Also by the Authors
JAMES C. ANDERSON AND
JAMES A. NARUS
Business Market Management: Understanding,
Creating, and Delivering Value, 2nd ed.
(Upper Saddle River, NJ: Pearson Prentice Hall, 2004).
NIRMALYA KUMAR
Marketing as Strategy: Understanding the CEO’s
Agenda for Driving Growth and Innovation
(Boston: Harvard Business School Press, 2004).
NIRMALYA KUMAR AND
JAN-BENEDICT E. M. STEENKAMP
Private Label Strategy: How to Meet the Store Brand Challenge
(Boston: Harvard Business School Press, 2007).
Copyright 2007 James C. Anderson, Nirmalya Kumar, and James A. Narus All rights reserved
Printed in the United States of America
11 10 09 08 07 5 4 3 2 1
No part of this publication may be reproduced, stored in, or introduced into a retrieval system or transmitted, in any form, or by any means (electronic, mechanical, photocopying, recording, or otherwise), without the prior permission of the publisher. Requests for permission should be directed to [email protected], or mailed to Permissions, Harvard Business School Publishing, 60 Harvard Way, Boston, Massachusetts 02163.
Library of Congress Cataloging-in-Publication Data
Anderson, James C., 1953–
Value merchants: demonstrating and documenting superior value in business markets / James C. Anderson, Nirmalya Kumar, and James A. Narus.
p. cm.
ISBN-13: 978-1-4221-0335-7 (hardcover: alk. paper)
9781422131077
1. Industrial marketing. 2. Sales promotion. 3. Purchasing. I. Kumar, Nirmalya. II. Narus, James A. III. Title.
HF5415.1263.A534 2007
658.8’04—dc22
2007017289
The paper used in this publication meets the minimum requirements of the American National Standard for Information Sciences—Permanence of Paper for Printed Library Materials, ANSI Z39.48-1992.
To my sons Perry and Ross:
so challenging, so worthwhile ...
so much love.
—JCA
To Vijay Mittal—
value merchant and
invaluable friend.
—NK
To Simon and Genevieve Narus,
for a lifetime of support and
encouragement.
—JAN
Table of Contents
Also by the Authors Title Page Copyright Page Dedication PREFACE ACKNOWLEDGMENTS ONE - Value Merchants TWO - Conceptualize Value THREE - Formulate Value, Propositions FOUR - Substantiate Value Propositions FIVE - Tailor Market Offerings SIX - Transform the Sales Force into Value Merchants SEVEN - Profit from Value Provided EIGHT - Prosper in Business Markets APPENDIX A - Relating Customer Value and Price APPENDIX B - PeopleFlo EnviroGear Pump Customer Value Model NOTES INDEX ABOUT THE AUTHORS
PREFACE
WE HAVE WRITTEN this book for general managers, marketing managers, and sales managers whose businesses serve business markets—firms, institutions, and governments. A common lament that we hear from these managers is that although they believe their offerings deliver superior value to customers, their businesses have difficulty persuading customers of this. Customer managers, increasingly pressed for time and demonstrable results, appear to focus simply on reducing price. What causes this? A faulty customer value proposition? A lack of knowledge of how to persuasively substantiate the superior value of their offerings relative to those offered by competitors? Salespeople who are unwilling, or unable, to sell value and instead rely on price concessions to retain or gain business? Each of these may contribute to frustrating results, when sales may grow but profitability lags disappointingly behind.
Our book enables general managers, marketing managers, and sales managers to overcome such obstacles and get a better return on the superior value that their market offerings deliver to target customers. We contend that to prosper in today’s demanding business markets, supplier managers have to fundamentally reexamine their philosophy of doing business and how they put it into practice. Suppliers must adopt a philosophy of doing business based on demonstrated and documented superior value and implement that philosophy using an approach we call customer value management. Customer value management is a progressive, practical approach to business markets that, in its essence, has two basic goals:
1 Deliver superior value to targeted market segments and customer firms
2 Get an equitable return on the value delivered
Customer value management relies on customer value assessment to gain an understanding of customer requirements and preferences and what fulfilling those are worth in monetary terms. Although firms may be able to accomplish the first goal without any methodical assessment of customer value, it is unlikely that they will be able to accomplish the second goal without it. Simply put, to gain an equitable or fair return on the value their offerings deliver, suppliers must be able to persuasively demonstrate and document the superior value they provide customers relative to the next-best alternative.
In this book we provide readers with a detailed, step-by-step understanding of customer value management and how to implement it in their businesses. We begin with how to conceptualize value and go all the way through to how to profit from the superior value provided. We offer numerous case examples from businesses in a wide variety of industries and countries to support our approach and help bring it to life for readers. In writing this book, we also draw on our experience in working with companies over the past decade to implement customer value management. We have seen the significant contribution that customer value management can make to business performance. Isn’t it time for your business to really