How do you know your marketing organization has the capability to win?
To be successful in today’s competitive environment, businesses must have effective marketing processes and tools as well as the experience to apply those capabilities appropriately.
Business and marketing leaders need to consider:
- Is my marketing organization equipped with the right capability (processes, skills, experience and enabling technology) to achieve our growth and profit objectives?
- Do we have a Capability Development Road Map that addresses priority gaps at the right time to ensure our most important new product launches and investments are successful?
- How will I know our capability is improving versus the right competitive benchmarks?
Multi-client studies indicate that 70% of marketers do not have a formal marketing background. This is even higher in B2B specialty chemical and materials companies!
Marketing Capability Assessments should be conducted by an independent internal or external resource that can provide comparisons across business units within a company and to external benchmarks in similar industries. The assessment should identify strengths (that can be shared and leveraged) and priority gaps (not all gaps are significant).
After the assessment is complete and priority gaps identified, a Capability Development Road Map is created to ensure the right capability is in place at critical commercial milestones.
Market Edge partners with category leading clients to assess and build the right commercial capabilities needed to deliver profitable growth. Our work includes capability assessment and development in a broad range of markets, including:
- Agriculture (crop protection, seeds, fertilizers and equipment)
- Animal Health
- Building & Construction
- Medical devices
- Specialty chemicals and materials
To learn more about implementing a marketing capability assessment in your organization, reach out to Market Edge at firstname.lastname@example.org
Create Value for Your Most Valuable Customers
Help your sales and marketing teams invest their time understanding and creating value for your most valuable customers with these three quotes and a Market Edge Framework.
“We’re not competitor obsessed, we’re customer obsessed. We start with what the customer needs and we work backwards.” – Jeff Bezoz, CEO Amazon
Understanding how the customer creates value for their customer is key in B2B sales and marketing. Too often, we see a narrow focus on understanding the buying cycle. Mapping the complete customer activity cycle from innovation triggers to product launch to product obsoletion will generate insights into other touchpoints and ways to help your clients. You will know your teams have made the mind-set shift when conversations switch from what makes the product better to how can we make customers more successful and profitable.
“Your most unhappy customers are your greatest source of learning.” – Bill Gates, Microsoft Corporation Founder
There is a need to change the lexicon from “Voice of the Customer” to “Voice of the Market” and then to “Voice of the Target Segment.”
- Voice of the Customer – falling into the trap of just speaking to your current customers, or even worse your current, loyal customers.
- Voice of the Market – suggesting there is a broader customer landscape which includes customers we have won and lost. This also suggests there are customers we have never spoken too!
- Voice of the Target Segment – knowing your target segment and narrowing your focus to that segment of customers will help you innovate, iterate and sell in shorter sales cycles. When your teams are focused on VOTS, you know it is time well spent!
“People do not care how much you know until they know how much you care.” – Theodore Roosevelt, 26th US President
Avoid the junior folly of “Show up and Throw-Up.” Your company’s marketing collateral, technical expertise, data sheets, and implementation guides are extremely valuable for the clients – just not all at once! (and definitely not at the beginning of the sales cycle) Understanding where the customer is in their value creation journey and feeding them the right information at the appropriate moment shows great respect for their time and understanding of their process.
Below is a Framework that will help teams map your customers value creation journey. We call it the Customer Activity Cycle. Pick a Target Segment and map the roles, actions and desired outcomes for a target segment as they create and sell value to their customers. Do this with a cross functional team and a wealth of actionable insights will emerge. If you need assistance or facilitation, contact us – email@example.com FRAMEWORK
Sales Call Planning in Complex B2B Environments
Closing the deal requires more than the typical transactional sales call plan
Pre-call sales planning is common practice for most organizations, but the nature of sales evolves as the interaction moves from relatively ‘simple’ transactional sales where individual customer requirements generate orders to ‘complicated’ (consultative and solution sales where multiple, connected needs are met with a combination of advice, products and services) to ‘complex’ (enterprise sales where the sale may result in partnering or value sharing models and the precise outcome for both buyer and seller cannot be predicted).
