Gary Shawhan, Chemark Consulting01.27.23
The term “Customer Value” has been characterized and defined in a variety of ways. In one reference, “Customer Value” is defined as “how much a product or service is worth to the customer.” The customer referred to, in this case, includes both the immediate user or buyer of a product or service but also extends to its value to the organization as a whole.
The art of successful selling has traditionally been guided by the importance of understanding the needs of the customer first as opposed to focusing primarily on the features and benefits of your products. Value Selling has been a fundamental principal of the sales process. Its goal is to communicate and deliver the values for your products that are important to the customer. This is a traditional view of what is meant by “Customer Value.”
Table 1 provides a list of key elements of “Customer Value” that are often considered part of the selling process. Depending on the actual situation, the importance of each will always vary.
The ability of companies to implement “Customer Value” programs that are effective and continue to deliver the intended result is an on-going challenge. While the individual values that are important to a customer are fluid, their relative achievability for many companies is increasingly challenged. The result is that “Customer Value” seems to be getting lost in the way that companies sell their products and services today.
• VS (Value Selling)
Value Selling has been a fundamental principal of the sales process. Its goal is to communicate and deliver the values for their products that are important to the customer.
• CRM (Customer Relationship Management
CRM is a system that is designed to formalize the process of managing customer relationships with the goal of growing sales revenue. CRM is often implemented as a contact and sales management system. It is also intended to provide information from those in direct contact with the customer to others on the management team.
• CVM (Customer Value Management)
CVM is a data-driven management system that enjoins those individuals that are directly connected with the revenue streams of the organization. Its objective is to have commercial value discussions across relevant organizational personnel on the value of both prospective and existing customer. The goal is to identify and correct misalignment between addressing customer values selling and the revenues that they represent to the organization.
• SAP (a software management solutions company)
SAP (one of several competing software companies in this market space) is a versatile software management system that is designed to integrate and centralize data management. Complex global businesses with a diverse portfolio of business units use this software to help manage their business at multiple levels of the organization. Real time data is provided that includes market pricing, supply chain dynamics, operational efficiencies and revenues from sales, expenses, etc., and are included in the information available to management.
The size and complexity of the global organizations that comprise a significant portion of our industry today is immense. This shift has altered the sales process. Direct sales, historically at the heart of “Value Selling,” has increasingly taken on a narrower focus with more customer face time tied to a select number of major accounts. In addition, as the size of organizations has grown, the number of direct sales personnel has remained the same or declined.
Acquisitions and mergers have had a major impact on the structure of sales organization for many companies. A key challenge in managing a combined organization is preserving the sense of “Customer Value” that customers had previously expected from each company.
As a consequence of M&A, the loss of a long-time sales representative or a change in representation through the realignment of sales territories can signal an unfavorable change that begins to erode past loyalties. Retained sales personnel, from the acquired or merged organization, can be a strong asset in a transition period. It can help anchor and stabilize the combined business with their traditional accounts.
Unfortunately, this is not always the case. When the business priorities of the acquiring company contrast with those of the previous organization, it doesn’t take long for both the sales representatives and their customers to recognize it. It is not uncommon for sales personnel to become a negative factor in the selling process when they see they cannot provide the same level of service and technical support to their customers under their “new” company.
Customer management systems and reporting practices normally differ between companies. With CRM and CVM, a key objective is to formally establish a link between the sales management team and other elements of the organization. When the net result is that the customer perceives their “Value” to the supplier is primarily driven by the revenue they generate rather than a true interest in addressing their needs and supporting their growth, some customer “fall-out” is the result.
The challenges, however, of creating viable, effective secondary sales channels are significant. The competition among manufacturers to secure a strong business relationship with a capable distributor is intense. While there are a large number of distributors, there are a limited number of distributors that have a knowledgeable sales organization that understand the technology and can identify and communicate a customer’s needs back to the manufacturer.
Manufacturers, who are considered (by the distributor) as a principal source of supply for their particular products, are given preference over other companies by the distributor’s sales force in the selling process. This provides the principal with the favored position for delivering the “Customer Value” message about their products and their company to customers. Manufacturers that are a second-tier source of supply are not given the same level of attention., The strength of the distributors sales and support effort is typically diminished and can be limited to special, differentiated products not available from their principal sources of supply.
