Sunday, March 3, 2019

Customer Value Propositions in Business Markets

guest order Propositions in Business Markets by JAMES C. ANDERSON, JAMES A. NARUS, AND WOUTER VAN ROSSUM Under pressure to keep be d take, guests whitethorn only look at outlay and not perceive to your sales throw away. Help them on a lower floorstand and believe in the first-rate assess of your passs. CUSTOMER VALUE masterposal has become i of the closely astray utilize terms in trading markets in recent familys. nevertheless our care-practice look for reveals that there is no agreement as to what studystitutes a guest take account hypnotism or what exploits virtuoso persuasive. Moreover, we ? d that just hygienic-nigh measure out professional personffers influence claims of savings and bene? ts to the client without backing them up. An go may rattling volition boss protect nevertheless if the provider doesnt endorse and document that claim, a client carriage leave behind potential knock off it as marketing puffery. guest managers, more than and more h years account equal to(p) for trim be, go int turn over the luxury of solely believing providers assertions. PETER HOEY litigate 2006 91 C u s t o m e r Va l u e P ro p o s i t i o n s i n B u s i n e s s M a r ke t s Take the carapace of a company that makes combine circuits (ICs).It hoped to supply 5 million building blocks to an electronic device manufacturer for its succeeding(prenominal)- extension proceeds. In the bunk of negotiations, the providers salesperson learned that he was competing a elaborationst a company whose legal injury was 10 cents lower per unit. The node asked individually salesperson why his companys go was fantabulous. This salesperson based his re re comfort suggest on the do that he, personally, would provide. Unbe noticenst to the salesperson, the guest had built a customer honour model, which found that the companys religious crack, though 10 cents higher in determine per IC, was truly hail 15. cent s more. The electronics engineer who was confidential information the development project had recommended that the purchasing manager buy those ICs, n whizztheless at the higher price. The renovation was, indeed, outlay something in the modelbut estimable 0. 2 cents Unfortunately, the salesperson had overlooked the 2 elements of his companys IC offering that were around invaluable to the customer, evidently unaw atomic number 18 how much they were deserving to that customer and, objectively, how outstanding they make his companys offering to that of the limition. non surprisingly,We conducted focusing-practice look for over the past two years in atomic number 63 and the building blocked States to understand what constitutes a customer c be for prompting and what makes one persuasive to customers. One striking disco truly is that it is exceptionally dif? cult to ? nd examples of prise bids that resonate with customers. Here, dra bring ing on the scoop practices o f a fistful of providers in stage dividing line markets, we pre direct a systematic plan of attack for ontogeny shelter propositions that ar conveyful to rear end customers and that condense suppliers efforts on creating superior(p) protect.Three Kinds of Value Propositions We wear classi? ed the federal agencys that suppliers subroutine the term repute propositioninto third founts all bene? ts, fortunate focalises of contrariety, and resonating focus. (See the give away Which option Conveys Value to Customers? ) all(prenominal) bene? ts. Our investigate indicates that intimately managers, when asked to shape a customer grade proposition, simply list all the bene? ts they believe that their Customer managers, increasingly held accountable for reducing costs, dont thrust the luxury of simply believing suppliers assertions. hen push came to shove, perhaps suspecting that his service was not worth the residual in price, the salesperson offered a 10-cent pr ice concession to win the business consequently leaving at to the lowest degree a fractional million dollars on the table. close to managers view the customer cheer proposition as a form of spin their marketing departments develop for publicizing and promotional copy. This shortsighted view neglects the very real contribution of value propositions to superior business public presentation. Properly constructed, they force companies to rigorously focus on what their offerings ar really worth to their customers.Once companies become disciplined nearly spirit customers, they crapper make smarter choices virtually where to allocate scarce company resources in developing new offerings. offering might drive home to tar narrow customers. The more they stack think of, the better. This approach requires the least greetledge about customers and competitors and, thus, the least sum of work to construct. However, its relative simplicity has a major say-so drawback bene? t asser tion. Managers may claim ad vantages for stimulates that actually provide no bene? to target customers. Such was the case with a company that sold highperformance gas chromatographs to R&D laboratories in large companies, universities, and government agencies in the Benelux countries. One feature of a particular chromatograph allowed R&D lab customers to maintain a high degree of audition integrity. Seeking growth, the company began to market the most basic model of this chromatograph to a new plane section