How to Help Your Customers Realize Value
A Four-Part Series
Jeb Dasteel | Amir Hartman
This is the first article in a four-part series on value realization and the subscription economy, where nearly any product can be delivered as-a-service. In this setting, helping customers realize and measure the value they have attained is more important now than ever. It’s even an imperative as virtually every industry evolves to offer products as a service, with the new model bringing fresh opportunities and new competitive threats.
Part One: Making the Case for Focusing on Customer Business Outcomes
Subscriptions are Taking Over the World
Most industries are now engaged in the subscription economy. For B2B organizations especially, this means that the acquisition process has been turned upside down: with customers demanding to spread their purchase out over years in the form of a subscription rather than paying for a product upfront or paying as they go through financing.
The popularity of the subscription model is no fluke: It is simpler and reduces risk for the buyer—saving upfront expenditures, eliminating variability, creating new opportunities for innovation, and delivering business outcomes. The buyer of human resources software wants a complete talent management process, not just a tool. The quarry operator wants excavation, not delivery of a backhoe. The building manager simply wants power, not ever-changing utility bills or their own power plant. These days, organizations that provide even the best tools to plug into the customer’s processes aren’t doing enough. It’s all about handing over the process—and the outcomes—to a provider who can do it better than you can.
In our research, 60% of all organizations say that they have at least a moderate number of their products available now as a subscription. That jumps to nearly 70% for B2B organizations. The subscription model gives customers the potential to reap the benefit of superior reliability and regular product updates, which translates into continuous innovation and improved outcomes. The customer can also continuously evaluate whether the subscription is worth renewing, which puts competitive pressure on the seller to constantly do better. Companies that offer subscriptions will be successful when they deliver, update, sell, and support a product that unquestionably enriches the customer’s business in tangible ways.
In the subscription model, the selling process can’t be detached from other interactions with customers. Selling has to be fully integrated into the many interactions you have with your customer’s business. Much of the focus shifts to delivering on the promise made during the sale. This means a different kind of partnership that demands hyper-vigilance if you hope to retain your customer for life.
These dynamics create a dramatic swing in the balance of power between buyer and seller. Not only are customers unburdened with big up-front capital outlays, the responsibility for costly maintenance, and dealing with ever-changing demand-driven pricing, they also gain much more leverage and control over the seller. A big portion of the risk of not realizing the full potential from an investment shifts from the buyer to the seller, who must now think differently about the customer.
Our research shows that 45% (106 of 238 respondents) of organizations believe that “less risk” is the greatest advantage of the subscription, or as-a-service, model, with other top advantages including lower cost of ownership and better innovation. The largest enterprises ($10B in annual revenue or more) appear to view faster deployment, lower initial outlay, and enabling innovation as the most important factors.
It’s All About Realizing Value
Many have written about the need for value selling, where the seller focuses on quantifying their value proposition. Value selling can transform the conversation between seller and buyer to one of delivering value versus features. In our recent book, Competing for Customers, we made the case that B2B providers must transform customer-facing functions to ensure “customer success.” In this series, we address what is most important: customer outcomes. At the core of delivering outcomes is the collaborative delivery and measurement of those outcomes with your customer.
This definition of value includes five aspects that must be addressed:
Our research shows that 73% of predominantly B2B organizations use some form of value selling methodology. 50% of organizations that are predominantly B2C have sales teams that employ a value selling approach.
Delivering Business Outcomes
Arguably, the most powerful marketing techniques start with engaging your most valuable customers who in turn talk about the results achieved by using your product. Word-of-mouth quickly spreads to prospects and other customers and keeps your employees on-mission. However, we’ve seen that only 38% of organizations with revenues less than $250M have either a lot or a great deal of programs that help customers assess realized value. 75% of organizations with revenue between $1B and $10B have either a lot or a great deal of such programs. The largest organizations ($10B and more in revenue) are between those two, with 54% of them having a lot or a great deal of this capability in place.
There are three core principles to follow for aligning your business to the success of your customer’s enterprise:
Listening is about continuously taking the pulse of your customers to gain a deeper understanding of their business needs, objectives, and measures of success. This is framed by what your customer is trying to accomplish—whether driving revenue growth, increasing market share, or reducing costs. When you listen in the right way, you not only clearly define what success looks like, but you also develop a more acute understanding of your customer’s business and an ability to anticipate their future needs. According to a recent report on the State of the Connected Customer, 75% of business buyers expect companies to fully anticipate their needs and make relevant suggestions.
Engaging your customers is about how you collaborate with them to solve their problems and realize their opportunities. The organizations most adept at this have a portfolio of programs that promote and drive engagement, with practices that vary by customer segment.
Ensuring is the most difficult principle to master—and it is the focus of this series of articles. The point is to systematically ensure that your customer attains the business results they seek in exchange for the investment they have made in your product.
In the second article of this series, we will present the four capabilities needed to guide your customers to attain desired business results. Your marketing, sales, and delivery processes need to be aligned to customer outcomes. Orchestrating these processes drives adoption of your products, allows you to assure business results are realized, and ensures that your customers are the strongest advocates for your brand.