Value Realization: The Key to Customer Success
A common dilemma that plagues many enterprises is the failure to adequately showcase, to their customers, the full value realized from a product or service. Sometimes a customer's perception or measurement of "value" may not take into account all pertinent factors. Companies who want to avoid consistently underwhelming sales numbers and high churn rates must master the ability to track, quantify and communicate value realized to their customers.
The Definition of Value Realization
What is value realization? Value realization is the process through which customers start with a value expectation, engage with a product or solution and then actually realize business value for their organization. Value realization leads to increased customer satisfaction and loyalty, as well as greater opportunities for cross-selling and upselling because it helps customers communicate the success of their project to key stakeholders, thereby justifying the renewal of their agreements.
Value realization is a highly impactful method to capture outcomes that are achieved from customers, both quantified (ROI, financial metrics, percentage improvement, time reduced, costs offset) and qualitative (customer sentiment, quotes, testimonials). These data points can all be fed back into the pre-sale motions of a business, to ensure that sales and marketing can continue to refine their messaging and value models that support the acquisition of new customers.
How to Measure Value Realization
The importance of value realization is self-evident. That's why developing a way to capture and communicate the metric to customers has been so important to its adoption as a business practice.
The value realization model includes a "measure it" stage, which effectively closes the loop on the customer value management chain. The "measure it" stage makes it possible to quantify actual value (as opposed to the planned ROI baseline model). It also builds out a mechanism capable of adjusting to reflect further value realization, as well as a means of capturing testimonials and other indicators of customer responses.
Value realization strategy follows a reliable cycle that can be best understood when it's divided into a series of five steps, also referred to as "value realization levels." Those steps are:
- Value definition
- Value delivery
- Value realization
- Value validation
- Value optimization
Each of these stages has its own recognizable characteristics and unique qualities. For the cycle to be successful, each step needs to be fully realized. A brief definition of each stage is available here.
In this stage, the seller sets out a clear definition of value for the customer's benefit. This definition may be communicated in several different ways. The most common example is during the point of sale itself, when the sales representative has the opportunity to describe the value to the customer, laying the groundwork for the customer's ongoing expectations.
Value delivery is a multi-tiered proposition. It involves every means of delivering the product's value to customers after the sale. Value delivery relies on continual engagement with the customer after the point of sale.
This will look like integration, implementation, content, and support. The entire process in which the customer uses the product and recognizes its value is known as the value delivery stage.
Value realization is when the customer truly understands the value they are achieving from using a product or service. This is a moment of affirmation for a buyer, in which customers understand that they've made a good purchase and they've now brought value to their organization.
Value validation is the stage at which the customer considers going a step beyond simply liking the product by adding additional value to it. The user has already realized the product is valuable — but at this stage, he or she also realizes that he or she wants more of the value that the product confers on him or her.
Value optimization is the stage where customers realize they've gotten as much value from the product as they can, therefore, it's time to explore different avenues to optimize and expand the value they are realizing from a purchase. This is also when customer loyalty can be locked in by turning a customer into a repeat customer, or even by encouraging customers to inform other people about the product.
Defining Value and Communicating Benefits
For a customer value management initiative to have long-term success and meaning across an enterprise, it's necessary to define terms as narrowly and precisely as possible.
To this end, the value model must contain a list of narrowly defined benefits that comprise the financial model that sales representatives should use in the process of creating unique business cases for each new customer.
The value model can give economic buyers the insight necessary to be able to conceive of various scenarios, ranging from worst case to best case, by performing analyses, weighing risk factors, assessing "what if" hypotheticals, and forecasting financial factors involved in a proposed investment.
A benefit can be understood as the smallest possible building block of a value model. Benefits each have a name, or label, that conveys their purpose. It is designed to capture each of the possible unique benefits that a product or service could have on a business, and are leveraged, as applicable, in each buying cycle. Not all benefits are relevant to all sales cycles, so ensuring you're tracking the correct benefits is an important first step between a buyer and seller.
Benefits also have a description or narrative that provides context for the benefit in question, usually by describing a pain point and explaining how this benefit will resolve that pain point. For example, the benefit may reduce the time needed to achieve a common business goal, or it may cut costs by reducing the hours needed to spend on a given project.
The benefit should describe use cases of the benefit and supply "proof points," or more specifically, detailed evidence of the product's success. Ideally, these proof points should come in the form of customer experience or narrative.
Creating a Value Realization Framework for Your Business
To implement a value realization framework for your business, it's vital for your entire company to act in unison toward the same ultimate goal. To this end, it's worth considering the shared values that your teams will need to embrace in order to make meaningful progress toward implementing value realization and creating a value realization template.
Building a Shared Definition of Customer Success
All too often, team members have widely divergent views about what precisely constitutes customer success. In many cases, employees simply have not tried to come up with a definition.