commercial-gradeised laboratories. In initial meetings with prospective customers, the ? rms crowd C. Anderson is the William L.Ford Distinguished Professor of merchandise and Wholesale Distribution at Northwesterns Kellogg check of watchfulness in Evanston, Illinois the Irwin Gross Distinguished ISBM Research Fellow at the make for the Study of Business Markets in University Park, Pennsylvania and a visiting question professor at the school day of Business, Public Ad ministration, and Technology at the University of Twente, the Netherlands. James A. Narus is a professor of business marketing at the Babcock Graduate School of Management at Wake Forest University in Charlotte, North Carolina.Wouter van Rossum is a professor of commercial and strategic management at the School of Business, Public Administration, and Technology at the University of Twente. 92 harvard business review C u s t o m e r Va l u e P ro p o s i t i o n s i n B u s i n e s s M a r ke t s Which Alternative Conveys Value to Customers? Suppliers use the term value proposition leash different ways. Most managers simply list all the bene? ts they believe that their offering might deliver to target customers. The more they arse think of, the better.Some managers do recognize that the customer has an substitute, but they often make the mistake of anticipate that favorable auspicates of variance must be valuable for the customer. Best-practice suppliers base their value propos ition on the few elements that matter most to target customers, prove the value of this superior performance, and communicate it in a way that chooses a sophisticated understanding of the customers business priorities. VALUE PROPOSITION ALL BENEFITS FAVORABLE POINTS OF DIFFERENCE whole favorable points of variation a market offering has relative to the future(a) beaver alternativeRESONATING FOCUS Consists of All bene? ts customers receive from a market offering The one or two points of deflexion (and, perhaps, a point of parity) whose improvement will deliver the sterling(prenominal) value to the customer for the foreseeable future Answers the customer caput why should our ? rm purchase your offering? Why should our ? rm purchase your offering instead of your competitors? What is most worthwhile for our ? rm to keep in mind about your offering? Requires Knowledge of own market offering Knowledge of own market offering and next scoop out alternativeKnowledge of how own m arket offering delivers superior value to customers, compared with next beat out alternative Has the potential stone pit Bene? t assertion Value assurance Requires customer value research sales mess touted the bene? ts of maintaining sample integrity. Their prospects scoffed at this bene? t assertion, stating that they routinely tested soil and water samples, for which maintaining sample integrity was not a concern. The supplier was taken aback and forced to rethink its value proposition. An separate pitfall of the all bene? ts value proposition is that many, even most, of the bene? s may be points of parity with those of the next outperform alternative, diluting the effect of the few genuine points of difference. Managers need to clearly severalise in their customer value propositions which elements are points of parity and which are points of difference. (See the exhibit The Building Blocks of a Successful Customer Value Proposition. ) For example, an international engineer consultancy was march 2006 bidding for a light-rail project. The finale chart of the companys presentation listed ten reasons why the municipality should award the roject to the ? rm. But the chart had modest persuasive power because the other two ? nalists could make most of the similar claims. Put yourself, for a moment, in the place of the prospective client. Suppose distributively ? rm, at the end of its presentation, gives ten reasons why you ought to award it the project, and the lists from all the ? rms are almost the equal. If severally ? rm is saying basically the same thing, how do you make a choice? You ask each of the ? rms to give a ? nal, best price, and thusly you award the project to the ? rm that gives the largest price concession.Any distinctions that do exist dupe been overshadowed by the ? rms greater sameness. 93 C u s t o m e r Va l u e P ro p o s i t i o n s i n B u s i n e s s M a r ke t s Favorable points of difference. The second casing of value proposition explicitly recognizes that the customer has an alternative. The recent experience of a leading industrial gas supplier illustrates this perspective. A customer sent the company a request for proposal stating that the two or three suppliers that could instal the most persuasive value propositions would be invited to visit the customer to discuss and re? e their proposals. After this meeting, the customer would select a sole supplier for this business. As this example images, Why should our ? rm purchase your offering instead of your competitors? is a more pertinent question than Why should our ? rm purchase your offering? The ? rst question focuses suppliers on differentiating their offerings from the next best alternative, a surgical process that requires detailed knowledge of that alternative, whether it be buying a competitors offering or solving the customers problem in a different way.Knowing that an element of an offering is a point of difference relative