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LinkYourValuePropositiontotheCustomerValueChainByJanetGregoryUnderstandingthecustomervaluechainisthesinglemostimportantconsiderationforthesuccessofaproduct,serviceofferingorbusiness.Thevaluepropositionforyourofferingisdefinedbythecustomervaluechainthatdeliversittothemarket.Linkingthevaluepropositionandvaluechainwillhelpyourecognize,leverageandcapitalizeonopportunitiesforsuccessaswellasidentify,minimizeand(hopefully)eliminateissues,risksandliabilities.Unfortunately,theentirecustomervaluechainseldomgetsmuch,ifany,attentioninmostbusinesses.Let’sconsidertheparts:Customer,ValueandChain.CustomerTheideaof“customer”seemsverysimpleatfirstbutthedefinitionisoftencomplexwithmanyfacets.Initiallycustomerisdefinedasbuyerwherethereisanexchangeofmoneyforproductsorservicesrendered.Abuyeristhedirectsourceofcompanyrevenue.Customercanalsobedefinedasuserwheretheproductsorservicesareconsumed,operated,puttouseandperform.Theexamplesaremany,fromsimpletocomplex.Forschoolsuppliesthebuyeristheparentandtheuseristhestudent.Forbusinesstelephonesystems,thebuyeristheIT(InformationTechnology)organizationandtheuseristhecompanyemployee,departmentorganizationsandlinesofbusiness.Theneedsofbothbuyerandusermustbeidentifiedandsatisfiedforaproductorservicetobesuccessful.Thebuyeranduserelementsofthevaluechainareimportanttoeveryfunctionalareaofabusinesstoensurethatcustomersreceivetheexpectedvalue,frompackaging,totheacquisitionexperience,touserexperience.

Inmanybusinessesthecustomervaluechainwillreachbeyondbuyerandusertoincludebeneficiary.Thebeneficiaryreceivesindirectvalueorvaluethatisadjacenttothecustomervaluechain.Inourschoolsupplyexamplethebeneficiaryistheclassroomteacherwhobenefitsfromanappropriatelypreparedstudentandacommunitythatisraisingtheeducationalstandards.Inthebusinesstelephonesystemexample,thebeneficiaryisthecommunitywherethecompanyresides,providingjobsandpayingtaxes,aswellasthecustomers‐of‐their‐customersthatprovideimprovedservicesandnewcapabilities.Anothertypeofbeneficiaryistheinvestor.Theinvestorsitsoutsideofthecustomervaluechainbutisimportanttotheconsiderationofvalueastheyareakeystakeholderinthebusiness.Investorscanbeshareholdersinpublicorprivatecompaniesorfunders,suchasventurecapitalinvestorsorfinancialinstitutions.Investorsarelookingforareturnoninvestment(ROI)wheresuccessinthecustomervaluechainyieldsgrowthinrevenueandprofits.Thebeneficiariesinthecustomervaluechainareimportanttothelongtermgrowth,supportandcommunityparticipation(ofbothlocal&investmentcommunity).

Businessisrarelythissimple.Mostbusinesseshaveamulti‐layered“customer”valuechain.Oneofthemultiplelayersmayinvolvethebusinessesnecessarytoreachtheultimatebuyer.Inaretailbusinessthismayrequirewholesalers,distributorsandretailers,likeourschoolsupplyexample.InmanyhightechbusinessesthedeliveryelementofthecustomervaluechainwillrequirechannelpartnersandVARs(value‐added‐resellers)toreachthecustomer,likeourbusinesstelephonesystemexample.Themultiplelayersofcustomerdeliveryinthecustomervaluechainareparticularlyimportanttopackagingandpricingdecisions.Packagingisimportanttoensureconsistentdelivery–physicalproductswanttoretainfactoryqualityandintangibleofferings,suchasservices,wanttoretainconsistencyandintegrity.Pricingisimportantsothateachparticipantinthedeliveryaspectofthevaluechainachievestheirrevenueandprofitgoalswhilestillmaintainingafairpricefortheultimatebuyer.

Intoday’sworldofincreasedspecialization,fewbusinessesareverticallyintegratedwheretheyprovideeveryelementinthecustomervaluechain.ManyyearsagotherewerenumerousexampleswhereorganizationslikeIBM,theBellSystem,Xeroxandothersdideverythingfromresearch&developmenttomanufacturingtosalesandservicedelivery.Theverticallyintegratedorganizationisraretodayandhasbeenreplacedbypartnershipsandoutsourcing.Thespecializedworldoftodayhelpstogrowbusiness,keepsnewideasflowing,increasescompetitionandenrichesproducts/services.Yourcustomervaluechainmayalsoincludeamanufacturer,assemblerorintegratorthatcombinesyourspecializedofferingwithotherstocreateaproduct.Intelisapowerhouseinthesemiconductorindustryandlaptopmanufacturersareoneofthekeyintegratorsintheircustomervaluechain.

Thedefinitionof“customer”atfirstseemssoobvious.But,itisaverycomplexareathatmustbeevaluatedandwellunderstoodtomaximizesuccessofaproduct,serviceorcompany.Eachstakeholderinthecustomervaluechainwillhaveaslightlydifferentvaluepropositionthatresonatesforthem.Asuccessfulbusinesswillcarefullylookatallelementsofthecustomervaluechaintoensurethattheproductsandservicessatisfyeachstakeholder.

