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B2B Customer Churn: It's All About Value

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B2B Customer Churn: It's All About Value

 
March 24, 2015

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  By Steve Anderson, Contributing TMCnet Writer
 


Back in the late nineties, the song “One Week” emerged, and not only provided us with a peppy little song about a week in a rocky relationship, but also offered up a phrase that would prove critical for businesses worldwide thanks to its sheer simple honesty: it's all about value. A new report, meanwhile, suggests that this phrase has a new connection in terms of figuring out why B2B customers leave a vendor, and it's all about value.


Value is, of course, a subjective term. But according to the report, price doesn't actually figure into value all that often. There do, however, seem to be three key points to keep in mind when it comes to determining value, based on a series of end-customer interviews: outcomes, relevance, and trust.

Outcomes are a fairly simple point to pin down: does the product work as promised, and if so, does the promised operation provide a use for the business? This is an idea that leads some to say that customers aren't buying products so much as solutions to problems, but that's not the whole story. What customers are actually buying, reports note, is a path to an outcome. Businesses aren't buying a solution to a problem, but rather a way to get to a point where there is no problem any longer—a small difference but an important one.

Relevance is a little tougher to establish; when a competitor leapfrogs a company's offering, the original offering loses relevance. When a company's desired outcome changes and the original tools don't help any more, relevance is lost. Establishing relevance on an ongoing basis, therefore, becomes important to the long-term health of an organization wanting to sell.

Finally, there's trust. This is a fairly binary condition; either a business is trusted, or it isn't. It's possible to be more or less trusted as time goes on, but when the level of reluctance is removed, it's really one outcome or the other. To establish trust, do so in the normal way: make promises, keep them and where things go wrong be ready to fix problems. No reasonable person expects a problem-free experience all the time, but knowing that if something does go wrong a fix will be on hand is a powerful comfort.

To suggest that price doesn't have a factor here is probably somewhat wrongheaded. Price is a measure of value as surely as relevance and trust: consider for a moment an environment where I offer to sell a briefcase full of cash worth $100,000. Perhaps I'm offered a little less, ensuring the buyer comes out a little ahead on the deal. But, if I ask for $105,000 who would pay it? The briefcase simply doesn't have that kind of value, and business solutions are really no different; the price tag (News - Alert) is just an expression of perceived value. If a solution isn't generating its costs and then some in revenue—either directly or indirectly—what point is there in having the solution?

Still, it's good to consider issues beyond price when it comes to establishing value; it's a good point to understand, and a better point to practice. There's more to value than the bottom line, and having a handle on this is likely to keep a business operating in the long term.




Edited by Maurice Nagle
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