Value Is as Value Does: How a Fortune 100 Pharmaceutical Company Calculates Value

If you are B2B vendor, chances are you ...

• Want to be a "trusted advisor" to senior decision makers
  
  
  
  
• Are encouraging your sales teams to "sell to value"
  
  
  
  

• Are changing marketing's focus to be more "solutions" oriented.
  
  
  
  

If any of these situations describes you (or if they all do), you are probably struggling to:

Instead of focusing on your organizational complexities, however, we at BluePrint Marketing believe you should work back from a simple and straightforward design point. We call this the "Value Equation," the balance between the impact your firm can deliver and the investment the customer must make to realize that promise.

I once worked closely with several executives within a major pharmaceutical company on a major purchase: desktop computers for more than 100,000 employees globally. Confidentiality prohibits me from naming the players, but the pharma had narrowed its selection to two suppliers.

Vendor A's famous CEO was involved in the sales effort to the point of personally calling all of the lower-level people involved in the pharma's purchase decision to give them his personal commitment to help them. Vendor A's price point was nearly 20 percent less than Vendor B's proposal. Yet in the end, Vendor B got the contract.

Value proposition
How does a multinational company lose a deal when its CEO is personally involved and its proposal is $24 million lower per year ($120 million over the term of the contract) than its competitor?

Simply put: The value of the offer was greater because Vendor B understood all of the pharma's investment elements (such as culture, risk and people costs) and was able to communicate a different and more powerful vision than Vendor A.

Vendor A focused so tightly on the economics of the deal, it never understood the customer's real needs. While Vendor A approached the customer as a monolith, Vendor B understood that it really was a complex federation of more than 100 affiliated organizations grouped into three major sectors, all of whom want the benefits of a leveraged purchase but also the freedom to make their own choice without being dictated to by a centralized corporate entity.

Figure 1: The value equation is simple; the more impact you communicate—while minimizing the delivery investments your customer must make to realize that vision—the more perceived value you will offer.

Vendor B's sales team learned all 185 acronyms of the pharma's internal businesses, going to great lengths to speak to the customer in its own internal vernacular. The team also understood that the customer was not buying computers; it was buying a better way to provide computing services to improve the productivity of its information workers. Vendor B realized that this better way included decentralized distribution of the equipment, a management process that balanced centralized procurement with affiliate autonomy and a relationship model that mapped directly to the customer's corporate structure.

Vendor B not only understood all of these complex variables, but also it communicated how its proposed solution would directly benefit each major constituency group. Representatives from the affiliates valued the freedom offered by Vendor B's proposal far more than the 20 percent cost savings offered by Vendor A, and the corporate group managing the process actually saved money with Vendor B because the vendor had thought through so many of the people issues involved in delivering computers to thousands of employees. Vendor B's proposal was so compelling that the vice president supervising the purchase for the pharma told me that her company probably would have paid 10 percent more, on top of the proposal.

Far too often, we see organizations try to create value selling and solution marketing organizations. To reduce complexity, they try to build programs around a few simple ideas like "improve margins" and try to force-fit capabilities and insincere messages into neat categories. What they miss is the ability to create a value framework in collaboration with the customer, based on the customer's real needs, rather than a generality such as providing the lowest bid.

B2B sales and marketing is at a crossroads; the companies that can create value frameworks that factor in all of customer's variables, as Vendor B did, are on a path to accelerating margins. Those that do not will become commodity providers competing on price, which means paper-thin margins. Those stuck in the middle are sure to be left behind. After all, value is as value does.