Discover the 4 Waves of Customer Value Management

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If you work in sales, customer success, or marketing and provide value to clients, it’s important to grasp the history of value management. Each wave stands for a distinct stage in the history of how organizations conceive and present value. Understanding these waves allows you to assess how this important field is developing, even though it’s still in its early phases. This context can also help you innovate your skills and offerings relative to those of your competition. As businesses strive to create value for their shareholders; executives implement different functions to manage that value. Over the years, there have been four waves of Value Management. Each wave had its own challenges and successes. Let’s have a look at each one in detail.

Wave 1: It’s just ROI…and spreadsheets are cool (Until 2006)

Ever since there have been salespeople, there has been ROI calculations. In marketplaces, vendors would have justified the higher price of one cow vs. another given its ability to produce more milk. These buyer-seller conversations must have gone something like this:

Buyer: “Why does this cow cost 4,000 shekels, while that one costs 3,000 shekels?”

Seller: “As you know, most cows produce 50 gallons of milk per week. This special cow, Betty, is worth 4,000 shekels because she can produce 80 gallons of milk per week; and a gallon of milk can earn you 1 shekel! You’ll pay off this cow in 1 year! For reference on cows’ ability to produce milk, please read this article from the future.”

Overtime, as corporate buying organizations became more complex, and would consider borrowing capital to fund projects or investments, there arose a need to create more sophisticated return on investment and total cost of ownership models. Thus was born the rich spreadsheet with conditional logic, scenario handling, and solver functions. That enabled the salesman to pitch to a CFO about collaborating on a multi-million dollar initiative and how the project was worthy enough to generate sufficient Internal Rate of Return (IRR). Bar charts, bar charts, and more bar charts told the story.

Keys to Success: These models required accurate calculations and good assumptions in order to be successful.
Challenges: The sheer amount of time taken to make a model might seem intimidating. The training required for sales reps to be able to conduct their own value analyses with customers appears staggering.
Leaders: In-house teams at Oracle and SAP became known as leaders in this profession.

Wave 2: Share your spreadsheets! (2006-2011)

As the field evolved, the prevailing best practice was to include more, rather than less detail in calculations. So that CFO customers would have enough backup that they would be able to endorse a large purchase. When web 2.0 emerged in the mid-2000s, spreadsheets could be moved to the cloud with tools like Xcelsius. Around the same time, Salesforce.com was leading the “No (Packaged) Software” revolution.

During this era, pioneers in the value selling field helped customers through innovation and ensured that the latest version of the ROI calculations were in a single location in the cloud. At this time, there were no data import, synchronization, or analytics capabilities. Moreover, in most cases, Value Management was still an internal function, with some outsourcing to third party firms and consultants.

Keys to Success: Organizing the data logically and having the questions and calculations flow in an intuitive way.
Challenges: Maintaining models proved to be extremely costly. Changes to basic calculations could take weeks and cost thousands of dollars. Also, there wasn’t an easy way to convert the output into something usable/presentable to customers. Flash and other web 2.0 capabilities worked well in some browsers, but compatibility would soon become a challenge across OS and device types.
Leaders: Alinean, Mainstay

Wave 3: Don’t show me numbers, let me play with the inputs and cool charts! (2012-2019)

With the advent of new “open source” technologies that made web development faster and more efficient, the kinds of dynamic applications that could be built grew exponentially. Innovators during this period were publishing new apps leveraging Javascript and HTML5, giving app users a feeling of true “responsiveness”.

This is when the “slider” concept became popular, where a user could dynamically select a point within a range to see how output calculations would be affected.

For the first time, these applications began to be published on customers’ websites for lead generation purposes. VisualizeROI was the first company to integrate and launch its value selling application in Salesforce’s AppExchange. The depth of its integration and ability to synchronize data bi-directionally for early adopter customers was a game changer. In addition, with the growth in sales enablement applications, visibility into adoption and usage statistics became increasingly important. Value management teams became much more popular inside of sales and marketing organizations.

Keys to Success: Select meaningful, credible starting values for key variables for Sales reps to cut short the long hours of discussions with customers. Providing a link to customers to collaborate and iterate on the assumptions.
Challenges: Gaining consensus internally among sales leadership regarding when these tools should be utilized.
Leader: VisualizeROI, Mediafly

Wave 4: It’s all about value (2020-Now)

By this time, a substantial percentage of B2B companies have staffed value management functions. Even those who don’t, in many cases, are maintaining active ROI or TCO models for their sales teams to use in sales cycles.

In addition, the pandemic created a substantial need for organizations to sell more effectively and digitally. Now, more than ever, any content that previously may have been delivered or presented in person needs to be discussed/shared over the web. For organizations to succeed with value selling in this phase, it’s essential to be able to quickly iterate on models and mix and match various output formats. In addition, the stakes are raised on the UI, as the expectations for B2B application UIs are much higher, even though Salesforce.com’s UI isn’t much better!

Finally, the general acceptance of value selling as a best practice within sales and marketing organizations is higher, driving increasing use cases for value selling throughout the customer lifecycle, including marketing, pre-sales, and customer success. The ability to demonstrate value at each stage is increasingly important, along with appropriate visuals corresponding to the stage. Demonstrating “Value realized” to existing customers is very important for Customer Success leaders.

Integrations with additional applications and data sources increase the stickiness of the applications at this stage. The most exciting element of this stage is the predictive component that’s emerging. When the presence of value drivers that exceed certain values exists, marketing and sales organizations can start to rate a prospect’s propensity to buy more highly. This is where AI and Machine Learning will start to play a bigger role.

Keys to Success: Flexible inputs, flexible outputs, self-service (can I maintain my own models easily and quickly), and integrations.
Challenges: The number of people with the skill sets required to create and deploy value models has not increased as quickly as the demand for the function.
Leaders: ValueCore.ai (previously VisualizeROI), Ecosystems

To Conclude

The 4 waves of customer value management are a way to think about how businesses have evolved their thinking around customer value. The first wave is transactional, focused on meeting the needs of the customer in order to close the deal. The second wave moves beyond transactions into creating and delivering long-term customer value. The third wave is all about using technology to create new ways of delivering value. While the fourth wave looks at how we can use data and analytics to understand what customers want and need before they even know it themselves. Each wave builds on the previous one and takes the field forward. It’s important for salespeople, marketers, and others involved in creating or delivering value to stay ahead of the curve by innovating and thus evolving.

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