This document summarizes an article that discusses the importance of customer value propositions in business markets. It outlines three types of value propositions and provides strategies for substantiating, demonstrating, and documenting customer value in order to persuade customers and improve business performance. These include using a value word equation to assess the benefits of an offering compared to alternatives, value case histories showing savings reference customers achieved, and value calculators to demonstrate potential savings. Documenting actual cost savings achieved allows suppliers to refine value models and enhance their credibility and knowledge. Developing compelling value propositions should be a fundamental part of business strategy according to best practices.

1. Vlerick Sales Center Article Summary Series
Customer Value Propositions in Business Markets (by James C. Anderson,
James A. Narus and Wouter van Rossum, Harvard Business Review, March
2006)
Summarized By Ellen Croux and Deva Rangarajan, Vlerick Sales Center
Article At a Glance:
This article is a must read for every marketer and sales professional. It clearly
highlights the importance of differentiating your offering with the competition,
while focusing on those benefits relevant to the customer. The authors go on to
discuss the different kinds of value propositions that have been put into practice
and suggest ways of developing a relevant value proposition.
Defining the problem
Customer managers are increasingly under pressure to keep costs down and don’t
have the luxury of simply believing suppliers’ assertions. Sales forces should create
a justifier in line with customer needs and they should help customers understand
– and make them believe in – the customer value proposition. Suppliers that are
not able to offer this often revert to price concessions, which are expensive and
might not even help the supplier to make the cut. A management-practice research
was conducted to understand what constitutes a customer value proposition and
what makes it persuasive to customers. This article describes a systematic
approach for developing value propositions that are meaningful to target customers
and that focus suppliers’ efforts on creating superior value.
Three kinds of Value Propositions

2. Substantiate Customer Value Propositions
Many suppliers offer dazzling value propositions but do not actually have the
people, processes, tools and experience necessary to back up their claims. This has
led many customers to dismiss value propositions as marketing puffery. Suppliers
must be able to demonstrate and document customer value propositions in order to
persuade customers.

3. A way to do this is by using a value word equation, which expresses in words and
mathematical operators how to assess differences in performance between an
offering and the next best alternative. The data needed for the value word equation
to provide value estimates is collected from the customer’s business operations
through collaboration between the supplier and customer managers or even from
outside sources.
Demonstrate Customer Value in advance
In advance, prospective customers must be able to see the cost savings or added
value they can expect from choosing a supplier’s offering over the next best
alternative. Best-practice suppliers use value case histories or value calculators to
demonstrate this. Value case histories document the cost savings or added value
that reference customers have received from their use of the supplier’s offering.
Value calculators, on the other hand, are customer value assessment tools that
salespeople use to demonstrate the value that potential customers could receive in
using the suppliers’ offerings.
Document Customer Value
Only demonstrating value to potential customers is no longer sufficient to be a
best-practice player. Suppliers must also document cost savings and incremental
profits in companies that have purchased their offerings. The use of value
documenters makes it possible to refine customer value models and to create value
case histories. It enhances the credibility of the supplier’s offering and enables
customer managers to receive credit. As value provided to customers is
documented, a supplier also gains knowledge, experience and confidence about
how their offerings deliver superior value to customers and how this delivered
value varies across kinds of customers.
Superior Business Performance
Properly constructed and delivered customer value propositions make a significant
contribution to business strategy and performance. Some businesses have already
made these value propositions a fundamental part of their business strategy. For
example at Sonoco, a global packaging supplier, each value proposition should be
distinctive, measurable and sustainable. They also track the relationship between
business unit value propositions and business unit performance.
Customer value propositions can be a cornerstone for superior business
performance, it is not only the responsibility of marketing, but also of senior and
general management. Best-practice suppliers realize that constructing and
substantiating a value proposition is not a onetime undertaking. They make sure
their people know how to identify what the next value propositions ought to be.
Doing customer value research pays off in finding that simple, yet powerfully
captivating customer value proposition that businesses can implement to
communicate the superior value they offer to target market segments and
customers.

4. Vlerick Food for Thought for Sales Executives
1. Always link the features of your solution to the needs of the customers.
These are the relevant benefits to the customers.
2. In almost all cases, the number of features of your offer will ALWAYS BE
GREATER than the number of benefits.
3. You will have as many value propositions as number of customer
segments
4. A shot video demonstrating the above points can be found here:
https://www.youtube.com/watch?v=m6wTQPZV2VY&feature=youtu.be