These are the criteria that influence and motivate B2B buying decisions. This extract from an ealier post looks at analysing how products, services and processes create Value in relation to each of the Five Factors.

It is a simple approach, but it produces bottom line results: marketers can deliver fact-based messages that go to the heart of what B2B markets are really buying.

Analysing Value

Begin by choosing a product or service and the way in which it is supplied. Then start a review of your selection in relation to the definitions for each Value Factor – as listed a little way below.

This review should include a performance-ranking of 1 to 5, with 1 being ‘poor’ and 5 being ‘exceptional’. By exceptional, I mean being at least equal to your competitors or better than them.

Here’s an example for the first definition under ‘Response’: if you think you beat the competition in listening to how you affect customer’s success, then you score a 5.  But, you need to support your ranking with a credible statement as to why you should score a 5 – as to why you excel… 

To help get the process started, here’s the type of questions you should perhaps be asking in terms of ‘Response’: 

• How do you identify and then meet your customers’ needs?  
• Who manages your communications with customers and what are the results of this communication? 
• In terms of customer expectations, how do you rate yourselves at fixing problems and delivering the outcomes the customer wants? 
• How does your performance in these areas compare with your competition? 

The Five Factors of Value:

1.  Response

• Continual communication with customers: listen to how you affect their success
• Identify and meet changing customer needs
• Speed of problem solving and solution delivery 

2.  Service

• Accessibility: an open and reassuring organisation
• Clear product information and project status
• Pro-active and innovative 

3.  Time

• Competitive lead times
• Dependable
• Consistent delivery format 

4.  Quality

• Consistent products, services and processes
• Meets the brief or specifications: fit-for-purpose
• Achieves the customer’s operational goal 

5.  Price

• Competitive
• Rational
• Structured 

My suggestion is to begin by involving your sales team in the analysis. Then, once you have built a series of rankings and supporting statements, begin broadening the evaluation process to include opinions from other core functions such as finance, technical, production and distribution. 

It’s an enlightening process and is the first step on building an understanding of how to accurately address B2B’s five buying motivators.

Back to The Long Hello: making B2B marketing work for the bottom line

• To rate something according to its perceived worth, importance, or usefulness
• An amount expressed in money or another medium of exchange that is thought to be a fair exchange for something

In these definitions, two phrases stand out for me: ‘perceived worth’ and ‘thought to be’. So, value is all in the eye of the beholder. Fair enough. But what is being ‘perceived’ or ‘thought to be’?

Value is not intangible. It can be defined and it can be measured.

In the B2B environment, Value has Five Factors: Response, Service, Time, Quality and Price.

These are the individual components that combine to produce Value within products, services and processes.

Simultaneously, they are the five reasons that motivate B2B buying – the real drivers of buying decisions. The Big Five.

The Five Factors of Value

1.    Response

• Continual communication with customers: listen to how you affect their success
• Identify and meet changing customer needs
• Speed of problem solving and solution delivery

2.    Service

• Accessibility: an open and reassuring organisation
• Clear product information and project status
• Pro-active and innovative

3.    Time

• Competitive lead times
• Dependable
• Consistent delivery format

4.    Quality

• Consistent products, services and processes
• Meets the brief or specifications: fit-for-purpose
• Achieves the customer’s operational goal

5.    Price

• Competitive
• Rational
• Structured

Measuring Value Performance

A revealing and rewarding exercise for any B2B company is to examine the performance of their products, services and processes in relation to each of the Big Five.

This exercise is one of the first steps in Value Marketing – a sort of value audit or ‘Value Mining’.

Value Mining is a structured process that delves deeply into individual products, services and processes to identify and measure how they create Value in relation to Response, Service, Time, Quality and Price.

Value Mining is a powerful marketing tool because it defines how Value is being created and it highlights performance in terms of the Big Five buying motivators.

However, it does not fully-define what your customers Value. To find out more about that, you may want to take a look at these posts:

Understanding what your market is buying     

Outcomes make the difference

How Value protects margins    

Leveraging B2B buying motivators

Back to The Long Hello: making B2B marketing work for the bottom line

There are only two objectives in B2B marketing:

Cultivating consistent customers

Preventing price pressure

These are the objectives that should motivate all B2B marketing activities – the two goals that have to be achieved: CCC and PPP.

If your marketing activities are not delivering bottom-line results in terms of CCC and PPP, then two things are probably happening:

• The activities are not marketing activities and should perhaps be handled elsewhere. (Organising the firm’s Christmas party?)
• The activities are not the right activities and should be re-focused or scrapped. (Promoting the wrong message to the wrong people?)

CCC means keeping the customers you want by keeping them loyal. It’s also about attracting new customers and keeping them loyal. Its focus should be on what you are selling and the amount you are selling.

PPP is all about margins. It’s how you communicate – and then deliver – the right Value to the right customers. It’s about being seen as the absolutely right choice of supplier in terms of the Big Five buying motivators: Response, Service, Time, Quality & Price – the Five Factors of Value.

