Aligning Product, Marketing, Sales, and Success to Expand Revenues and Margins
The ability to communicate, sell, realize and expand the value your offering delivers to prospects and clients has become the basis of differentiation and competitive advantage in B2B. Why?
Selling value over price is difficult when buyers have too much information, pricing is transparent, and they don’t want to talk to professional sellers, or take risk.
Buyer research tells us that B2B buyers have become more informed, considered, independent and demanding. Buying cycles are longer, with more stakeholders, and guided by more rigorous financial and strategic criteria.
Most of this process happens in the absence of conversations with the humans on your revenue team. B2B buyers now spend only 17% of the total purchase journey with sales reps according to Gartner research. That leaves little room for the professionals on your revenue team to educate customers, demonstrate value, and build confidence and consensus.
The core of the problem is that with all this information and consideration, today’s buyers still lack confidence in their decision. Regret is a top concern. B2B buyers who rely on online channels have greater fear they made the wrong decision and will fail to deliver value to justify the investment after the fact. The net effect is many buyers lack a clear understanding and consensus about the business problem they are trying to solve, the financial value of solving it, and the best solution to the problem. They lack confidence. And without confidence, buyers will often resort to no decision at all, the status quo, or a low risk solution.
Recession concerns create an even greater sense of urgency to deliver more value to customers. If enterprise buyers are pushed into aggressive cost-cutting mode - your ability to communicate, sell, and realize the full value your offering delivers becomes critical to getting prospects to part with scarce resources, and customers to justifying renewals.
That is why the most progressive and successful selling organizations – like Sumo Logic, VMWare, ServiceNow, and Gainsight - are adopting Customer Value Management– which provides a roadmap and a system to consistently communicate, quantify, build and realize value at every stage of the revenue cycle.
What Is Customer Value Management And Why Is It So Important?
Customer Value Management is a data-driven system that helps every member of the revenue team have more consistent and impactful value conversations with prospects and customers. “Customer Value Management is an operating system for consistently having commercial value conversations at scale across all your channels,” says Chad Quinn, Founder of Ecosystems, and one of the early pioneers in the field of Customer Value Management Software. According to Quinn, Customer Value Management helps product and solution teams engineer value into their offerings. It helps marketers communicate value using value benchmarks. It helps sellers to collaboratively discover value with customers in value assessments. And it helps Customer Success Managers to help clients to realize and reinforce the value they are getting.
Customer Value Management is a powerful commercial concept because it creates a system for consistently executing what was previously a fragmented set of disparate methodologies and principals that have traditionally been deployed in functional silos. These include value based pricing and value engineering in product design (first embraced in 1940 at GE), and the many value selling methods in sales (popularized in the 1960s).
“Almost every major sales organization has a value selling methodology,” says Brent Adamson, the author of The Challenger Sale, a popular value selling methodology. “Overall, value selling as a principle can be very effective at turning sales business outcomes, financial impact and strategic alignment, regardless of the flavor your organization favors. Historically, the challenge has always been how to apply those principles consistently in sales and reduce the manual labor and effort involved by already overburdened revenue teams.”
Customer Value Management as a business discipline has been around for almost twenty years. It is highly effective at unlocking revenue and margin by improving conversion rates and moving sales conversations from value to price.
As an operational discipline it had its beginnings at SAP when Bill McDermott came in as the new head of Customer Service in 2003, before he subsequently rose to CEO of both SAP and ServiceNow. McDermott’s team wanted to find an effective way to bridge the growing gap between the way SAP presented their solutions and capabilities and the business outcomes customers were trying to achieve.
“For me, Customer Value Management really came together 19 years ago when Bill McDermott, Chakib Bouhdary who became Chief Value Officer, and I met to discuss what they called the ‘Value Gap’,” recalls Chad Quinn, who has spent the subsequent two decades formalizing and systematizing the Customer Value Management discipline in a scalable platform. “The Value Gap became the bridge to reconcile the obvious and widening misalignment between customers focused on achieving business outcomes and suppliers’ capabilities to deliver against those outcomes.” That meeting was the genesis of what became a value management office – a dedicated set of advisory resources to execute a formal process to quantify, validate, and communicate the ways their solutions created value to top clients.
“Customer Value Management was a financial success from a sales, productivity, and customer experience standpoint,” says Chris Hummel, who subsequently scaled the program across territories and industry segments as SAP’s EVP of Field Marketing. “We saw close rates double, discounting decrease, and deal size increase at the clients who were nominated for Value Management.” Benchmarks that Ecosystems tracks across customers show revenue teams that adopt a Customer Value Management system see improvements in both sales and customer success and productivity overall. Sales close rates increase over fifty percent and deal sizes more than double. Net Recurring Revenues grow in double digits. Retention by over 50%.