Market Edge recently interviewed a range of Sales leaders in category leading B2B companies who reinforced that their highest value accounts continue to move toward ‘complicated’ and ‘complex’ sales. In these cases, the importance and sophistication of pre-call planning increases.
In transactional sales, relatively simple pre-call sales planning includes:
- Defining call objectives
- Developing talking points that reinforce the value proposition
- Preparing for objections
As the sale becomes more complex, the number of purchasing criteria, individuals involved in the decision-making process and the role of influencers increases. Sellers need a deeper understanding of their customers in order to refine their value propositions and offers accordingly. In these situations, selling organizations need a more sophisticated customer engagement process and pre-call planning.
The customer engagement process starts with customer understanding, summarized in three main areas of analysis:
Account Strategy: Define the account’s strategy: stated strategy, observed strategy, performance indicators and supporting facts
It is difficult to ask the customer directly, “What is your detailed strategy?” However, key insights can be obtained by considering the following:
What are their goals?
- What is their corporate vision and mission?
- Do they have a corporate Balanced Scorecard or some other measure of Key Performance Indicators?
- How is management incentive compensation structured?
Where are they focusing to win?
- What are their key markets?
- What are their target segments?
- Who are their top customers?
What makes them better than their competition?
- Who do they compete against?
- How do they differentiate?
What do you see them doing?
- What are they doing internally?
- What are they doing externally with their customers?
Account Organization: Define the current account Decision Making Unit (DMU), individual roles, and disposition towards your organization
- How do decisions get made? Who has the authority? Do they use a cross functional committee? When do they meet?
- Who do you know at the account? Where are your relationships and strengths? Do you have an organizational chart – Center of Power, Influencers, Users.
- Who are receptive, dissatisfied, neutral?
- Make new contacts on every visit! Expand your network in their organization.
Customer Needs: Map the customer’s activity cycle and implications for pain points and critical purchase criteria
- Develop an in-depth understanding of the customer experience and value creation by mapping the entire activity cycle
- Explore inefficiencies, frustrations and unmet needs as opportunities for innovation
- Understand the customer’s purchase criteria or requirements for the product/service and the experience (what’s the job to be done)
Once these analyses have been completed, is time to reflect: Where do you have shortcomings in your account understanding? Do you have actionable customer insights that your competitors do not have? Pre-call plans should include specific objectives and tactics to close these gaps.
The application of advanced customer engagement and pre-call planning processes enables selling organizations to win more complex B2B sales.
For examples of the concepts and tools above in practice, contact firstname.lastname@example.org
Strategic Marketing Programs
What return on investment are you realizing for your marketing efforts?
Many B2B companies struggle to identify and measure the value they expect to receive from their marketing efforts. Customer interactions often focus on sales rep relationships and promoting offers with slick collateral and fact sheets. In those situations, marketing is relegated to a support function to the sales organization. In difficult economic times, it is often marketing roles that are sacrificed to control fixed costs and remain on budget as the near-term return on investment is not clear.
However, in leading B2B organizations, strategic marketing creates the bridge between business strategy and the specific, tactical actions to execute the strategy. Highly capable marketing organizations:
- understand how market drivers shape volume and profitability
- segment using both application and customer perspectives
- target the most attractive segments where the business has a competitive advantage (for resource allocation)
- create segment specific positioning and communicate compelling value propositions to distinguish their offers from competition
So, while marketing does develop eye catching content, it also provides the sales organization with direction to deliver tailored value propositions and market activation plans to the target segment(s), improving sales efficiency and effectiveness. Marketing also identifies segments and activities that are not priorities and non-value added activities can be stopped.
What is the expected return on investment in your marketing organization? In short, the value of strategic marketing is targeting your organization’s limited resources to achieve the business strategy. Strategic marketing aligns the business to create, communicate and capture value in the right customer segments.
