Question

1. Explain the concepts of a) value exchange b) customer lifetime value and c) value proposition and describe how these concepts are integrated into a professional selling process?

Answer 1

a.) A classic retail and business value exchange is money for goods or services. In business, value is often defined in terms of the benefit to the company and hence is more quantifiable than social value. A 'value exchange' between consumer and brand is one of the fundamentals of modern marketing; the basic transaction of swapping rich data for better experiences, as a means of facilitating commercial transactions and improving connection and engagement. ... The consumer sharing information in return for a reward.

I think the understanding the exchange of value is important to sales people. Too often, we get caught up in trying to provide value, to create value, without paying attention to the value we are getting in return. We invest time, energy, our knowledge, and experience–as well as the resources of our companies–in catching a customer’s attention, trying to engage them, trying to get them to change, ultimately trying to get them to buy. But if the customer doesn’t provide value in return, then we are wasting and devaluing our time.

As sales professionals, we have to pay attention to the exchange of value through the entire process, through the life cycle of our relationship with the customer. Value isn’t only measured in a business case, ROI, or the money they pay us. The moment value stops being exchanged, the relationship, the deal, the account begins to collapse. Too often, we don’t pay attention to the exchange of value–we our pipelines become filled with deals that will never be closed; we desperately discount to get a deal–because the customer doesn’t value what we provide (or values it less than we do); we invest in servicing customers who we should really be firing. Value has to be exchanged or there is simply no value in the relationship.

b.) The lifetime value of a customer, or customer lifetime value (CLV), represents the total amount of money a customer is expected to spend in your business, or on your products, during their lifetime. The customer lifetime value must account for customer acquisition costs (CAC), ongoing sales and marketing expenses, operating expenses, and, of course, the cost required to manufacture the product and services the company is selling. Many companies take a short-sighted approach by overlooking this valuable metric and instead optimize for a single sale in the near term. It’s still important to find new customers for the growth of the company, but optimizing the lifetime value of existing customers is also essential for a company to sustain a viable business model. Since customer lifetime value is a financial projection, it requires a business to make informed assumptions. For example, in order to calculate CLV, a business owner must estimate the value of the average sale, average number of transactions, and the duration of the business relationship with a given customer. Established businesses with historical customer data can more accurately calculate their customer lifetime value.

c.)  

A Value Proposition (VP) is a statement of differentiated and timely value of a product which meets a need or solves a problem for an individual customer or group of customers. It consists of a package of benefits from which a customer is persuaded that he/she derives greater value than from a competitor's offering.

The VP has several major purposes:

• to provide focus on customer needs and competitive differentiation
• to provide concise understanding and verbalization for customers and for sales team members
• to assure consistency of sales approach at all customer levels and throughout a market segment
• to establish basis and context for development of sales strategies and tactics for specific markets and specific customers

Other than the above, why should a sales person or team member be concerned with VPs? Because the customer is concerned with VPs! Price is supported by the customer's educated perception of value; a fully understood and articulated VP keeps the focus on value, not price. And properly directed at the weakness of a fully researched and understood competitor, the VP can help verify or substantiate a supplier's positive differentiation from that competitor.

Successfully selling to value (value selling) in the SEM industry requires a certain amount of strategic thinking on the part of the sales persons (or sales teams, the approach most frequently used in key account selling these days). All the basic selling skills — FABPs*, overcoming objections, persuasion/negotiating, probing, listening — must be second nature, and cost/benefit understanding is integral to the value sell. So too is the understanding by the account sales team members of the importance of building value "bridges" between fully understood customer needs and proposed supplier solutions. Such bridges are more easily built and sustained in the context of a solid inter-corporate business relationship than on a transaction-by-transaction basis.