It's important for your business's leadership to hammer out a clear definition that is aligned with your organization's goals and outlook. To be a customer-driven enterprise, you'll need to have a clear sense of what success looks like, have plans to help customers achieve it, and programs in place to course-correct, for those accounts that are not. That means defining what drives value for your customers. It also entails determining exactly how to measure that value so you'll be capable of tracking your success.
Key Stages in the Value Realization Framework
A simple value realization framework includes as a foundation a value realization roadmap, as shown in the image above, starts by attracting customers by outlining the value they will receive and engaging with them to better understand their business and articulate future value further. What follows is convincing the customers to enter into an agreement and then continuing to communicate and optimize value regularly to retain these customers for life.
Value Realization Metrics: Establishing Performance Indicators and Benchmarks
Earlier, we described the stages of value. This can also be understood as a customer journey, as your customers move through the steps of interacting with your product and your business.
It's a best practice to build value realization metrics or key performance indicators (KPIs) that can map out the stages of this journey and make it easy to track how you're performing at each stage of the journey. Having clear metrics, including benchmarks and performance indicators also makes it easy to assess where each team could be performing better and to plan for improvement at each step of the journey.
Data, Data, Data
Below, we'll discuss how customer value management (CVM) platforms can revolutionize value realization. Broadly, businesses that wish to succeed with a customer-driven value model will need to focus heavily on both collecting data and data analysis.
Moreover, it's vital to engage with a platform that can give you a 360-degree insight into customers and their experience. The goal here is to create as full and meaningful an understanding of your customers as possible so that your entire enterprise can focus on adding value to your customers' experiences at every touchpoint.
Implementing Value Realization Through Agile Customer Value Management
Agile customer value management has an important dimension to consider — that the outputs generated along the journey must satisfy the needs of different buyer and customer personas. As one software company COO puts it: "Value content must be packaged at the right altitude, for the right people, at the right time."
There are also ways to create this content to help with its consistency and ease of use. Below, we explain what content to develop and some of the nuances associated with creating it.
Sales Assets Should Support the Complete Customer Engagement Journey
It's important to understand precisely what specific knowledge needs to be created. To this end, it's helpful to think in terms of the objectives associated with the customer value journey. Content is needed to:
- Gain insights into a prospective buyer's situation
- Open doors to buyer decision-makers
- Establish credibility as a trusted advisor
- Close deals by engaging buyer teams to build a defensible business case
- Grow an account by measuring and showcasing value realized to justify expansion
Keeping these objectives and the targeted buyer personas in mind, you can create a list of the sales assets and collateral that should be created.
Because the value model is central to the development of many of these assets, it deserves a few further words on its creation — specifically, some of the considerations in how to define and quantify benefits efficiently and consistently.
The Nuances of Identifying and Naming Benefits and Factors
Earlier, we characterized the elements of a precisely defined benefit. In this section, we drill down a bit further to provide some tips on how you (a) identify the set of benefits that comprise a value model and (b) how you can use syntax to name benefits and factors to ensure consistency across different value models and make the result easy to communicate and understand.
Think Through Your "Driver Factor Hierarchy"
The "driver factor" is a variable used to quantify a specific benefit in the value model. The driver factor represents something measurable that is of key interest to the management of the business. You may wonder, "Is there a logical way to think through the driver factors that make the most sense for a specific solution value model?" Here's one way to do it.
It may be helpful to think of driver factors in terms of a hierarchical data model. At the highest level are subject areas — "things that matter" to a business that need to be managed effectively. Consider the following list as a starting point for your deliberations.
- Assets. Resources owned or leased by a company that have future economic value and can be measured in dollar terms.
- Budget line items. The cost and revenue-related line items in an organization's annual budget that must be managed.
- Customer. Any buyer of a product or service offering that affects revenue and costs of an enterprise.
- Event. A one-time or repeatable occurrence that's sufficiently noteworthy to measure and record.
- Incident. An occurrence, possibly as a result of something else, that requires a response/resolution by either a person or machine that's measurable in terms of business value. (An incident, in the context of information technology, is an event that isn't part of normal operations that disrupts operational processes.)
- Location. A physical place of work (such as bank branches or warehouse locations).
- Partner. A commercial entity with which another commercial entity has some form of business relationship.
- People. A type of labor that performs a defined role to deliver measurable business value and receives compensation in terms of salary, hourly rate, or commission.
- Product. An item that's produced using enterprise resources (labor or capital) and offered for sale. Every product is made at a cost and sold at a price; therefore, it has measurable economic value.
- Program. An initiative with a particular long-term aim providing measurable economic business value to the enterprise.