NPV in MLB
How Could the Philadelphia Phillies Give Bryce Harper a $330M Contract?
by Dave Anshen, Sr. Consultant, Market Edge
Image from USA Today
As we approach the start of the 2019 baseball season, baseball fans and analysts are debating the decisions by the California Angels and Philadelphia Phillies to give such lucrative contracts to Mike Trout and Bryce Harper respectively. Just a few weeks ago, Bryce Harper received an unprecedented $330 Million (13 year) contract. Until Mike Trout’s deal with the Angels, Harper’s deal was the largest contract in the history of the big four U.S. professional sports (MLB, NHL, NFL and even the NBA). While some observers might want to believe that these deals are based upon emotions, these contracts are purely financial decisions. For example, if we take a deeper look at the Phillies’ deal with Harper, the financial analysis looks very attractive.
Whether it’s a Fortune 500 company, private enterprise or professional sports, business decisions must consider both strategic and financial metrics. In the case of the Philadelphia Phillies, a Net Present Value analysis is all that is needed.
The NPV Analysis
It is now public knowledge that Bryce Harper had several non-negotiable items, and a 13-year contract was at the top of his list.
As the Phillies considered various scenarios, they also needed to assess their risks and key assumptions that should be incorporated into their analysis. This type of discussion is similar to a company decision to enter into a new business venture, or develop a new product. Bryce Harper is the new business venture and there are potential risks to be considered. Also, there are minimum, likely, and optimistic scenarios regarding revenue streams. In the corporate world, this would be primarily driven by market size, market share, and the selling price of a product / service. In the case of professional sports, it is primarily driven by stadium attendance and TV revenue. Other revenue contributors include parking fees, apparel licensing and stadium concessions.
The biggest factor is the assumption that signing Bryce Harper will increase the attendance at the Phillies home stadium. Just considering the regular season, there are 81 home games. If the Phillies make the playoffs (beyond the wild card game), there could be an additional 4-12 home games each season. Based upon historical data, the Phillies attendance increased by more than 500,000 per (regular) season in years when they made the playoffs.
- For the Net Present Value analysis, we will assume they will make the playoffs in year 1, 3, 5, 7 and 9 (only 5 out of the 13 years of his contract).
- During these playoff years, there will be additional TV revenue and attendance revenue as well.
- Ticket prices have weighted average of $65 each.
- 50% of the attendees will park at the stadium (with an average of three persons per vehicle).
- No additional apparel revenue is included in this assumption (this will be considered upside). Note: there are already reports that apparel sales are increasing significantly
- No additional TV revenue is included in the model – because that information is not easily available, but certainly can be estimated by the Phillies management team
- Bryce Harper will be injured 3 years (of the 13) and this is reflected in assumption #1
In this equation:
Rt = net cash inflow-outflows during a single period t
i = discount rate or return that could be earned in alternative investments
t = number of time periods
As a simplified scenario, let’s consider the following:
T = The number of time periods = 13 (years)
i = 10% (or .10); This is a reasonable assumption for the current market environment
The net cash flows over the 13 years is estimated as follows:
Based upon the assumptions, the Net Present Value is a positive $9,251,339.
This does not even include any incremental TV revenue or apparel licensing revenue. So, even with these (arguably) conservative estimates, it seems to be a sound business and financial decision for the Phillies.
In summary, all significant business decisions need to consider both strategic and financial implications. In this case, an unbelievably large (and unprecedented) contract appears to be a sound financial decision – even on a risk adjusted basis. When you have financial discussions in your company, it’s absolutely critical that you identify potential risks and assumptions, and agree upon the key assumptions that will have the largest impact on the NPV analysis. In situations where you have many scenarios and probability factors associated with each assumption, you may need to consider more advanced analytical tools (e.g. Crystal Ball®). The Market Edge team helps clients with strategic decision making and the qualitative and quantitative assumptions that help guide sound decisions.
How do we lead the discussion from Price to Value?
If we do not understand our value, we are destined to give it away
Does your organization have the required commercial capabilities to quantify and capture the value associated with your offer?
Our clients face increased pressure to define and hold value in markets with professional purchasing, increased transparency and consolidated downstream power.