ValueValueisdefinedbythe“customer.”Each“customer”inthevaluechainwillhaveaslightlydifferentdefinitionofvalue,basedonwhatismostimportanttothem.Youwillneedtodevelopmultiplevaluepropositionstatementsthatarecommunicatedseparatelyinproposals,presentations,collateraloradvertisingspecifictoeachaudience.Yourcustomersareofteninterestedinthevaluepropositionfor“downstream”customers,astheyarealsodefiningthevaluechain.Youhelpsimplifythebuyingprocessforthembyevaluatingthevaluechainandofferinginsightintothedownstreamvalue.Valuepropositionisnotone‐size‐fits‐all.Youcannotcommunicateyourvaluepropositioninasinglestatement.Youhavemultiple“customers”andeachonewillhaveaslightlydifferentvaluepropositionbasedonwhatisimportanttothem.Valueisindividual,intimateandpersonal;itisnotwhatisimportanttoyouortoyourothercustomers.Inourschoolsupplyexamplethevaluepropositionforthedistributormaybeaboutpackaging,marginandlogistics.Asyoulookdownstreamthevaluepropositionschangeslightly;fortheretailoutletitmaybeproductturnover,forthebuying‐parentquality‐for‐priceandforthestudent‐user,style.Thebetteryouunderstandandarticulateeachvaluepropositioninthecustomervaluechain,theshorterthesalescycletime.Whilethedefinitionof“customer”looksforwardfromthevantagepointofyourbusinessaheadtowardintegrator,buyer,userandbeneficiary,valuelooksbackwardtowhatmerithasbeenreceivedbythestakeholder.Picturethevaluechainasasidewalk,andwalkdownthevaluechain,lookingbackatthepathtraversed.Valuepropositionisbasedontheperspectiveofthestakeholder,throughallthevariouslayersandpartnersalongtheway.Inourbusinesstelephonesystemexample,theuserwantsease‐of‐useandimprovedservicesfromIT.ThevalueperspectiveoftheITbuyerisforqualityhardware/softwareandresponsiveservicesfromtheVAR(value‐added‐reseller).TheVARwantsalongMTBF(mean‐time‐between‐failure)andcompetitivepricing.Eachvaluepropositionisuniquetothatstakeholderandpointofdeliveryinthevaluechain.Valuepropositionscascadedownthevaluechain;theyareoftensimilarbutneverthesame.

Valuepropositionisnotatagline.Taglinesaretypicallyshortmemorablestatementsthatconveyvaluetotheuserorbuyer.Therearethousandsofgreattaglines‐“Justdoit”‐“MmmMmmGood”‐“Bringgoodthingstolife.”Thankstotheamazingcreativityofourmarketingdepartments,taglinesprovideidentity,arememorableandelicitanemotionfortheuserand/orthebuyer.Buttaglinesarenotthevalueproposition.Valuepropositionmustbemeasureable.Valuegoesbeyondthetaglinetotheimportance,significanceandbenefitdelivered.Today’sworldisallaboutresults.“Whathaveyoudoneformelately”isheardinbusinessesaroundtheworld.Meritsandvaluemustbequantified.Valuethatismeasured,calculated,countedandprojectedovertimeiswhatcustomerswanttounderstand.Yes,intrinsicvalueisimportantbut…behonest,weliveinaworldbasedonresults.Benefit‐per‐costishowCarlson&Wilmotquantifyvalueintheirbook“Innovation:TheFiveDisciplinesforCreatingWhatCustomersWant.”Thevalue

chainalsoexpectscontinuedimprovementinmeasureableresults.Justlookattheautoindustryoverthelast10yearswherethevaluechaindemandshigherMPGandlowerCO2emissions.ChainThecustomervaluechainisdirectlylinkedtoyourproduct,serviceandcompanysuccess.Yourcompanyreputation,brandandimageareconnectedtothecareprovidedtoeachlinkinthecustomervaluechain.Achainwillremainstrongovertimeifproperlycaredfor.Thecustomervaluechain’sstrengthisprovidedbyvaluepropositionsthatareuniqueandindividualizedtoeachlinkinthechainwithquantifiablebenefitsthatimproveovertime.Oneneglectedlinkwillbreaktheentirechain.Understandingthecustomervaluechainiscomplex.Mostcompaniesthinkthattheconceptof“customer”iswellunderstood,butkeystakeholdersareoftenleftoutorexpectedtoridealongonthevaluepropositionsfurtherdownthevaluechain.Somegreatopportunitiesforbusinessgrowthandexpansionmaybemissedifstakeholdersinthecustomervaluechainarenotaddressed.Orworse,theseunaddressedstakeholderscandropoutorsabotageyourcustomervaluechainbyturningtocompetitorswhoaretakingthetimetoaddresstheirvalueneeds.Janet Gregory is a veteran sales executive and co-founder of KickStart Alliance. For assistance with sales strategy, sales planning, training, sales enablement, compensation or any aspect of sales operations, contact Janet. Janet leads the sales readiness practice at KickStart Alliance. For help in aligning sales & marketing for results contact any member of the KickStart Alliance team.

June2011