to th e next best alternative does not, however, convey the value of this difference to target customers. Furthermore, a product or service may carry several points of difference, complicating the suppliers understanding of which ones deliver the greatest value. Without a detailed understanding of the customers requirements and preferences, and what it is worth to ful? ll them, suppliers may stress points of difference that deliver relatively little value to the target customer. Each of these locoweed lead to the pitfall of value presumption assuming that favorable points f difference must be valuable for the customer. Our opening anecdote about the IC supplier that unnecessarily discounted its price exempli? es this pitfall. Resonating focus. Although the favorable points of difference value proposition is favourite(a) to an all bene? ts proposition for companies crafting a consumer value proposition, the resonating focus value proposition should be the gold standard. This approach ac knowledges that the managers who make purchase decisions stimulate major, ever-increasing levels of indebtedness and often are pressed for time.They want to do business with suppliers that fully grasp critical issues in their business and deliver a customer value proposition thats simple yet potently captivating. Suppliers can provide much(prenominal) a customer value proposition by making their offerings superior on the few elements that matter most to target customers, demonstrating and documenting the value of this superior performance, and communicating it in a way that conveys a sophisticated understanding of the customers business priorities. This type of proposition differs from favorable points of difference in two signi? cant respects.First, more is not better. Although a suppliers offering may cause several favorable points of difference, the resonating focus proposition steadfastly concentrates on the one or two points 94 of difference that deliver, and whose improve ment will continue to deliver, the greatest value to target customers. To better leverage particular resources, a supplier might even cede to the next best alternative the favorable points of difference that customers value least, so that the supplier can concentrate its resources on improving the one or two points of difference customers value most.Second, the resonating focus proposition may contain a point of parity. This occurs either when the point of parity is required for target customers even to escort the suppliers offering or when a supplier wants to counter customers mistaken perceptions that a particular value element is a point of difference in favor of a competitors offering. This latter case arises when customers believe that the competitors offering is superior but the supplier believes its offerings are comparablecustomer value research provides empirical support for the suppliers assertion.To give practical meaning to resonating focus, consider the following exam ple. Sonoco, a global packaging supplier head namequartered in Hartsville, South Carolina, approached a large European customer, a master of consumer packaged goods, about redesigning the packaging The Building Blocks of a Successful Customer Value Proposition A suppliers offering may watch many technical, economic, service, or social bene? ts that deliver value to customers but in all probability, so do competitors offerings. Thus, the essential question is, How do these value elements compare with those of the next best alternative? Weve found that its useful to sort value elements into three types. Points of parity are elements with essentially the same performance or functionality as those of the next best alternative. Points of difference are elements that make the suppliers offering either superior or inferior to the next best alternative. Points of fillion are elements about which the supplier and its customers disagree regarding how their performance or functionality c ompares with those of the next best alternative.Either the supplier regards a value element as a point of difference in its favor, while the customer regards that element as a point of parity with the next best alternative, or the supplier regards a value element as a point of parity, while the customer regards it as a point of difference in favor of the next best alternative. harvard business review C u s t o m e r Va l u e P ro p o s i t i o n s i n B u s i n e s s M a r ke t s for one of its product lines. Sonoco believed that the customer would pro? from updated packaging, and, by proposing the initiative itself, Sonoco reinforced its reputation as an innovator. Although the redesigned packaging provided 6 favorable points of difference relative to the next best alternative, Sonoco chose to emphasize one point of parity and two points of difference in what it called its typical value proposition (DVP). The value proposition was that the redesigned packaging would deliver signi ? cantly greater manufacturing ef? ciency in the customers ? l lines, through higher-speed closing, and provide a distinctive look that consumers would ? nd more appealing all for the same price as the present packaging. Sonoco chose to include a point of parity in its value proposition because, in this case, the customer would not even consider a packaging redesign if the price went up. The ? rst point of difference in the value