In January, George Cressman joined us to deliver an excellent webinar on The Right Path to Pricing Maturity. Click here to watch the recording or download a copy of his slide deck. At the end of his remarks, we received a number of great questions from attendees. This is Part Two in a two-part series in which we present George’s expanded responses. Click here to review Part One, his response on the time and resource investment necessary to complete the pricing maturation process.
Q: How do you assess the value to the customer? How do you deal with challenges of B2B value assessment?
George: The key is to understand your customer's economics. The key questions are: How does my customer make money? What is it that they're doing? How do they go to market? Who do they compete with? What's their key for delivering differential value themselves? And then ask the question: How do we impact that? How do we change that customer's economics (either by increasing their revenue flow or by decreasing their cost of operation)?. In a B2C environment, we need to understand how we can impact our customers' monetary lives. But we also want to understand from B2C customers how they behave. How do they position themselves versus their peers? And what is it that changes in their lives when they use our offerings?
Often, when we work with firms in a B2B environment, what we see happening is that we think of our customers in terms of the features or attributes of our offering, rather than in the context of how we impact their business economics. So one of the biggest challenges in B2B value assessment is moving beyond what our offering is to understanding how our offering impacts the customer; and then getting in front of the customer, and actually confirming that by having a conversation with the customer about what their business is about and how we can impact it.
Q: How do you obtain input from channels or sales, the customer-facing functions of the business, and how do you integrate those functions into the process?
Let's think about the sales force first. This falls into the category of a simple smart aleck response, and that is: if you want feedback from the sales force, it's always helpful to ask what they know. The issue with the sales team is that often we burden them with significant demands for who are our customers, what are our customers' plans for the next quarter. We rarely ask our sales team to think strategically about what are our customers' businesses, and what makes those businesses work for them; what are they trying to achieve. So my bias is the sales team is a terrific source for information about where customers are and what their businesses are all about. And one of the reasons why I really like the notion of an integrated customer intelligence database, is because that's a means for collecting that customer business information; collecting it and getting it sorted out and ultimately validated. And then for many sales teams, the ability to ask really good sales questions is a challenge; so there's a skill issue here that's important. Many of our sales teams are given scripts that send them off immediately to talk about the features, the attributes of our offering, before figuring out what the customer's business is. Equipping the sales team to ask really powerful questions about customers' business processes is really important.
Channels are another issue that's critically important. And there, of course, the smart aleck response is: it's important to ask what they know. Often our discussions with the channel firms are about what kind of discount they're going to get, how much product they're going to hold in inventory, how much they're going to move this quarter, and so on. Those things are clearly important in terms of business planning, but they really don't help us figure out what their customers' businesses are all about. So I find it particularly useful with channel firms to help them do the same kinds of things I've just highlighted about sales teams. The first is asking them what they know about customers' businesses, and helping formulate that in a way that we can accumulate it across our entire channel base. Secondly, I think it's really important that our channel firms be equipped to ask good questions, too, about their customers' business, and sharing that information with you. Third, one of the challenges that lots of firms have today is that they have way too intense a distribution system, with way too many distributors. The challenge is that those distributors all compete with each other and they're always coming back to us, asking for better discounts and help for them to pursue an order with price. Particularly in very mature industries, it's incredibly important to go back through the distribution system, and ask: Are we getting what we should be getting out of our distribution system? Do we have too many distributors? And are we incenting them to do the wrong thing? My belief is that channel firms will share with you an incredible amount of information about their marketplace. It's there for the asking, but we often don't ask.