The Growing Importance of Customer Value Management in Customer Service and Success
As more and more organizations adopt recurring revenues and subscription models, the challenge has become how can you extend the value conversation from marketing, through sales to customer success where a lion’s share of the client engagement opportunities occur. Managing value across the entire end-to-end revenue cycle gives growth leaders the ability to have value conversations in the places they can maximize customer lifetime value. For SaaS organizations like Sumo Logic, much of that activity happens after the initial sale. “Some organizations I have worked in believe that eighty percent of the effort happens before the sale,” says Lynne Doherty President, Worldwide Field Operations At Sumo Logic, whose revenue teams use Ecosystems. “But in a SaaS model, the sale is just the starting point of the relationship. So, we’ve redesigned roles and incentives to get our teams focused on customer education, customer experience and account development activities that drive loyalty and expansion of our recurring revenues.”
“Customer Value Management is central to Revenue Operations because it supports the alignment of marketing, sales and success to expand revenues, margins, and customer lifetime value,” says Chris Hummel, who authored the book Revenue Operations. “Customer Value Management is fast becoming a key driver of the modern revenue engine,” echoes Nick Mehta, the CEO of Gainsight, and author of the book Customer Success: How Innovative Companies are Reducing Churn and Growing Recurring Revenues. “The Customer Value Management and the Customer Experience worlds are coming together to help Customer Success and Service teams to better realize mind-blowing new outcomes in durable, long-term growth.”
The move to reinforce, realize, and expand value is part of the natural evolution and maturity of Customer Success (CS) organizations as more conversations about the adoption, ROI, and impact of services and solutions occur within that function. “Customer Success gets a lot of airtime and visibility on a strategic and executive level because Net Recurring Revenue (NRR) is a primary measure of healthy growth.” continues Mehta. “Most organizations have established Customer Success as a function, with a clear role definition relative to other stakeholders on the revenue cycle like product marketing, marketing, and sales. The very best organizations are now evolving their focus from managing churn to actively improving retention and expansion.”
The notion of managing and measuring customer value through the expansion phase of the revenue cycle is critically important to proactively managing customer, account and pipeline health. “ARR and NRR are key financial measures of healthy revenue growth in a subscription operating model. Taken on their own, these are lagging indicators.” according to Mary-Beth Donovan, Vice President, Global Customer Success Management and Experience at VMware. “The opportunity for growth leaders and their operations teams is identifying the actions that deliver and realize value for the client. The associated measures of solution adoption and customer outcome realization are the effective leading indicators of value.”
This means organizations need better systems for carrying the value conversation that starts with marketing and sales through implementation to adoption, best practice, and ultimately customer advocacy. This creates a fertile field for revenue expansion conversations, according to Chad Quinn. To help B2B growth leaders unlock more expansion revenues, Gainsight and Ecosystems recently announced a commercial partnership to offer the first-ever fully integrated value management-customer success platform. Customers using the combined solution can now monitor and direct customer health based on both internal and customer-based inputs simultaneously.
The companies established an initial integration in May 2020 to empower buyers and sellers to compare the value promised in sales with the value actually delivered in customer success. Based on this success, new joint development has deepened the integration of Ecosystems with Gainsight components, including alerts, step-by-step playbooks, and the customer health scoring framework – furthering the ability to use quantified customer value as a proactive driver of customer success actions. The combined solution allows for simultaneous execution of internal customer success plans and external customer-led value reviews in a seamless fashion.
“We believe the combined capabilities of Ecosystems and Gainsight will allow us to efficiently scale value conversations across all of our customers,” said Tammi Warfield, Chief Customer Officer at Delphix - a customer of both Ecosystems and Gainsight. ”The notion of Customer Value Management – and the integrated platform that Gainsight and Ecosystems are putting together - is a big step forward in operationalizing value across the business ecosystem and to the customer,” echoes Mary-Beth Donovan of VMware.
The combination also reinforces the trend towards using AI and insight to improve the customer experience, enhance margins and demonstrate value. By connecting the dots across the technology ecosystem – the combined platform allows commercial leaders to leverage data from many sources to support Customer Value Management. This includes product telemetry data to track usage, customer satisfaction and support data to understand account health, and CRM data to link value to contracts and opportunity. “Our strategic partnership with Gainsight will help all companies drive net recurring revenue with efficiency and scale,” says Chad Quinn. "When we combine the best-in-class customer success platform with the best-in-class Customer Value Management system, we get 1 + 1 =3, where the biggest winner is the customer.”
Ultimately, the platform will give business leaders visibility into account revenue expansion and cross sell opportunities that are created and uncovered in success and services conversations. ”Customer Value Management really comes home when considered as an enabler of revenue expansion,” says Mary-Beth Donovan. “Through proactive customer engagement and prescriptive data insights like Success Planning, and adoption risk and opportunity frameworks we demonstrate value to our customers, earning the right and trust to identify new outcomes. Expansion is operationalized into the customer journey management motion through Customer Success Qualified Leads (CSQLs), a leading indicator of customer value, identifying expansion opportunity. A platform integrating end-to-end customer value throughout the business and providing transparency of that value back to the customer, it’s simply a game-changer.”