However, not all businesses have the required commercial (sales AND marketing) capabilities to raise or hold prices effectively in this environment.
Our experience with a range of global, category leading B2B companies shows the following are critical to defining and holding value.
Customer selection – Targeting the right customers is a critical first step in a value-oriented approach. Leading organizations understand that “average is the enemy” and focus on target customer segments, not simply the average customer.
Actionable customer insight – Detailed identification of the value drivers for a target segment or account is critical to developing a value proposition and focusing on the most important components of value.
Value quantification – Defining the value associated with customer offers involves more than product performance and benefits. Leading organizations uncover other operational or efficiency components that can be validated and quantified.
Value communication – Disciplined value proposition development, negotiation preparation and campaign development ensure that value messages are delivered clearly and concisely in a way that resonates with the target customer.
Value capture discipline – Organizations have an agreed price strategy and are ready to capture the value confidently. Value discipline extends from marketing to operations, sales and technical departments and ensures that the aligned organization has process and metrics to capture the value it delivers.
Developing B2B Sales Capability: Can B2C examples be used to develop B2B Selling Capability?
We are often asked if B2C tactics and examples are relevant for developing B2B Sales Capability. The answer (as with most consulting answers) is, “it depends”.
In both B2C and B2B, the sales function helps move customers through the buying cycle (awareness, consideration, decision, acquisition) deliberately and efficiently. In B2C purchases, there is usually one decision maker and procurement cycles are shorter. B2B sales, however, must target multiple roles with varying needs and problems to be solved. Typically, B2B sales must communicate:
- Technical advantages to engineering
- Processability improvements to operations
- End use differentiation to marketing
- Total value created to procurement
Great sales managers know how to develop and communicate their value proposition to the right role at the right time.
Both B2C and B2B customers want to “feel good” about their purchase decisions (i.e. I paid a fair price for good value…). B2B decision makers have business as well as personal wins to consider. The Business Win is proving value. The seller’s value proposition articulates how their offer increases the customer’s profitability. The Personal Win is achieved by linking the purchase to the decision maker’s performance criteria (e.g. reduce variable spend for a purchasing manager) or by increasing the decision maker’s status (e.g. delivering a new product launch on time and on budget).
B2B selling skills are not art (although there can be a lot of creative license in delivery styles) but do follow disciplined approaches and proven practices to maximize strategic and tactical selling investments. Sales capability is a product of knowing and practicing the right skills. Those who consistently outperform their peers usually follow a disciplined approach to engaging, understanding and anticipating the needs of their customers.
Market Edge has worked with category leading B2B companies to develop effective selling programs for the past 25 years. To learn more about our programs related to Selling Skills or to attend a Market Edge Academy program on this subject or other related Marketing and Sales topics, CLICK HERE.
Value-Based Portfolio Management
Transforming Your Business & Improving Your Competitive Advantage
Product portfolio management is fundamental to business success. In any economic environment, companies are challenged with optimizing their portfolio to ensure that their product development pipeline reflects business objectives and growth targets. Senior managers observe business case presentations by enthusiastic product and market managers that forecast optimistic market share gains and growth projections. Unfortunately, nearly 50% of these new products never achieve market success, as measured by sales and profits.1 Managers need to address the following questions
- Were the financial projections realistic?
- Did companies choose the right products to develop and/or projects to pursue?
- Did the new products hit the mark – as measured by the creation of real customer value?
Financial versus Value Based Metrics
Without quantifiable alternatives, most companies continue to depend on sales estimates, market share projections and net present value calculations. While these measures are important components of a business case, these figures typically comprise an uncomfortable amount of speculation and guesswork.
Market Edge believes there is a better and more reliable way to select the right products to include in a business, division and company portfolio. Business leaders who want to improve chances of developing sustainable sales growth and profitability must include customer value based measures into portfolio development and management. Furthermore, companies should approach portfolio management holistically, considering how resource allocations and priorities align to create products that create value for the target customers.
