believe that adopting the customer value management approach is crucial for achieving such growth. Thus, DeLoach has championed a distinctive value propositions (DVPs) program, giving responsibility for its implementation to Eddie Smith, vice president of strategy and business development and a member of the executive committee. Smith has established that Sonoco DVPs must fulfill three criteria:
1 Distinctive—Sonoco’s value proposition must be superior to that of its competition.
2 Measurable—Sonoco prefers that all value propositions are based on tangible points of difference that can be quantified in monetary terms.
3 Sustainable—Sonoco will be able to execute this value proposition for as long as possible.
Although it’s not on the list, Smith adds the requirement that all Sonoco value propositions be “translated into the customer’s unique language.” By that, he means that sales and marketing people must be able to identify what’s in it for the customer.
The executive team has signaled how critical DVPs are to business unit performance by making value propositions the first of ten different metrics on the performance scorecard for which general managers are accountable. In senior management reviews, business unit general managers present the value proposition for each of their target market segments and key customers. Every presented value proposition is scored on the three criteria for DVPs. The general manager then receives summary feedback on the value proposition metric (as well as on each of the other nine growth factors) as follows:
Green—capable of meeting the profitable growth goal
Yellow—prompting significant concerns that need to be addressed
Red—not adequate to meet the profitable growth goal
Not content to rely simply on belief, Sonoco senior management has had data gathered to understand the relation between business units’ value propositions and their performance. Sonoco has found that there is a significant positive relation. Further, it has found that improvement in DVPs leads to improved business unit performance.
Has Sonoco been able to achieve the overall growth goal that senior management sought, in part, through its use of customer value management and DVPs? Sonoco sales increased 14.4 percent from 2003 to 2004, 11.8 percent from 2004 to 2005, and 4.1 percent from 2005 to 2006, for a three-year average sales growth of 10.1 percent. Perhaps more important, profitability expressed as earnings before interest and taxes (EBIT) increased 23.9 percent from 2003 to 2004, 14.6 percent from 2004 to 2005, and 17.6 percent from 2005 to 2006, for a three-year average growth in EBIT of 18.7 percent. While superior business performance depends on a number of factors, Sonoco’s experience provides strong evidence that customer value management makes a significant contribution.
Promoting a Value-Driven philosophy to Business Markets
The responsibility for leading a value-based market strategy in business markets lies at the top of the firm. Senior managers need to convey to the firm that it generates value through both its core offerings and its augmenting services and that it expects to receive an equitable return for those offerings and services. In larger multi-business firms, the senior management of each business unit—especially the general manager and top marketing and sales executives—has primary responsibility for customer value management. We will show that customer value management is more than a marketing and sales activity, so the general manager must ultimately own and lead its successful implementation.
While “senior management support” may sound like a cliché, we have found through both outstanding and terrible experiences while working with firms to implement customer value management that it is no cliché—it’s absolutely essential. And such support cannot be simply talk from senior managers about how important customer value management is. More telling to everyone in the business is how senior managers choose to spend their time. Making time in their schedules to attend the launch of customer value management initiatives, serving as executive sponsors of customer value projects, monitoring the progress of initiatives, and setting aside a day to attend business cases for change and to give feedback all send a stronger message throughout the business that senior management is committed to implementing a philosophy of doing business based on demonstrated and documented value to customers.
Sonoco’s corporate culture reinforces to each salesperson the preeminence of value in the firm’s overall market strategy. From the day they are hired, sales representatives learn that Sonoco products are typically higher priced than those of competitors. And they quickly discover that Sonoco prospers because it provides value to its customers in the form of technologically superior products and outstanding services. From these lessons, salespersons readily conclude that if they are to succeed at Sonoco, they must sell value, not price. Moreover, the Sonoco “value story” is repeatedly reinforced through such things as annual reports, brochures, company newsletters, case histories presented at sales meetings, and sales tools.
GE Infrastructure Water & Process Technologies (W&PT), for example, stresses the importance of documenting the results its solutions have provided customers in its brand slogan: “Proof, not Promises.” What does this slogan mean? According to W&PT’s Web site, “‘Proof, not Promises’ is the GE Water Technologies commitment to measure success in terms of the savings and performance improvements achieved for our customers. ‘Proof, not Promises’ sets a standard for excellence and accountability that our customers can count on, providing documented proof that their profitability goals have been met.”
Similarly signaling its commitment to documenting the results it delivers to customers, Sweden’s SKF, a global leader in bearings, has given its SKF Documented Solutions Program this tagline: “Real world savings—and we can prove it!” Figure 1-1 illustrates SKF’s customer value approach.
Of course, Sonoco, W&PT, SKF, and the other best-practice firms we will draw on in this book did not just stumble onto customer value management. Their journeys began years ago with small steps, learning through experience, and an unwavering, visible commitment by senior management to see the approach through. We find that despite all the talk about value in business markets these days, these leaders are in the minority. In fact, remarkably few suppliers have made any systematic or methodical effort to understand the value of their offerings to customers. They talk about value but continue to struggle against commoditization pressures and succumb repeatedly to customer demands for price concessions. However, by adopting customer value management as a philosophy for doing business, suppliers can demonstrate and document the value of their offerings, helping turn gray money into green money for both customers and themselves.
Overview of the Book: The Path to Superior Business Profitability
Our intent in this book is to transform businesses and, especially, their sales forces into value merchants. Doing business based on demonstrating and documenting superior value is, indeed, a rare commodity. Yet it doesn’t have to be so rare. We contend that by adopting the customer value management approach we present in this book, value merchants can prevail when they encounter challenges of the type that the IC salesperson faced. Specifically, readers of our book will learn how to:
Assess customer value in practice
Craft value propositions that resonate with target customers
Achieve spirited implementation for superior profits
FIGURE 1-1 SKF Documented Solutions