proposition (increased ef? ciency) delivered cost savings to the customer, allowing it to move from a seven-day, three-shift return schedule during peak times to a ? e-day, two-shift operation. The second point of difference delivered an advantage at the consumer level, sufficeing the customer to grow its revenues and pro? ts additively. In persuading the customer to change to the redesigned packaging, Sonoco did not neglect to mention the other favorable points of difference. Rather, it chose to place much greater emphasis on the two points of differe nce and the one point of parity that mattered most to the customer, thereby delivering a value proposition with resonating focus.Stressing as a point of parity what customers may mistakenly presume to be a point of difference favoring a competitors offering can be one of the most important parts of constructing an effective value proposition. Take the case of Intergraph, an Alabama-based provider of engineering parcel to engineering, procurement, and construction ? rms. One software product that Intergraph offers, SmartPlant P&ID, enables customers to de? ne ? ow processes for valves, pumps, and scream within plants they are designing and generate piping and instrumentation diagrams (P&ID).Some prospective customers abusely presume that SmartPlants draft performance would not be as good as that of the next best alternative, because the alternative is built on computer-aided design (CAD), a better-known drafting tool than the relational infobase platform on which SmartPlant is b uilt. So Intergraph tackled the perception head on, assemblying data from reference customers to substantiate that this point of contention was actually a point of parity. march 2006 Heres how the company vie it.Intergraphs resonating focus value proposition for this software consisted of one point of parity (which the customer initially thought was a point of contention), followed by three points of difference Point of parity Using this software, customers can create P&ID graphics (either drawings or reports) as fast, if not faster, as they can development CAD, the next best alternative. Point of difference This software checks all of the customers upstream and downstream data connect to plant assets and procedures, using universally accepted engineering practices, company-speci? c rules, and project- or process-speci? rules at each stage of the design process, so that the customer avoids expensive mistakes such(prenominal) as missing design change interdependencies or, worse, ordering the wrong equipment. Point of difference This software is integrated with upstream and downstream tasks, such as process simulation and instrumentation design, thus requiring no reentry of data (and reducing the margin for error). Point of difference With this software, the customer is able to tie remote of? ces to execute the project and consequently merge the pieces into a bingle deliverable database to hand to its customer, the facility owner.Resonating focus value propositions are very effective, but theyre not easy to craft Suppliers must cut 95 C u s t o m e r Va l u e P ro p o s i t i o n s i n B u s i n e s s M a r ke t s customer value research to gain the insights to construct them. Despite all of the talk about customer value, few suppliers have actually done customer value research, which requires time, effort, persistence, and some creativity. But as the best practices we studied highlight, thinking through a resonating focus value proposition disciplines a company to research its customers businesses enough to help solve their problems.As the experience of a leading resins supplier amply illustrates, doing customer value research allowances off. (See the sidebar Case in Point Transforming a wispy Value Proposition. ) savings from reduced power usage that a customer would gain by using a Rockwell mechanisation motor resolving power instead of a competitors comparable offering designer Reduction = kW dog-tired number of operating hours per Cost Savings year $ per kW hour number of years system solution in operation Competitor Solution ? kW spent number of operating hours per year $ per kW hour number of years system solution in operation Rockwell Automation SolutionSubstantiate Customer Value Propositions In a series of business roundtable discussions we conducted in Europe and the United States, customer managers reported that We can barely you money has become almost a generic value proposition from prospective suppliers. Bu t, as one participant in Rotterdam wryly observed, most of the suppliers were telling fairy tales. After he heard a pitch from a prospective supplier, he would follow up with a series of questions to determine whether the supplier had the people, processes, tools, and experience to actually save his ? m money. As often as not, they could not really back up the claims. only if put, to make customer value propositions persuasive, suppliers must be able to expose and document them. Value cry equations enable a supplier to show points of difference and points of contention relative to the next best alternative, so that customer managers can intimately grasp them and ? nd them persuasive. A value word This value word equation uses pains-speci? c terminology that suppliers and customers in business markets rely on to communicate precisely and ef? iently about functionality and