Cultivating consistent customers

I like the word cultivate because it implies caring for something so that it grows and flourishes. That it thrives and does well. It also implies a productive process that takes place over time, something that is continuous.

If any gardeners are reading this, you’ll know that not all your plants like the same things. Same goes for customers. Some plants like a lot of water, others don’t. Some plants can’t take too much shade, some can’t take too much sun.

Equally, in the productive process of cultivating customers it’s necessary to understand that they don’t all Value the same things. Neither do the decision-makers within your customers. For example, an FD may not be too bothered about a product’s ease-of-use or technical functionality, but will rather be concerned with the likes of ROI and payment terms.

Preventing price pressure

Margins are everything because margins mean profit. That’s why PPP is the only other objective in B2B marketing.

For a long time I have been uneasy with the concept of ‘added-value’. We all recognise it as being mainly a B2B term and, to me, it sounds a bit like something for nothing. As if something is being added for free.

We are all used to buying things for ‘free’ – like getting 20% more toothpaste this week for the same money we paid a month ago.

The world of B2B certainly understands pricing structures but I don’t think it routinely expects anything for free. It certainly doesn’t expect items of Value to be added free-of-charge.

Think of a company selling big earth-movers. They do a deal for four machines at an agreed, contracted price. Having done the deal, do they then offer a full-on, five-year maintenance programme for free? Added-value? Certainly not.

So, put a price on it

If something is of Value to a customer, surely it should carry a price? And that price should represent the amount of Value it creates for the customer – the monetary value of the outcomes it delivers.

If a product or service doesn’t create any Value for the customer, if it doesn’t produce outcomes for their business, then, bluntly, it just ain’t worth the money. To them. And also: to them at that particular time.

It does not mean that the product or service is worthless to all customers or will continue being worthless to that particular customer.

In part, this is where segmenting and bundling comes into play – the process of taking products and services apart, breaking them into their component parts and pricing each component. This does offer more flexibility in pricing and margin-maintenance simply because something can be removed if it doesn’t deliver an outcome of Value.

Having gone through the process of identifying how Value is being created by products, services and processes, it may transpire that some components are simply not producing any required outcomes for any customers. This represents an opportunity to cut costs by removing those components that deliver no Value.

Integrating Value

Instead of the term ‘adding-value’ perhaps it’s more relevant to be thinking about ‘integrating Value’.

If a company can arrive at a point where it clearly understands the Value it’s creating - and for whom it’s being created – then activities can be implemented to serve the two objectives of B2B marketing:

1. CCC: keep selling to the good customers, keep finding more like them
2. PPP: keep your profits up by protecting your margins

Read more on making marketing work: 

The What-How-Who of B2B buying - marketing is not about selling, it’s about buying

Leveraging B2B’s buying motivators - results-driven marketing communications

Back to The Long Hello: making B2B marketing work for the bottom line

Price, Quality, Response, Service and Time.

These are the Five Factors of Value. That may not sound very significant, so let me put it another way:

They are the five reasons that make customers buy, the reasons that deals get done. The five buying motivators. The Big Five.

This Big Five are particularly important in the B2B environment, where one company is buying from another company. Where products and services will have much higher prices than in the retail or consumer sector.

Sales cycles will be longer and more complex. There may well be many people involved in the decision to buy. The competition is likely to be actively looking for your deals and challenging you directly: chances are, your competitors are also talking to your customers. And if they’re not, they should be. Just as you should be talking to their customers.

So what are your B2B customers buying from you?

What is going to make customers get the money out of their account and into yours? What really makes them buy? What do they Value?

What is Value?

PQRS&T is just an easy way to remember each of the Big Five. The things that make companies buy things.

What’s more significant is the order of their importance to customers:

1. Response
2. Service
3. Time
4. Quality
5. Price

Some people are surprised to see Price coming last on the list. Surely, Price should be at the top, ranking as the most important of the Big Five? Well, it isn’t.

As an example, think about the relationship between Time and Price. At some point in the timeline of supplying customers, Time becomes more important than Price. In simple terms, you might have the cheapest product, but if you don’t have any stock then you can’t supply. And if you can’t supply, you lose the sale and you lose the customer. Perhaps for ever. Bad for revenue, bad for margins, bad all round.

The importance of Response

In order to develop an understanding of Value, each of the Five Factors has some pretty specific definitions.

For example, Response is defined as:

• Continual communication with customers: listening to how you affect their success
• Identify and meet changing customer needs
• Speed of problem solving and solution delivery

Given the fact that Response is at the top of the Big Five and is therefore ranked as the number one buying-motivator, it’s important to consider your company’s performance in these terms.

How do you identify and then meet your customers’ needs? Who manages your communications with customers and what are the results of this communication? In terms of customer expectations, how do you rate yourselves at fixing problems and delivering the outcomes the customer wants? How does your performance in these areas compare with your competition?

The other important question here is this: Who is responsible for managing and developing Response?

My suggestion is that the answer to the last question should be: the marketing team.

Back to The Long Hello: making B2B marketing work for the bottom line