When using distribution, it is important to understand the incentive compensation plan for their sales representatives. If it is only based on total year/year territory revenue growth, the tendency is for sales representatives to spend a high percentage their time at the larger accounts. This shifts the focus for the selling process away from understanding “Customer Values” and supporting their needs and towards the revenues they represent.
Other consequences include: (a) smaller customers increasingly do not get the support or attention they need from suppliers, (b) manufacturers with product lines that do not generate high revenue dollars but may be very important to the total performance of a finished product do not necessarily receive the attention of the distributor’s sales force. Alignment with a distributor that is a good match for the products being manufactured and effectively serves the markets where your products are a good fit is extremely important. Unfortunately, the competition for obtaining a preferred business position with the right distributor is strong.
Independent sales reps or rep organizations represent an important channel option for manufacturers. Sales reps typically specialize in certain markets or in focused territories where their relationships with key accounts provides a sales path forward for their products. This approach can be an effective way to bring the “Customer Value” message to certain accounts or into specific target markets. For smaller companies, especially those with innovative products, it can provide an important alternative.
Individual customer attention is increasingly difficult for manufacturers to provide. Smaller, independent companies who have innovative products are increasingly challenged to successfully communicate the Value their products bring to existing and potential customers in meeting their needs.
Table 1: Key Elements of Customer Value
The art of successful selling has traditionally been guided by the importance of understanding the needs of the customer first as opposed to focusing primarily on the features and benefits of your products. Value Selling has been a fundamental principal of the sales process. Its goal is to communicate and deliver the values for your products that are important to the customer. This is a traditional view of what is meant by “Customer Value.”
Table 1 provides a list of key elements of “Customer Value” that are often considered part of the selling process. Depending on the actual situation, the importance of each will always vary.
The Shifting Meaning of “Customer Value”
In today’s coatings marketplace, two questions present themselves relative to “Customer Value.” First, “where does the process of understanding and addressing customer needs stand? Second, what changes have occurred in the dynamics of the selling process that impact a company’s ability to effectively address this issue?”The ability of companies to implement “Customer Value” programs that are effective and continue to deliver the intended result is an on-going challenge. While the individual values that are important to a customer are fluid, their relative achievability for many companies is increasingly challenged. The result is that “Customer Value” seems to be getting lost in the way that companies sell their products and services today.
Some Traditional Methodologies
There exist a number of methodologies and management tools used to address the subject of “Customer Value.” While their goals and objectives vary, they are structured around the actions that can be taken to improve and strengthen the company’s relationships with current and new potential customers. Examples include:• VS (Value Selling)
Value Selling has been a fundamental principal of the sales process. Its goal is to communicate and deliver the values for their products that are important to the customer.
• CRM (Customer Relationship Management
CRM is a system that is designed to formalize the process of managing customer relationships with the goal of growing sales revenue. CRM is often implemented as a contact and sales management system. It is also intended to provide information from those in direct contact with the customer to others on the management team.
• CVM (Customer Value Management)
CVM is a data-driven management system that enjoins those individuals that are directly connected with the revenue streams of the organization. Its objective is to have commercial value discussions across relevant organizational personnel on the value of both prospective and existing customer. The goal is to identify and correct misalignment between addressing customer values selling and the revenues that they represent to the organization.
• SAP (a software management solutions company)
SAP (one of several competing software companies in this market space) is a versatile software management system that is designed to integrate and centralize data management. Complex global businesses with a diverse portfolio of business units use this software to help manage their business at multiple levels of the organization. Real time data is provided that includes market pricing, supply chain dynamics, operational efficiencies and revenues from sales, expenses, etc., and are included in the information available to management.
Selling “Customer Value” in Today’s Coatings Industry
The importance of identifying and understanding customer needs will always have a high degree of importance in the selling process. The challenge more and more companies face is how do you accomplish this objective in today marketplace?The size and complexity of the global organizations that comprise a significant portion of our industry today is immense. This shift has altered the sales process. Direct sales, historically at the heart of “Value Selling,” has increasingly taken on a narrower focus with more customer face time tied to a select number of major accounts. In addition, as the size of organizations has grown, the number of direct sales personnel has remained the same or declined.
