Is your company looking to maintain or increase margins in a competitive environment? Would your company like to better insulate its customer base? Is your sales team spending too much time reacting to competitive threats? Most companies would answer yes to one or more of those questions. A tool every company should look at implementing is a value-based marketing program.
Early in my career I was fortunate enough to learn value-based marketing and was ultimately responsible for commercializing a qualitative and quantitative value-based marketing program while working for a Fortune 250 company. This successful program allowed us to elevate the conversation with customers away from transactional pricing and enabled us to maintain premium pricing and improve customer loyalty.
Startups to Fortune 500s, B2B and B2C, service providers as well as product manufacturers all offer value to their customers. However, most companies fail to receive credit for that overall value. Value can take many different forms and what one customer deems to be of value another customer may not. Some examples of value are time savings, access to additional services, education programs, training, access to proprietary software, convenience and the list goes on and on.
Understanding what value is not is also important. At one company I worked the heads of sales and marketing thought value was simply selling a product at a lower price. Working with another group they thought of value as a discount program (i.e. BOGO’s) on its products. In these examples, as well as many more, the perception is value means a discount to transactional selling price. Although cost factors into the value equation the idea of a good value-based marketing program is to take credit for everything that comes along with the purchase while maintaining or increasing the transaction price on the item that is being purchased.
I mentioned the value equation. Simply put, value is the difference between the benefits received from the customer and the cost the customer has to pay. The formal definition for value by Merriam-Webster is “a fair return or equivalent in goods, services, or money for something exchanged.” As can be seen, neither definition limits value to simply the transaction price for a particular item. Instead, both look much broader at the benefits the purchaser receives vs. what the purchaser must give up in exchange.
If including a value-based marketing tool to support the overall marketing strategy is so beneficial why doesn’t every company implement it or why if it is implemented it is not successful? In my experience there are a number of factors that influence the success or subsequent failure of value-based marketing programs. Some of these are:
- The value has to be driven by the customer and not simply generated internally. By this I mean many companies I have been associated with feel they know what their customers want and value better than their customer does. To be successful actual customers need to validate and have input into the value propositions being created.
- Not every customer is going to value the same thing. Therefore, a “menu” of items is needed.
- Flexibility. The value program needs to include both qualitative and quantitative information to appeal to all levels within the customer buying process. The C-Suite and financial people may want different validation than other groups.
- Allocating appropriate resources to develop the program. Like any marketing initiative creating a value-based program does not happen by itself.
- Patience. A value-program takes time to develop and is something that needs to be continually reinforced with customers.
A well-executed value-based marketing program can help differentiate a company, improve profitability and increase customer loyalty. If you are interested in developing a value-based marketing program for your company or would like to discuss other marketing initiatives please contact me.
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