performance. Demonstrate Customer Value in Advance Prospective customers must see convincingly the cost sav ings or numbered value they can expect from using the suppliers offering instead of the next best alternative. Best-practice suppliers, such as Rockwell Automation and precision-engineering and manufacturing ? rm Nijdra Groep in the Netherlands, use value case histories to shew this. Value case histories document the cost savings or added value that reference customers have actually received from their use of the suppliers market offering.Another way that best-practice ? rms, such as Pennsylvania-based GE base urine & Process Technologies (GEIW&PT) and SKF USA, show the value of their offerings to prospective customers in advance is Some best-practice suppliers are even willing to control a certain amount of savings before a customer signs on. equation expresses in dustup and simple mathematical operators (for example, + and ? ) how to assess the differences in functionality or performance amidst a suppliers offering and the next best alternative and how to convert those diff erences into dollars.Best-practice ? rms like Intergraph and, in Milwaukee, Rockwell Automation use value word equations to make it clear to customers how their offerings will lower costs or add value relative to the next best alternatives. The data needed to provide the value estimates are most often collected from the customers business operations by supplier and customer managers working together, but, at times, data may come from outside sources, such as industry association studies.Consider a value word equation that Rockwell Automation used to calculate the cost 96 through value calculators. These customer value assessment tools typically are spreadsheet software applications that salespeople or value specialists use on laptops as part of a consultative selling approach to demonstrate the value that customers likely would receive from the suppliers offerings. When necessary, best-practice suppliers go to extraordinary lengths to demonstrate the value of their offerings relativ e to the next best alternatives.The polymer chemicals unit of Akzo Nobel in clams recently conducted an on-site two-week pilot on a production nuclear reactor at a prospective customers facility to gather data ? rsthand on the performance of its high-purity metal organics offering relative to the next best alternative in producing compound semiconductor wafers. Akzo Nobel paid this harvard business review C u s t o m e r Va l u e P ro p o s i t i o n s i n B u s i n e s s M a r ke t s prospective customer for these two weeks, in which each day was a trial because of daily considerations such as output and maintenance.Akzo Nobel now has data from an actual production machine to substantiate assertions about its product and anticipated cost savings, and evidence that the compound semiconductor wafers produced are as good as or better than those the customer currently grows using the next best alternative. To let its prospective clients customers verify this for themselves, Akzo Nob el brought them sample wafers it had produced for testing. Akzo Nobel combines this point of parity with two points of difference signi? cantly lower energy costs for conversion and signi? antly lower maintenance costs. Document Customer Value Demonstrating superior value is necessary, but this is no longer enough for a ? rm to be considered a best-practice company. Suppliers overly must document the cost savings and incremental pro? ts (from additional revenue gener- ated) their offerings deliver to the companies that have purchased them. Thus, suppliers work with their customers to de? ne how cost savings or incremental pro? ts will be tracked and then, after a suitable period of time, work with customer managers to document the results.They use value documenters to further re? ne their customer value models, create value case histories, enable customer managers to get credit for the cost savings and incremental pro? ts produced, and (because customer managers know that the suppl ier is willing to return later to document the value received) lift the credibility of the offerings value. A pioneer in confirm value propositions over the past decade, GEIW&PT documents the results provided to customers through its value generation planning (VGP) process and tools, which enable its ? ld personnel to understand customers businesses and to plan, execute, and document projects that have the highest value impact for its customers. An online tracking tool allows GEIW&PT and customer managers to easily monitor the Case in Point Transforming a Weak Value Proposition A leading supplier of specialty resins used in architectural coatings such as paint for march onings recognized that its customers were coming under pressure to accede with increasingly strict environmental patterns. At the same time, the supplier reasoned, no coating manufacturer would want to sacri? e performance. So the resins supplier developed a new type of highperformance resins that would enable its customers to comply with stricter environmental standards albeit at a higher price but with no reduction in performance. In its initial discussions with customers who were using the product on a trial basis, the resins supplier was surprised by the tepid reply it received, particularly from commercial managers. They were not enthusiastic about