B2B MARKETING

THE LEVELS OF VALUE

Offering business to business value

Imagine that you’re an executive who has negotiated a multimillion dollar deal that favours the company and purchased a fleet of cars for it. And to reward yourself, you’re now shopping for a Porsche Panamera to enjoy during weekends. 

You will apply the same price value calculation to your personal purchase as you did while negotiating for your company. 

The two calculations aren’t all that different. 

Your fleet decision must obviously include objective criteria such as price, warranties and service levels, in addition to more subjective criteria. For example, the cars should reflect your company’s brand, and their design and handling must appeal to those who drive or ride in them… especially with the higher end models for executives.  

In reality, there aren’t such clear-cut differences between business to business and consumer decisions. Of course, B2B sellers should optimise prices, meet specifications, comply with regulations and adhere to ethical practices. 

And procurement teams must painstakingly evaluate vendors, and run total cost of ownership models to make sure that rational quantifiable criteria around price and performance underpin their analyses. 

Coauthors of an article in the Harvard Business Review (HBR) – titled The B2B Elements of Value – Eric Almquist, Jamie Cleghorn and Lori Sherer say that meeting those criteria amounts only to table stakes today. 

They add that as B2B offerings become ever more commoditised, the subjective and sometimes personal concerns that customers bring to the purchasing process are increasingly important. Their research shows that with some purchases, considerations such as whether a product can enhance the buyer’s reputation or reduce anxiety play large roles. 

Recognising the full range of both rational and emotional factors that lie behind business purchases, and tailoring the value proposition accordingly, is critical to avoiding the commodity trap. 

To help B2B suppliers understand the spectrum of customer priorities, the authors analysed scores of quantitative and qualitative customer studies that their global management consulting firm – Bain – had carried out for clients over three decades, and identified what mattered most to buyers. 

From this research, they found 40 fundamental elements of value that fall into five major categories: table stakes, functional, ease of doing business, individual and inspirational.

After sorting these into various levels, this model takes after the famous hierarchy of needs identified by American psychologist Dr. Abraham Maslow. 

TABLE STAKES Sitting at the bottom of the pyramid, table stakes is about meeting specifications at an acceptable price in compliance with regulations while following ethical standards and practices. 

Nearly all B2B offerings available today rarely fail to meet the table stakes – the bottom line is that it’s no longer an important differentiator. 

FUNCTIONAL Immediatelyabove table stakes are functional elements. These address the needs of economic or product performance of business entities – such as product quality, costreduction, scalability and innovation. 

Delivering on these has long been a priority in old-line sectors such as manufacturing. As both buyers and sellers, B2B businesses still focus most of their energy on functional elements.

DOING BUSINESS The elements on the third level make it easier to do business. Some provide purely objective types of value such as stepping up a customer’s productivity or improving operational performance. 

But here, we run into the first set of elements that entail subjective judgements by buyers and encompass factors that enhance relationships between the parties, such as a good cultural fitand a vendor’s commitmentto the organisation.

INDIVIDUAL The elements sitting on the individual layer offer additional types of subjective value that address individual buyers’ priorities irrespective of whether they’re personal or career related. In this case, the elements of value can address highly emotional concerns. 

A fear of failure persistently shadows buyers who spend large sums of money and make decisions that may affect revenue or employees. 

INSPIRATIONAL At the zenith of the pyramid are inspirational elements such as those that enhance customers’ visionof the future, offer hope for the prospects of the organisation or individual buyers, or improve a company’s social responsibility.

If your company is a B2B business, it’s important that you meticulously analyse how and where your offerings may sit on this value hierarchy – and focus your energies on improving the elements that are the source of core benefits in what you are offering. 

You can also add elements to expand your value proposition without overhauling your products or services.