A customer value proposition in B2B is a clear statement of the value a customer will get from your offering compared with the next best alternative, expressed in terms of the outcomes that customer cares about most. Research by Anderson, Narus and van Rossum identifies three ways suppliers write them: listing all benefits, listing favorable points of difference, or building a "resonating focus" on the few elements that matter most to the target customer. They recommend the resonating focus, backed by documented proof of the value and communicated in a way that shows you understand the customer's business.
The three types of value proposition
Anderson, Narus and van Rossum (2006) studied how suppliers in business markets construct value propositions and found three common approaches, each answering a different question.
1. All benefits
The question it answers: Why should our customers buy our offering?
The supplier lists every benefit the offering might deliver. It is the easiest to write and the most common. The risk is what the authors call benefit assertion: claiming advantages for features the customer doesn't care about.
Illustrative example: "Our compressor is energy efficient, quiet, compact, easy to maintain, durable, backed by a strong warranty and supported by a global service network."
2. Favorable points of difference
The question it answers: Why should a customer buy our offering instead of a competitor's?
The supplier focuses on what makes the offering different. This is better, but without a detailed understanding of the customer's requirements, it can stress differences that deliver little value to that customer. The risk is value presumption: assuming any favorable difference must be valuable.
Illustrative example: "Our compressor uses less energy than the leading competitor." Useful, unless the customer's real pain is unplanned downtime.
3. Resonating focus
The question it answers: What is most worthwhile for our customer to keep in mind about our offering?
The supplier makes the offering superior on the few elements that matter most to the target customer, demonstrates and documents the value of that superior performance, and communicates it in a way that conveys a sophisticated understanding of the customer's business priorities.
Illustrative example: For a food processor whose biggest cost is line stoppages: "Our compressors are built for continuous operation in washdown environments. A documented case at a plant like yours shows how the service model kept the line running through peak season, and our engineers can model the expected uptime for your line before you buy."
Why most industrial companies get stuck at "all benefits"
Writing a resonating focus requires knowing your customer's business well enough to say which two or three outcomes matter most and to put a number on them. That is hard work, and research on pricing shows how often it is skipped.
Hinterhuber (2008) reports that despite wide support for customer value-based pricing, more than 80 percent of companies still price mainly on costs or competitors' prices. In a survey of 81 executives, he identified five obstacles: deficits in value assessment, deficits in value communication, lack of effective market segmentation, deficits in sales force management and lack of support from senior management. The first three are value proposition problems. If you can't assess and communicate the value you create for a specific segment, you can't build a resonating focus, and you can't price on value either.
In industrial relationships specifically, Töytäri, Rajala and Alejandro (2015) found that sellers overcome barriers to value-based pricing by working to understand and influence how customers want to perceive value, influencing the value customers perceive, and improving their bargaining position. Liozu and Hinterhuber (2012), in interviews with 44 managers in 15 industrial firms, found stark differences in how companies organize for pricing and make price decisions depending on their pricing orientation.
The lesson for marketing is direct: the value proposition and the price are two sides of the same work.
How to build a resonating-focus value proposition: a worksheet
Work through these steps for one target segment at a time.
- Define the segment precisely. For example, "mid-sized food processors running continuous lines in Western Canada," not "manufacturers."
- Identify the next best alternative. What will the customer do if they don't buy from you: a competitor, an in-house fix, or doing nothing?
- List the elements of value. Everything your offering does differently from that alternative: performance, reliability, service, delivery, technical support, total cost of ownership.
- Talk to customers. Ask three to five current customers in the segment which of those elements matter most to their business and why. Look for the two or three that come up again and again.
- Quantify the difference. For each of the chosen elements, estimate the value in the customer's terms: hours of downtime avoided, scrap reduced, labor saved, energy cost, compliance risk.
- Document the proof. Collect case studies, test data, field results or customer testimonials that show the value was delivered. Without proof, the proposition is still an assertion.
- Write it in the customer's language. One or two sentences that name the customer's priority, your superior performance on it and the evidence.
- Test it with sales. Have the sales team use it in real conversations and report back on what resonates.
A simple template:
For [segment] who need [the outcome they care about most], [your company] delivers [your superior performance on that element], proven by [documented evidence], so that [the business result in their terms].
Frequently asked questions
What is a customer value proposition in B2B?
It is a statement of the value a business customer gets from your offering compared with the next best alternative, framed around the outcomes that matter most to that customer and supported by evidence.
What is the difference between a value proposition and a slogan?
A slogan is a memorable brand line for broad audiences. A value proposition is specific to a target segment, names the value delivered against an alternative, and is backed by proof. A company might have one slogan and several value propositions, one per segment.
How many value propositions should an industrial company have?
One per priority segment, because what matters most to a mining operator is rarely the same as what matters most to a food processor. They can share a common positioning underneath.
How does a value proposition affect pricing?
Directly. Research on value-based pricing shows that weak value assessment and weak value communication are among the main reasons companies fall back on cost-based pricing (Hinterhuber, 2008). A documented value proposition is what makes a value-based price defensible.
The bottom line
Take your current value proposition and ask: does it name the one or two outcomes this customer cares about most, and can we prove we deliver them? If not, run step 4 of the worksheet with three customers this month. AXXEN's Brand Systems work starts with exactly this positioning question. For the wider context, see our B2B marketing strategy playbook.
About the author
Mo Farrokhi, PhD, is the founder of AXXEN in Calgary, Alberta. His path runs from electrical engineering through an MBA and a PhD in marketing to industry roles, including VP Marketing & Product at a TSX-listed clean-tech company. AXXEN builds marketing systems for technology, manufacturing and industrial companies that have outgrown ad-hoc marketing.
Sources
- Anderson, J. C., Narus, J. A., & van Rossum, W. (2006). Customer value propositions in business markets. Harvard Business Review, 84(3), 90–99. https://hbr.org/2006/03/customer-value-propositions-in-business-markets
- Hinterhuber, A. (2008). Customer value-based pricing strategies: Why companies resist. Journal of Business Strategy, 29(4), 41–50. https://doi.org/10.1108/02756660810887079
- Liozu, S. M., & Hinterhuber, A. (2012). Industrial product pricing: A value-based approach. Journal of Business Strategy, 33(4), 28–39. https://doi.org/10.1108/02756661211242681
- Töytäri, P., Rajala, R., & Alejandro, T. B. (2015). Organizational and institutional barriers to value-based pricing in industrial relationships. Industrial Marketing Management, 47, 53–64. https://doi.org/10.1016/j.indmarman.2015.02.005
