Why now is the time for Customer Value Management 2.0
With the explosion of enterprise B2B SaaS solutions in the last 15 years, there has been a shift in power from the SaaS vendor to the customer. Customers can buy more easily, churn more easily, and they need to see value 24 x 7. This led to the birth of a deliberate focus on managing customer value, and a new category called Customer Value Management.
ChatGPT defines Customer Value Management (CVM) as a strategic approach to understanding customers’ needs and preferences and creating strategies to increase the lifetime value of these customers. By implementing a customer-centric approach, businesses can create long-term relationships with their most valuable customers, leading to increased revenue and profitability over time.
We couldn’t have said it better ourselves. CVM is a connected approach to discovering, demonstrating and delivering on customer value (in other words aligning on and managing customer value across an organization).
And it’s not just relevant for SaaS. Traditional B2B industries have also been embracing CVM, but as is often the case — the software industry leads, and the rest follows.
So, how did B2B companies embrace managing customer value?
They hired business consultants to discover and communicate value (I was one of them!). The Business Value Engineer function exploded — going from 5,000 in 2016 to over 50,000 on LinkedIn in 5 years. They built awesome excel-based ROI calculators. Trouble is that these consultants are expensive, and the function does not scale. And to it, the calculators were built by quantitative consultants, for use by quantitative consultants — your average seller wouldn’t touch them with a 10 foot pole.
Clearly, there was the need for a tech solution and the market responded. Gartner lists half a dozen Customer Value Management (CVM) platforms, and more are cropping up. Gartner attests that CVM platforms have increased win-rates by 2x and growth of existing customers by 5x** (something we can also see with our customers).
Sounds AMAZING right? So, why was CVM 1.0 slow to take off?
There are so many undeniably good reasons why B2B companies should align on and manage customer value (we outline them here). The question you’ll no doubt be asking yourself is why the category hasn’t yet sky rocketed.
CVM 1.0 solutions did not take off because they got five fundamental things wrong:
1. They defined value as ROI to justify a price, instead of solving pain
A value conversation starts with discovering pain, not crunching numbers. Early CVM concentrated on the financial ROI calculation of a deal, jumping straight into number quantification. These black box ROI calculators were essentially used to justify the vendor’s price. They took in generic information from a prospect and spat out big, ambitious impact numbers without the story to back them up. Needless to say, they lost all credibility with potential buyers.
And the pain in getting this wrong is real, here’s my own epic fail when I rushed straight to ROI with as client in a previous role.
Selling a solution means solving pain. Good B2B sellers, therefore, start by uncovering and aligning on a customer’s pain through deliberate discovery. Only then does it make sense for them to quantify the impact of solving that pain with their solution.
CVM 1.0 solutions ignored this critical discovery step — rushing straight to producing meaningless ROI numbers. In missing discovery, CVM 1.0 solutions had a hidden cost to the business.
CVM 2.0 is correcting for this mistake, starting with a focus on doing discovery right, before quantifying the impact.
2. They were built for value consultants to use, not for sellers and buyers
CVM 1.0 tools were built for the growing of Business Value Engineer function — usually ex-consultants who love complicated models. But value is sold by a sales rep and bought by a prospect with a problem to solve. Early CVM solutions were far too complicated for sales reps to use and were completely misaligned with what buyers needed.
CVM 2.0 focuses on bringing the buyer and seller together. Built for the sales rep to use in their sales cycle AND for the prospect to communicate their pain, new CVM solutions understand that value is collaborative.
3. The output for was a CFO, not a business buyer
CVM 1.0 tools started as complex financial models with NPVs and IRRs in their DNA. But the problem is that what a business buyer views as valuable is not necessarily expressed in terms of a positive NPV. Business buyers care about results — some of which will be financial, but many are not.
CVM 2.0 is built to understand this, focusing on a business buyer’s success outcomes, instead of viewing the world purely as a CFO.
