INTRODUCTION
Welcome to the 6th Newsletter that describes the five major themes of customer management - VALUE PROPOSITIONS.
Whilst this is being described last, it is arguably the most important of the five customer management capabilities.
Why?
Because it describes what the customer buys.
Get this right and you are off to the races.
To put things into context:
Picture this: You're in a boardroom, presenting to your most important client. The procurement team is focused on price, your champion from operations is nodding along, but the customer CEO looks distracted.
Then you say something that changes everything: "What we're really offering is to improve the future state of your business." Suddenly, everyone leans forward.
This moment captures the heart of what separates exceptional key account managers from the rest. While most suppliers get trapped in conversations about features, specifications, and costs, the truly successful ones understand a fundamental truth:
When you pitch to clients, what do you want?
- For the customer to "lean in" with anticipation?
- For the customer to "zone out" with boredom?
A high-impact CUSTOMER value proposition will get them leaning in.
Customers don't buy products or services. They buy better futures.
Warren Buffett captured this beautifully when he said, "Price is what you pay, value is what you get." Yet despite this wisdom being common knowledge, most B2B organisations struggle to escape the gravitational pull of price-based competition. They find themselves in endless procurement cycles, competing against rivals who seem willing to cut margins to the bone, wondering why their carefully crafted proposals lose out to cheaper alternatives.
The answer lies in understanding that a value-based business isn't just a sales methodology or a collection of frameworks. It's fundamentally about one thing: demonstrating how you can improve the future state of your customer's business in ways that matter deeply to them.
Consider the pharmaceutical equipment manufacturer who realised their dosage form manufacturing clients weren't buying machines. They were buying the confidence that their production lines would run smoothly, that quality standards would be maintained, and that regulatory compliance would never be in question. When they shifted their value proposition from "precision engineering" to "guaranteed production continuity," everything changed.
Sales cycles shortened, margins improved, and customer relationships deepened.
This isn't about clever marketing or persuasive selling techniques. It's about understanding what customers need (and hence value) and then positioning your offering as the bridge between their current reality and their desired future state.
When you master this capability, you develop a superpower in B2B markets.
Cost, price and value. The foundation of value-based business.
Three words dominate every B2B conversation, yet they're consistently misunderstood and inappropriately interchanged: cost, price, and value. This confusion isn't just semantic. It lies at the heart of why so many promising supplier relationships deteriorate into price-focused negotiations.
I'd like to share a story that shows this perfectly. A global industrial automation company spent months developing a sophisticated proposal for a major automotive manufacturer. Their solution promised to increase production efficiency by fifteen per cent, reduce downtime by thirty per cent, and improve quality metrics significantly. When they presented their proposal, the procurement manager's first question was: "What's your margin on this equipment?"
The automation company found itself defending its costs, explaining its pricing structure, and ultimately competing against suppliers who offered functionally similar equipment at lower prices. They lost the deal despite having the superior technical solution. Do you know what went wrong?
They failed to maintain the distinction between cost, price, and value throughout their sales process. Cost represents your internal expenses required to produce and deliver your offering. Price is the external figure you present to customers. Value represents the cumulative impact that customers receive from adopting your offering.
An additional element to always consider is risk. There is a risk when the customer shifts to buy an unknown offering. Similarly, there is a risk for a supplier providing a new offer or serving a new customer.
Please consider the risks and price the offer accordingly.
The key account managers who consistently win in these situations have learned to shift conversations from "fee-wrestling" to "value-building." They understand that every procurement conversation is a value conversation in disguise. When customers focus intensely on price, it's usually because no one has helped them understand the full value being offered.
Defining VALUE PROPOSITION & CUSTOMER OFFER: Building your strategic foundation.
The phrase "value proposition" gets thrown around in virtually every sales meeting, yet ask ten different managers to define what a value proposition actually is, and you'll likely get ten different answers. This ambiguity isn't just frustrating. It's commercially dangerous.
A genuine customer value proposition is fundamentally different from generic capability statements. It's a clear, specific description of an improved future scenario offered by a supplier to a particular customer. It describes exactly how that customer's business will be different and better as a result of working with you.
Think of value propositions as operating at three distinct levels within an organisation. At the corporate level, value description is captured in brand messaging. At the divisional level, value becomes more specific to market segments. But the real power emerges at the customer level, where value propositions become laser-focused on individual client outcomes.