the sales prospects for higher-priced coatings with commercial painting contractors, the primary target market.They would not, they said, move to the new resin until regulation mandated it. Taken aback, the resins supplier decided to conduct customer value research to better understand the requirements and preferences of its customers customers and how the performance of the new resin would affect their total cost of doing business. The resins supplier went so far as to study the requirements and preferences of the commercial painting contractors customers building owners. The supplier conducted a series of focus groups and ? eld test s with painting contractors to gather data.The performance on primary customer requirements such as coverage, dry time, and durability was studied, and customers were asked to make performance trade-offs and indicate their willingness to pay for coatings that delivered enhanced performance. The resins supplier also joined a commercial painting contractor industry association, enrolled managers in courses on how contractors are taught to estimate jobs, and skilled the staff to work with the job-estimation software used by painting contractors. several(prenominal) insights emerged from this customer value research.Most notable was the realization that only 15% of a painting contractors costs are the coatings labor is by far the largest cost component. If a coating could provide greater productivity for example, a faster drying time that allowed two coats to be applied during a single eight-hour shift contractors would likely accept a higher price. The resins supplier retooled it s value proposition from a single dimension, environmental regulation compliance, to a resonating focus value proposition where environmental compliance vie a signi? cant but minor part.The new value proposition was The new resin enables coatings producers to make architectural coatings with higher ? lm build and gives the painting contractors the ability to put on two coats within a single shift, thus increasing painter productivity while also being environmentally compliant. Coatings customers enthusiastically accepted this value proposition, and the resins supplier was able to get a 40% price premium for its new offering over the traditional resin product. march 2006 97 C u s t o m e r Va l u e P ro p o s i t i o n s i n B u s i n e s s M a r ke t s xecution and enter results of each project the company undertakes. Since it began using VGP in 1992, GEIW&PT has document more than 1,000 case histories, accounting for $1. 3 billion in customer cost savings, 24 billion gallons of water conserved, 5. 5 million dozens of waste eliminated, and 4. 8 million tons of air emissions removed. As suppliers gain experience documenting the value provided to customers, they become knowledgeable about how their offerings deliver superior value to customers and even how the value delivered varies across ation can submit NPI requests whenever they have an inventive judgment for a customer solution that they believe would have a large value impact but that GEIW&PT now does not offer. Industry marketing managers, who have extensive industry expertise, then perform scoping studies to understand the potential of the proposed products to deliver signi? cant value to segment customers. They create business cases for the proposed product, which are racked and stacked for review. The senior management aggroup of GEIW&PT sort through aBest-practice suppliers make sure their people know how to identify what the next value propositions ought to be. kinds of customers. Because of this extensive and detailed knowledge, they become con? dent in predicting the cost savings and added value that prospective customers likely will receive. Some best-practice suppliers are even willing to guarantee a certain amount of savings before a customer signs on. A global automotive engine manufacturer turned to Quaker Chemical, a Pennsylvania-based specialty chemical and management services ? m, for help in signi? cantly reducing its operating costs. Quakers team of chemical, mechanical, and environmental engineers, which has been meticulously documenting cost savings to customers for years, identi? ed potential savings for this customer through process and productivity improvements. Then Quaker implemented its proposed solution with a guarantee that savings would be ? ve times more than what the engine manufacturer spent annually just to purchase coolant. In real numbers, that meant savings of $1. 4 million a year.What customer wouldnt ? nd such a guarantee persuasive? lar ge number of potential initiatives competing for limited resources. The team approved Panichellas initiative, which led to the development of a new offering that provided re? nery customers with documented cost savings amounting to ? ve to ten times the price they paid for the offering, thus realizing a compelling value proposition. Sonoco, at the corporate level, has do customer value propositions fundamental to its business strategy. Since 2003, its CEO, Harris DeLoach, Jr. and the executive committee have set an ambitious growth goal for the ? rm sustainable, double-digit, pro? table growth every year. They believe that distinctive value propositions are crucial to support the growth initiative. At Sonoco, each value proposition must be Distinctive. It must be superior to those of