Value Based Portfolio Management
With a Value Based Portfolio Management (VBPM) approach, portfolio management never stands alone. Strategic planning, capability assessment and gathering actionable customer insights are ‘hard-wired’ to the development and management of a value-based portfolio. Market Edge utilizes this ‘VBPM’ approach to help clients build and sustain a leading position in the marketplace.
Value Based: The fundamental driver for pursuing an opportunity (new products and/or services) should be based on the value created for the customer. This is the foundation that will enable the creation of new product and service offers that have a competition advantage – because they start with the identification of problems and underserved needs rather than product features and attributes.
Portfolio: The entire collection of products, services and support that is required to create the value realized by the target customer(s).
Management: It is essential that senior management is active in the process of creating and supporting the organizational framework and process that enables the creation of a value-based portfolio.
Far more encompassing than the traditional portfolio management, VBPM leads to a product portfolio that:
- Satisfies customers at a greater level by delivering products and services that address their most important problems and leads to innovation opportunities
- Aligns new products and service offers with the overall business strategy
- Optimizes portfolio decisions to ensure the appropriate amount of investment and resources are in the right places to enable success
The key building block to portfolio management is a deep understanding of your target customers and deep understanding of their requirements. Furthermore, you must have insight that enables you to uncover customer needs, their future direction and future requirements so you can provide significant customer value and not just peer-competitive offers or simply fill a gap in a product line. Perhaps an equally significant problem is that portfolio management often is treated only as a tactical activity related to allocating engineering resources and accelerating individual development projects.
A Change is Needed
Portfolio management is not a new discipline. There are many books and papers that suggest methods for determining which projects and products will be the most successful. Unfortunately, many of these accepted tools (e.g. GE/McKinsey Matrix and BCG Matrix) are useful for classifying existing products and business opportunities but not as useful for determining the future composition of a product portfolio. Even tools that appear to take an external (i.e. customer / market) view by including customer meetings or expert focus groups often fail to capture the customer’s true, unspoken and latent needs beyond simple feedback regarding product features or attributes.
Many companies have become very comfortable with a phased review process or stage-gate model and the milestone meetings that address project plans and execution. These models are effective at managing individual projects but may not effectively address or challenge broader strategic decisions about the portfolio and the value generated for the target customers.
Value Based Portfolio Management provides your business with the actionable insights to evaluate a product or service solution – not just whether it meets a set of internal specifications, but whether it provides enough customer value such that it influences their behavior (i.e. start, stop or continue to use a specific product or service). Furthermore, it can lead to the discovery of customers’ latent requirements or delighters that can enable companies to introduce truly innovative products and services. Offers are not innovative because they include a technology or capability that is unique to your company; an offer is innovative when it addresses an underserved need or problem that is significant to your customers.
A World-Class Portfolio Requires World-Class Customer Insights
When times get tough, customer focus typically becomes a casualty of financial constraints. There is no longer money spent on customer visits dedicated solely to gathering customer insights. As a result, the next new products may not generate significant value and will likely be an upgrade of existing features or a reaction to a competitor’s product launch. When financial constraints increase, companies need to sharpen their focus and align resources to the opportunities that will enable a competitive advantage.
The only way to ensure you have the best portfolio is to ensure that you continue gathering world-class insight through continuous engagement with your target customers. While slashing expenses across the board may result in short term savings, the long term consequence may be a significant devaluing of the business as your business loses ‘touch’ with customers and misses the mark with the next generation of products and services.
When customer value considerations are integrated into every stage of your business planning process, your company or business can begin to create an optimal portfolio that delivers value to the customer while also supporting the business strategy. Properly aligning the portfolio with the vision and strategy is not easy or simple. However, Value Based Portfolio Management will enable your company to stay ahead of peers and develop a sustainable competitive advantage that results in above-average industry sales growth and profits.
Market Edge collaborates with client teams to lead the application of the VBPM process that will lead to the following:
- A project portfolio that is aligned with company and/or business strategy
- Products in your portfolio that offer a high degree of customer value
- A Portfolio that has the appropriate balance of risk and value
- Aligned resources that match the portfolio priorities
- Clear performance metrics