What are value propositions and how do they work, exactly? If you’re looking to build strategic, collaborative, and mutually beneficial relationships with your most important customers, it’s necessary to understand the importance of value propositions. Through the practice of key account management, you can not only win better and more complex business but see off stiff competition by establishing your business as preferred supplier among key customers.
What is Key Account Management?
Also known as strategic account management, key account management is often mistaken for just another sales strategy but requires a far more fundamental commitment from across the business to pull off. In a nutshell, it is the proactive development of relationships with those customers that are of the most strategic value to your organization. These ‘key accounts’ are customers that show all the signs for long term business development and growth. These aren’t just customers with whom you do the most business with but whose customers you have the chance to collaborate with, developing opportunities for better, more profitable, and longer term business.
Selecting these key accounts from among your customer portfolio requires a deep understanding of strategic value; both in terms of what you and your customer values. This goes beyond revenue and account size, with growth potential, business values and openness to collaboration all being key criteria in the selection process.
Because strategic account management concentrates on high value and more complex solutions, it requires a completely different approach compared to a simple sales strategy. This involves business wide involvement, senior buy-in from both businesses, cross-departmental involvement and workshops, change management and the appointment of strong key account managers to oversee the process and bring people round the table.
Before you can get any key account initiative off the ground though, you need to win your prospective key account over. This is where a powerful value proposition comes in.
Why Value Propositions Matter
Value propositions are important because they articulate the potential value in any given initiative or collaboration with a customer. Key account management is not transactional in the way a sales approach is (i.e. primarily focused on how your company can quickly benefit) but is intrinsically more reciprocal (i.e. focused on how both companies can benefit in both the short and long term), so value propositions form a vital persuasion tool for justifying the commitment of resources, as well as a blueprint for moving forward.
Value propositions can work at differing levels, depending on the nature and scope of what you are proposing:
- Organizational level: This will focus on explaining why you’re the best organization for your target key customer to deal with. This is the prelude to a potential range of initiatives and collaborations to improve the relationship and win new business.
- Solutions level: This focuses on how and why you have the best solution to address a particular need or challenge that the customer is facing, which it sees as important and as a priority.
- Product / service level: This will explain why you are the best supplier of a given product or service, based on the needs and requirements of the key account.
There are any number of ways you could improve the relationship you have with your key customers at all the levels above. Perhaps you can offer specific expertise to an area of your customer’s business where it is missing, or reduce their risks in terms of IT issues. Complex, high value initiatives require collaboration and joint investment of resources and it is the job of a value proposition to make the case for this.
The Importance of Good Communication
Communication and business insight is absolutely crucial to the process of preparing and drafting a value proposition. Chief among the skillset of any good key account manager is the ability to not only communicate with key players from both businesses, but also to identify who those key players are.
How a value proposition is communicated is vital. This isn’t a generic document that can be fired across all involved on a group email. Qualifying and expanding upon the points raised and going over the data used to justify ROI and value received is what is really needed here.
The Five Principles of a Good Value Proposition
Powerful and persuasive value propositions will display a deep understanding of your customer’s business needs and market challenges. By applying your particular market or operational insights you may find opportunities or areas of improvements your customer hasn’t yet identified.
A good value proposition should offer this kind of insight and also work to set you apart. I’ve broken down the five key characteristics of a great value proposition as follows:
- Motivational: It needs to meet the specific needs and requirements of your key account’s business (i.e. ROI, risk profile, impact on future business).
- Differentiated: Standing out from the competition must underpin your value proposition. This isn’t just about being different but also being better.
- Credible: You can make all the claims in the world about what you can deliver but without strong evidence and data your value proposition won’t be credible.
- Quantified: Risk is a key factor in any investment decision and a value proposition that quantifies risk and offers strong ROI will be compelling.
- Customer focused: As we’ve discussed, an understanding of your customer’s business is crucial to a strong value proposition. While a good value proposition won’t skirt over the mutual benefits, it will be focused on the value your customer gains.
Key account management is a new way of thinking about your business’s long term growth and how you can establish that growth by building long term value and winning bigger and more complex business with those customers that represent the most potential. A value proposition is a key element of winning these key accounts over, securing investment, senior buy-in and establishing a more transparent and collaborative working relationship.
Alistair Taylor is a key account management consultant and the founder and managing partner of UK based Brightbridge Consulting. He has over two decades experience working as a senior manager and consultant for large corporations and organizations all over the world, implementing and running highly successful key account programs. You can connect with Alistair on LinkedIn.