Acquisitions and mergers have had a major impact on the structure of sales organization for many companies. A key challenge in managing a combined organization is preserving the sense of “Customer Value” that customers had previously expected from each company.
As a consequence of M&A, the loss of a long-time sales representative or a change in representation through the realignment of sales territories can signal an unfavorable change that begins to erode past loyalties. Retained sales personnel, from the acquired or merged organization, can be a strong asset in a transition period. It can help anchor and stabilize the combined business with their traditional accounts.
Unfortunately, this is not always the case. When the business priorities of the acquiring company contrast with those of the previous organization, it doesn’t take long for both the sales representatives and their customers to recognize it. It is not uncommon for sales personnel to become a negative factor in the selling process when they see they cannot provide the same level of service and technical support to their customers under their “new” company.
Customer management systems and reporting practices normally differ between companies. With CRM and CVM, a key objective is to formally establish a link between the sales management team and other elements of the organization. When the net result is that the customer perceives their “Value” to the supplier is primarily driven by the revenue they generate rather than a true interest in addressing their needs and supporting their growth, some customer “fall-out” is the result.
The Critical Role of Channels-to-Market
Establishing an effective channels-to-market business strategy is a critical part of a company’s sales strategy. Distributors along with independent sales representative are a necessary component of a successful sales effort for most companies today. They provide a needed complement to a direct sales force, especially when the markets served are comprised of many smaller and medium-sized customers.The challenges, however, of creating viable, effective secondary sales channels are significant. The competition among manufacturers to secure a strong business relationship with a capable distributor is intense. While there are a large number of distributors, there are a limited number of distributors that have a knowledgeable sales organization that understand the technology and can identify and communicate a customer’s needs back to the manufacturer.
Manufacturers, who are considered (by the distributor) as a principal source of supply for their particular products, are given preference over other companies by the distributor’s sales force in the selling process. This provides the principal with the favored position for delivering the “Customer Value” message about their products and their company to customers. Manufacturers that are a second-tier source of supply are not given the same level of attention., The strength of the distributors sales and support effort is typically diminished and can be limited to special, differentiated products not available from their principal sources of supply.
When using distribution, it is important to understand the incentive compensation plan for their sales representatives. If it is only based on total year/year territory revenue growth, the tendency is for sales representatives to spend a high percentage their time at the larger accounts. This shifts the focus for the selling process away from understanding “Customer Values” and supporting their needs and towards the revenues they represent.
Other consequences include: (a) smaller customers increasingly do not get the support or attention they need from suppliers, (b) manufacturers with product lines that do not generate high revenue dollars but may be very important to the total performance of a finished product do not necessarily receive the attention of the distributor’s sales force. Alignment with a distributor that is a good match for the products being manufactured and effectively serves the markets where your products are a good fit is extremely important. Unfortunately, the competition for obtaining a preferred business position with the right distributor is strong.
Independent sales reps or rep organizations represent an important channel option for manufacturers. Sales reps typically specialize in certain markets or in focused territories where their relationships with key accounts provides a sales path forward for their products. This approach can be an effective way to bring the “Customer Value” message to certain accounts or into specific target markets. For smaller companies, especially those with innovative products, it can provide an important alternative.
Global Image Building And Corporate Branding
Outside of the sales arena, significant attention is being given to “Customer Value” by the major global manufacturers serving the coatings industry in addressing the subject of sustainability. The global market leaders have taken a pro-active lead in implementing programs directed at providing more sustainable products. This is creating a pull-through effect in the marketplace that is providing a common thread in addressing “Customer Value” that crosses over all levels of the value chain. In this case, it is being addressed, not through the sales effort, but through brand and corporate image building on a global scale.Summary Comments
In summary, our industry continues to evolve in its ability to address the basic concept of identifying and supporting individual customer needs. The goal of delivering “Customer Value” on a personal level by the manufacturer to its customers is compromised by industry consolidations, globalization and organizational management practices.Individual customer attention is increasingly difficult for manufacturers to provide. Smaller, independent companies who have innovative products are increasingly challenged to successfully communicate the Value their products bring to existing and potential customers in meeting their needs.
