Understand what your customers’ context dictates about value
An epicure, dining in Crewe, once found a large mouse in his stew. Said the waiter, “Don’t shout or wave it about, or the rest will be wanting one too.”
What’s the real value of a bottle of water? Not much, if you’re reading this book in a developed country. In fact, if you take into account the toll on the environment from the manufacture, transport, and disposal of all those plastic bottles, the value may well be negative. If you’re among the one out of six people in the world without dependable, safe drinking water, on the other hand, the value is significantly higher and more tangible. Bottled water can keep you healthy and free from diseases. At an extreme, it can be the difference between life and death.
Context determines value. In three of the top four world consumers of bottled water—Brazil, Mexico, and China—the unreliability of safe tap water means that bottled water has demonstrable value. Americans, blessed as we are with treated, regulated tap water, purchase $15 billion worth of bottled water every year, a quarter of which is repackaged tap water. In the United States, the value of bottled water is perceived, not demonstrable.
If you’re selling to consumers, perception as value works. You may be able to position the mouse in the stew as a desirable and trendsetting feature. If you’re selling to businesses, your offering had better be the equivalent of bottled water in a desert. Or at least, in a developing country. To sell big-ticket solutions to businesses that are mature enough to track metrics about their own business performance and the returns they receive on their investments, you need to demonstrate measurable value.
Many businesses attempt to do so by creating a list of product features, then matching each to qualitative business benefits. Unless you’ve just invented a time machine, the problem with this approach is that most of your competitors have 80 percent of the same features. They can deliver or create the perception of the same benefits. To get beyond perception into demonstrating tangible value, there are two considerations.
First, understand what your customers’ context dictates about value. That context comes from external forces like industry and buyer trends, technology, competition, regulation, and changing social and/ or economic environments. It also comes from characteristics of the customers themselves (see rule 9). A great yet simple example of contextual value comes from business process automation. Systems that automate business processes provide significant savings because these tools reduce manual work and improve productivity. The ability to eliminate or better utilize hours of work by highly skilled staff translates into clear value that outweighs the cost of the software. That value holds true most places, except in developing economies like India. In India, where highly skilled staff work for a much smaller cost than their counterparts in North America and Europe, productivity may not be valuable enough to justify the cost of productivity-improving technology. The context requires a different set of value propositions.
Second, demonstrate value by showing specific changes in business metrics that you can impact. These changes are rarely the result of a specific product feature, but rather of the sum of all the features, perhaps in combination with other products and services (see rule 25). Many companies make claims that their products help increase revenue, cut costs, and improve customer satisfaction. Of course, these are the mom and apple pie of any business. Which is why everyone claims these benefits, and no one is believed. Get more specific about how you make a change to the quantitative and qualitative aspects of your customers’ business environment. Rule 34 discusses how to create more tangible and believable value claims.