Sonocos competition. Measurable. All value propositions should be based on tangible points of difference that can be quanti? ed in monetary terms. Sustainable. Sonoco must be able to execute this v alue proposition for a signi? ant period of time. Unit managers know how critical DVPs are to business unit performance because they are one of the ten key metrics on the managers performance scorecard. In senior management reviews, each unit manager presents proposed value propositions for each target market segment or key customer, or both. The managers then receive summary feedback on the value proposition metric (as well as on each of the nine other performance metrics) in terms of whether their proposals can lead to pro? table growth.In addition, Sonoco senior management tracks the relationship between business unit value propositions and business unit performance and, year after year, has concluded that the emphasis on DVPs has made a signi? cant contribution toward sustainable, double-digit, profitable growth. harvard business review crack Business Performance We contend that customer value propositions, properly constructed and delivered, make a signi? cant contribution to business strategy and performance. GE Infrastructure Water & Process Technologies recent development of a new service offering to re? ery customers illustrates how general manager John Panichella allocates limited resources to initiatives that will generate the greatest incremental value for his company and its customers. For example, a few years ago, a ? eld rep had a creative idea for a new product, based on his comprehensive understanding of re? nery processes and how re? neries make money. The ? eld rep submitted a new product introduction (NPI) request to the hydrocarbon industry marketing manager for further study. field of operations reps or anyone else in the organi98 C u s t o m e r Va l u e P ro p o s i t i o n s i n B u s i n e s s M a r ke t sBest-practice suppliers recognize that constructing and substantiating resonating focus value propositions is not a onetime undertaking, so they make sure their people know how to identify what the next value propositions ought to be. Quaker Chemical, for example, conducts a value-proposition study syllabus each year for its chemical program managers, who work on-site with customers and have responsibility for formulating and executing customer value propositions. These managers ? rst review case studies from a variety of industries Quaker serves, where their peers have executed savings projects and quanti? d the monetary savings produced. Competing in teams, the managers then participate in a simulation where they interview customer managers to gather information needed to work up a proposal for a customer value proposition. The team that is judged to have the best proposal earns bragging rights, which are highly valued in Quakers competitive culture. The training program, Quaker believes, helps sharpen the skills of chemical program managers to identify savings projects when they return to the customers they are serving. As the ? al part of the training program, Quaker stages an annual real-world contes t where the chemical program managers have 90 days to submit a proposal for a savings project that they plan to present to their customers. The director of chemical management judges these proposals and provides feedback. If he deems a proposed project to be viable, he awards the manager with a gift certi? cate. Implementing these projects goes toward ful? lling Quakers guaranteed annual savings commitments of, on average, $5 million to $6 million a year per customer.Each of these businesses has made customer value propositions a fundamental part of its business strategy. muster on best practices, we have presented an approach to customer value propositions that businesses can implement to communicate, with resonating focus, the superior value their offerings provide to target market segments and customers. Customer value propositions can be a guiding beacon fire as well as the cornerstone for superior business performance. Thus, it is the responsibility of senior management and g eneral management, not just marketing management, to look into that their customer value propositions are just that.Reprint R0603F HBR OnPoint 3544 To order, see page 151. P VEY . C. What we need are some fresh new ideas. You know, like we had last year. march 2006 99 Harvard Business Review Notice of Use Restrictions, whitethorn 2009 Harvard Business Review and Harvard Business publishing Newsletter content on EBSCOhost is licensed for the private individual use of authorized EBSCOhost users. It is not intend for use as assigned course material in pedantic institutions nor as corporate learning or training materials in businesses.Academic licensees may not use this content in electronic reserves, electronic course packs, persistent linking from syllabi or by any other means of incorporating the content into course resources. Business licensees may not host this content on learning management systems or use persistent linking or other means to incorporate the content into learni ng management systems. Harvard Business Publishing will be pleased to grant permission to make this content available through such means. For rates and permission, contact emailprotected org.

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