This progression from broad to specific reflects a fundamental truth about how business decisions are made. Senior executives don't buy cybersecurity software, consulting services, or industrial equipment. They buy business outcomes. They invest in solutions that help them achieve strategic objectives, solve operational problems, or capitalise on market opportunities.
The need to INNOVATE
Today a peacock, tomorrow a feather duster
An old Wall Street is saying that perfectly captures the reality of competitive business: "Today a peacock, tomorrow a feather duster." No matter how impressive your current offering, everything can change with startling speed.
This reality hit home for a manufacturing services company I worked with several years ago. They had built a successful business providing maintenance and operational support for chemical processing plants. Then the recession arrived. Suddenly, their customers didn't need increased efficiency. They needed reduced capacity.
They chose reinvention. Instead of optimising five manufacturing sites for each client, they helped clients consolidate operations into three sites running at higher capacity. Their value proposition shifted from "operational optimisation" to "flexible capacity management."
The suppliers who thrive over time are those who treat innovation in customer value propositions as a core capability, not an occasional activity. They systematically explore new ways to create customer value, test emerging concepts with trusted clients, and continuously refine their offerings based on market feedback.
The value equation (making value tangible)
At its heart, every purchasing decision in B2B markets comes down to a simple calculation: Value equals Benefits minus Costs. But like many simple concepts, its power lies in rigorous application rather than superficial understanding.
I want to show you a story from the aerospace industry. A component manufacturer was competing for a contract to supply hydraulic systems for a new aircraft program. Their solution costs approximately thirty-five per cent more than the closest competitor. Using traditional cost-plus thinking, they should have lost the business decisively.
Instead, they won by helping the customer understand the complete value equation. Yes, their hydraulic systems cost more upfront. But they offered significantly longer service intervals, reducing maintenance costs and aircraft downtime. They provided comprehensive diagnostic capabilities that enabled predictive maintenance. Most importantly, their systems were twenty per cent lighter than competitive alternatives, delivering fuel savings worth millions of dollars over the aircraft's operational lifetime.
When the customer calculated the complete value equation, the higher upfront price became irrelevant compared to the total operational benefits. This wasn't creative accounting or sales manipulation. It was a rigorous analysis of genuine value creation.
The four sources of B2B value
Every compelling customer value proposition draws from at least one of four fundamental sources of business impact: growing revenue (top line impact), reducing costs (bottom line impact), protecting and enhancing reputation (business continuity), and providing strategic guidance (advisory value).
Let me illustrate how this works with a story from the food manufacturing industry. A packaging equipment supplier traditionally competed on technical specifications. Everything changed when they began analysing their impact across all four value sources. They discovered that their equipment enabled customers to launch new product variations more quickly (top line), reduced packaging waste (bottom line), provided better contamination protection (business continuity), and generated data analytics that helped optimise packaging strategy (advisory value).
This broader perspective transformed their customer conversations. Instead of discussing equipment specifications with operations managers, they began presenting business impact analysis to executive teams. The most powerful value propositions often combine multiple sources, creating comprehensive solutions that address several customer priorities simultaneously.
The fifth source of value
The customer's customer (the consumer)
If you can consider the purpose of your customer's business, it is more than likely to grow by making sales. These sales are with the customer's customers.
The secret to real value creation is to understand the value that these customers seek and to support that.
Eventually, the end-of-the-line customer is the consumer.
You and me. Individuals who are buying in stores and online.
The compelling organisations with world-beating brands understand this and tap into this way of providing value.
Think of P&G, Apple, Unilever, Mercedes Benz, Google, etc.
If you want to understand more about brands and how consumers drive real growth, go to Interbrand and download some of their annual ranking reports.
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Total Cost of Ownership (TCO)
The moment a customer starts evaluating suppliers based solely on purchase price, they've fundamentally misunderstood the economics of their buying decision. Understanding and communicating total cost implications isn't just a sales technique; it's a service to customers who might otherwise optimise the wrong variables.
I once worked with a chemical processing company evaluating pump systems for a new production line. The procurement team favoured a supplier offering pumps for two hundred thousand dollars less than alternatives. However, when we analysed the total cost of ownership over the equipment's expected fifteen-year operational life, a completely different picture emerged.
The low-cost pumps required more frequent maintenance, used twenty per cent more energy, and had shorter replacement intervals. More critically, they required specialised technicians for service, while the higher-priced alternatives could be maintained by existing plant personnel. The total cost analysis revealed that the "expensive" option would cost four hundred thousand dollars less over the equipment lifecycle.
