduction of enhancements do the revaluation of how they perform against competitors, mostly by rerunning the initial research
- *Similarly value proposition could be used by individual and inspirational value creations. For ex. Individuals can use to for personal satisfaction indicator in terms of reduced anxiety. They can use it for understanding whether the product will offers them emotional satisfaction and meets their experience expectations better than the competitor alternatives.
- Formulating an ecosystem innovation strategy is an iterative process. It needs to be iterated each time managers find risks associated with the plan which forces them to revise their expectations in terms of performance and rethink their strategy. It could result in accepting lower target, allocating more resources and reassigning development responsibilities across the ecosystem, changing the market targets, acquiring a competitor or even lobbying the government for supportive policies.
- *Gaps could be there due to partners activity related challenges due to their expectations. The two types of associated risks: 1.co-innovation risk : These refer to the challenges partners face in developing new activities or competencies in order to take new activities which are part of their planned contributions 2.adoption chain risks: These refer to partners’ willingness to undertake required activities and raise concerns of priorities and benefits of participation. A successful and meaningful innovation strategy has to assess and manage these risks. Apart from these there are challenges associated with partner expectation regarding structure and roles. Structural expectation refer to how will be the position and who will hand over to whom, who will face the client and who will be at the backend. Role expectations refer to the leader- follower roles as to which actors will take charge of leading the alignment and who will follow the guidance of these leaders and be accepting to a non-leadership role. Recognizing gaps from inconsistent position expectations are easier to manage than gaps in expectations of roles. This is because though some roles are defined by activities, but others are more ambiguous.
- Refer Appendix.2
- Coproduction is related to the situations where customer is an active participant in forming a suppliers value proposition, whereas value co-creation refer to situations in which customer and supplier together form the customer experience. Collaborative creation of value covers both co-creation of customer experience and co-production of suppliers value propostion.
- The focus on standardizing value research to utilize customer knowledge acquired by the firm after all interactions with the customer are the main areas where current operations could be improved. Many a times the focus on acquiring new customer overtakes that on existing ones. However, up-selling and reselling are hidden possibilities to create relationship value. The above three steps in the diagram are very crucial for implementing the value proposition in the firm. In addition the key account managers and service personnel who are in direct contact with the customers all the time can be a valuable resource of information. This will not only help in conveying the value proposition to client and gaining their trust and loyalty but information gained from their reviews could help iterate the value proposition. A firm should establish themselves as credible and trustworthy and finally deliver the promised value for any value proposition to make any success. Points for final analysis for consultancy point of view: 1.1: How do companies create value propositions in B2B contexts? • Standard template value propositions • Iterative value proposition adaptation 1.2: What means do companies employ to learn the value perceptions of their customer in B2B contexts? • Uncover customer’s value perceptions • Focus on individuals as value researchers • Own employees as source of information 1.3: What methods do companies employ to communicate value to their customer in B2B contexts? • Monetization and quantification • Earlier engagement with customer • The value of brands 1.4: What are the greatest challenges faced by companies in effecting value based selling in B2B contexts? • Paradigm shift in salesforce • Value sharing and outcome-based pricing • Lack of customer access 1.5: How can companies create effective Value Propositions? • Uncover stakeholder value preference and KPIs • Use iterative value proposition development • Quantify value with structured tools • Establish credibility with references and a strong brand