- Project. A work effort that usually involves research, design, development, and/or implementation; requires a significant investment of time; is temporary in that it has a specified beginning and end time (and therefore defined scope and resources); and provides measurable economic business value to the enterprise.
- Transaction. An economic event with a third party that is measurable in money as a unit cost and recorded in an organization's accounting system.
- User. Any consumer of a provider's products or services.
- Vendor. Provider of products or services.
- Application. Any software or set of computer programs used by business users for a business function.
Why Value Realization Assessments Matter
For value realization to be meaningful, it must be tracked and communicated regularly and on an ongoing basis. The assessment is a crucial component of value realization, since it provides the opportunity to determine the success or failure of each cycle and determine where there might be room for improvement. The assessment period also provides the opportunity to assess value realization methodology and decide what might need to be done differently going forward.
This ongoing assessment is valuable because it provides the opportunity to learn from failures, as well. In fact, where failures do take place, it's a best practice to carry out an in-depth analysis of the reasons why the cycle was a failure and to investigate, as closely and with as much detail as possible, what might have been done differently in order to achieve a more successful outcome in that case.
Value Realization Assessments and Customer Success
Customer success stands to gain considerably by having a post-implementation value realization assessment capabilities. Getting this team involved early on in defining the initial baseline business case helps set expectations and sets the stage for a comparison of actual value achieved versus the initial ROI baseline.
Value realization assessments provide empirical data that affect the various factors in the baseline value model or contribute to case studies and proof points that should be added.
How Often Should Value Realization Assessments Be Carried Out?
While there isn't a definite rule for this issue, value realization assessments should ideally be carried out at least quarterly with key stakeholders from both the customer and supplier side.
Many companies are adopting Quarterly Value Reviews, which are conducted on a quarterly basis. The focus of these assessments would be on creating a conversation around planned versus actual business value realization achievement to date, while also collecting feedback from the customer regarding their experience and sentiment. Following the assessment, the results will be evaluated to recommend appropriate corrective actions or opportunities for value expansion.
Value Realization and Customer Loyalty
Customer loyalty, sometimes described as customer retention, is one of the most highly prized indicators of success that any business can have, as it's significantly more expensive to acquire a new customer than it is to retain an existing one. The image below demonstrates the difference in cost quite clearly.
Fortunately, value realization provides a variety of indicators to measure and predict customer loyalty. The value cycle contains several stages that indicate the onset of customer loyalty and the opportunity to upsell.
It's also important to note that customers become loyal to businesses when those businesses consistently deliver recognizable value, which is another reason why value realization is such a good metric for assessing customer satisfaction. After all, a customer who is aware of the value in their products and who has optimized that value is prepared to remain with the same company — as long as that company can continue to generate value.
Value realization is about earning customer retention through a constant process of adding quantifiable economic value to a company based on your products and solutions.
Value Realization and Communication With Customers
For value realization to become achievable, it's vital to communicate and connect with customers through as many channels as possible.
Encouraging Customer Feedback
Customer feedback can come in the form of social media interactions, website comments, point of sale interactions, or other channels of communication. Ideally, any and all forms of communication should be open so that customers can convey their level of satisfaction, as well as any questions and concerns, to your teams.
Customer feedback allows businesses to assess their success and to determine areas of opportunity and for improvement.
Looking for Metrics
It's a best practice to consistently develop new metrics that will help assess customer satisfaction. The more narrowly defined these metrics can be, the more useful they are. Tying them to existing performance indicators and using them to measure the stages of the customer journey is an effective value realization strategy for assessing success.
Value Maturity Matters
While more and more companies realize the importance of customer value in the sales stages of their relationships, the impact of CVM at every step of the customer journey is a game changer for customer success teams and overall net recurring revenue. Increasing your value maturity level is an opportunity to differentiate your company.
What is evident from the maturity model (pictured below) is that to make a real impact, it is essential to integrate CVM into every step of the customer journey. The more sophisticated your abilities to measure and communicate value to your customer-base, the greater the potential for cross-sell and up-sell.
When you have the data, your customer conversations change. It’s no longer from a stand point of uncertainty, “I hope they will renew”, but shifts to a more confident point of urgency, “My customer needs to expand or they are limiting their business potential.” Crossing into this new world of customer success conversation is powerful.
In the long run, communication with customers will always drive success, especially when that communication is focused on achieving a shared definition of value. This shared definition will make it possible for your business to create a product that meets (or even exceeds) your customers' expectations and allows them to recognize the value in it throughout the entire customer journey.
DecisionLink is a value realization leader, helping businesses achieve strong value realization for their customers. To learn more about providing value realization for your customers, checkout our free eBook "Unleashing Customer Value: Your Guide to Agile Value Management" or schedule a free customer value management assessment today. Or, if you want to do an initial ROI analysis of what scaling value selling could mean for your business, visit our Smart Web Calculator.