For service-based relationships, a different framework provides more relevant insights: total cost of partnership. This includes the customer's internal costs associated with managing the supplier relationship, encompassing time spent briefing service providers, coordinating activities, and ensuring alignment with internal objectives.
HOW TO WRITE A COMPELLING CUSTOMER VALUE PROPOSITION:
Turning strategy into stories
The difference between a compelling customer value proposition and generic marketing language isn't subtle. It's the difference between winning business at premium prices and losing to competitors who might offer inferior solutions but superior communication.
Let me share an example. A global engineering consulting firm consistently lost competitions despite exceptional technical capabilities. Their value proposition was: "We deliver world-class engineering expertise and innovative solutions for complex infrastructure challenges." This statement was accurate but utterly generic.
Working together, we developed a completely different approach:
"We enable your infrastructure investments to deliver measurable community benefits six months ahead of schedule while maintaining costs within approved budgets."
This statement focused on specific customer outcomes rather than supplier capabilities and addressed the customer's primary concerns about schedule delays and cost overruns.
This transformation required deep analysis of what the customer valued, why this project mattered to their organisation, and how success would be measured. The new value proposition reflected a genuine understanding of customer priorities rather than sophisticated marketing language.
- Compelling value propositions follow several key principles:
- Focus on customer outcomes rather than supplier capabilities
- Emphasise specificity over generality, provide evidence over assertions
- Speak the customer's language rather than industry jargon
- Address customer scepticism proactively
- Quantify benefits wherever possible
- Understand multiple stakeholder perspectives
- Create emotional engagement alongside rational justification
- Continuously refine based on feedback
- Maintain authenticity over marketing sophistication.
Constructing a value proposition takes some effort. Future Value Matters articles and Newsletters will explore this in more detail.
I've included a good reference table below, detailing the five main blocks that can be followed. Firstly, lead with a strong statement that describes the part of the customer's business that will be impacted and what that future state might look like.
Secondly, bring that statement to life by referencing the five sources of value. For instance, your offer might add value by driving sales for the customer by providing consumer insights.
Thirdly, could you describe your offer? What are the products, services, people, processes, channels and commercial aspects that you will adopt to deliver the value you promised?
Fourth, could you explain where you have delivered this type of value proposition before? Could you describe why the customer should trust you and buy your offer?
Finally, could you do some number crunching? What will the payback be for the customer? You will expect a higher fee than your competitors. Could you make it easy for your customer to purchase by doing the math?
Final Thoughts:
Value ALWAYS Matters: Your strategic advantage.
The journey from product-focused selling to value-based account management represents a fundamental transformation in how you think about customer relationships, competitive positioning, and business growth. The organisations that master this transformation don't just win more business. They reshape entire market dynamics and build sustainable competitive advantages.
Value-based key account management requires recognising that every customer conversation is ultimately about their future state. Master the language of business impact rather than product functionality. Invest in understanding customers' total cost structures, not just procurement budgets. Develop value proposition portfolios rather than depending on a single approach. Treat innovation in value propositions as seriously as innovation in products or services.
Remember that compelling value propositions serve customer interests as much as your own. When you help customers understand the complete value potential of working with you, you enable better decision-making that benefits everyone involved. This service orientation often creates lasting competitive advantages and customer loyalty that transcends individual transactions.
The competitive landscape will only become more challenging as markets mature and customers become more sophisticated. The suppliers who master value-based approaches today will be the ones who thrive tomorrow, while those who remain focused on price and features will find themselves increasingly marginalised.
Your customers need partners who can help them achieve their most important business objectives. They're looking for suppliers who understand their challenges, speak their language, and deliver measurable results. The transformation begins with a simple recognition: your customers aren't buying what you're selling. They're buying what you're offering, which enables them to achieve their goals.
When you truly understand this distinction and build your entire go-to-market approach around it, you don't just change your sales results. You change your whole relationship with the marketplace. Value matters because in an increasingly competitive business environment, the ability to create and communicate value becomes the ultimate differentiator.
When you are ready, there are a few ways I can help.
1. DOWNLOAD THE RETHINKING KAM ARTICLE:
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Rethinking Key Account Management: The 4 blocks to ignite KAM as your strategic competitive advantage.
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