4. They forgot value upon signature, instead of building a fly wheel
Managing customer value is not just ‘a sales thing’, used to get a deal done. But that’s what early CVM solutions were built to do. Producing quantitative business cases that had no relevance to the rest of the organization.
CVM 2.0 realises that value is a company-wide goal. It is built to provide post-sales teams like Customer Success with the outcomes customers are looking to achieve so that these teams can deliver and reinforce value with a success plan. CVM 2.0 also understands that Product and Marketing need to continually evolve a company’s proposition, so provides the insight into what customers truly value. The impact of value discovered by sales flowing through to improve the proposition they are selling is to create a virtuous cycle of managing customer value, otherwise known as the flywheel effect.
5. Only large Enterprises could use them. SMB cares about customer value too
The effort to set-up and maintain early CVM platforms has held this market back. It meant only the big enterprise companies with scale and resources were investing in CVM. However, the need to sell and deliver value is just as strong for small companies and scale-ups.
CVM 2.0 platforms are now prioritizing easy and fast configuration management, as well as automatic learning via AI and LLMs to make them accessible to any size company. Ease of use by sales reps is central to the new CVM solutions, no longer requiring companies to invest in a team of expensive Business Value Engineers as a pre-requisite for a CVM deployment.
CVM 2.0: The time is right
There’s no doubt organisations are becoming more value mature, evidenced by the exponential growth of Business Value Engineering teams. But the problem is people don’t scale — companies need tech to solve this problem
CVM 2.0 isn’t just a massive step change in solving the value problem for B2B organisations, it’s also come at a time where value itself is gaining increasingly more focus.
1. Sales performance is a burning problem, value enablement is the key
B2B enterprise sellers are struggling. Even in the best organizations sales productivity is incredibly uneven. Salesforce CEO, Marc Benioff in his January 2023 All Hands stated that 50% of the sales team brought in less than 5% of ACV. “They are struggling….they don’t know how”. The best reps instinctively sell value. Enabling the rest to do so too is what produces those impressive results Gartner’s research showed.
2. Buyer Budgets are tighter than ever, value is table stakes to win
Cost efficiency is on every SaaS CEO’s lips right now. Buying any new enterprise technology must now more than ever be accompanied with a clear value story. The value story is not a sell-it-and-forget-it exercise any more either. Tech that is not delivering and reinforcing value is being switching off. The onus of communicating ongoing value is becoming essential for retention. It’s no longer just about a value case for the sake of landing and expanding, value needs to be in a company’s DNA — from sales to customer success to product and marketing.
3. The boom in Customer Success reveals a gaping hole for value infrastructure
Customer Success has been a huge area for investment — becoming one of the fastest growing job roles in LinkedIn. The goal of Customer Success is to deliver and reinforce value in order to improve retention and up-sell. But as this function matured, Customer Success leaders realized that the connection between selling value and delivering it is completely disjointed. The infrastructure to align Sales and Customer Success around value is now being acknowledge as a critical need for the function to succeed. Think of it as the CRM 2.0 — aligning functions not around what a customer bought, but why they bought.
Customer Value Management: The cusp of a wave about to break
The importance for B2B organisations to communicate and align on customer value has been around for some time. The explosion in Business Value Engineering and Customer Success made the calls for value infrastructure impossible to ignore.
The first to hear it were those who had built ROI calculators for big enterprises to quantify value. They believed they could evolve their existing offerings to create the first set of CVM solutions. But in doing so, they completely failed to solve the problem. By building on top of their existing solutions they neglected to realise that value is not found through complicated calculations done by expensive consultants.
Value is discovered by sales reps, not derived through models. Value is collaborative and defined by customers, not used by consultants to justify high ticket prices. And most of all, value transcends sales, feeding into Customer Success, Product and Marketing to create a virtuous circle. This is what the market is demanding now more than ever. And this is what CVM 2.0 is built to solve.