The B2B Value Pyramid

The Growth Report #25

Hello fellow adventurer!

Quite a few of you gave me feedback (thanks!) over the past two weeks, that you liked the resources and brand inspiration section. So we’re keeping that for a little while.

As for other news, I have started recording podcasts again. It’s a conversation-style format where I sit down with marketers (some of them among you readers!) and talk about their wins, challenges and learnings on the job (and personal life). I am super excited to tell you more about it very soon.

So let’s get to the meat. In todays newsletter we’ll cover how you can improve your B2B marketing offerings, “The Tesla of Chicken Nuggets”, and what I learned about the characteristics of a real optimist (and his naive twin).

Cheers and have fun reading,
Sandro


Today's topics include

📈 B2B Marketing:
The B2B Value Pyramid

⚒️ Tools of the Trade:
Educational Resources and Inspiration for Marketers

⛑️ Reflections from the Trenches:
Mindsets: Optimism vs. Complacency


📈 B2B Marketing

The B2B Value Pyramid

Eric Almquist, partner at Bain & Company has already popularized the Consumer Value Pyramid (super helpful framework if you are working in the direct to consumer business). In a recent Harvard Business Review article he now came out with his B2B Value Pyramid that I'd like to have a closer look at with you today.

I think most uf us accept that consumer products are bought based on subjective criteria and personal preferences. On the other hand, when we talk about business to business transactions, we often presume that a purchase decision of a product or service is purely based on rational, objective and economic factors. But is it?

Almquist makes an counter argument:

As B2B offerings become ever more commoditized, the subjective, sometimes quite personal concerns that business customers bring to the purchase process are increasingly important. Indeed, our research shows that with some purchases, considerations such as whether a product can enhance the buyer’s reputation or reduce anxiety play a large role. Recognizing the full range of both rational and emotional factors behind business purchases—and tailoring the value proposition accordingly—is critical to avoiding the commodity trap.

So Almquist and his team at Bain went to work and analyzed the business to business transactions of hundreds of their clients over a period of three decades and constructed the B2B Value Pyramid based on Maslows hierarchy of needs. Their elements of value approach extends those insights to people in corporate roles and their motivations for buying and using business products and services.

The B2B Value Pyramid

Bain has organized the 40 distinct kinds of value that B2B offerings provide customers into a pyramid with five levels. The most objective kinds of values are found at the base, and the higher a level is, the more subjective and personal the types of value it contains.

Almquist explains why the realm of B2B is still resisting the idea of subjective value:

Elements at the base of the pyramid have long been easy to measure, and competing on them has been straightforward. The more emotional elements at the middle and upper levels have traditionally been difficult to isolate and quantify and, therefore, harder to implement. But the battle for differentiation is shifting toward these less transactional aspects.

The issue is, for a product- or marketing manager it is much harder to implement and talk about the intangible parts of a customer experience, so they instead often opt for making the product or service faster, cheaper or more durable.

But when they went out and conducted a study with 2500 corporate decision makers, they found that both the Net Promoter Score and the rate of recurring customers rises in correlation with the number of high value elements (which are higher up in the pyramid). Not only that, but they also found that in every study they did with the end consumer (regardless of industry) the "ease of doing business values" and "individual values" in the pyramid above ranked considerably higher on average than the "functional" and "table stakes" values.

How to make use of the B2B Value Pyramid

Almquist stresses the point that implementing higher values in the pyramid requires "taking the customer’s point of view, not an inside-out, operational perspective" and that "..a product or service might function just fine, but if customers find the purchasing, order tracking, or technical support process terrible, many will seek out other suppliers".

There is often a big gap between a self-assessment and the actual customer opinions when it comes to the overall experience of purchasing and using a product or service. So Almquist and his team suggest the following steps to determine where and how your company might be able to improve:

  1. Benchmarking - benchmark your company's value proposition against your competitors' by surveying your customers on how your products and services perform relative to rival offerings on the 36 non-table-stakes elements.

  2. Talking with customers - try to understand how the overall experience of your customers. Explore their needs and sources of satisfaction and frustration, and the compromises they make in using your product or service.

  3. Brainstorm, test and learn - out of the survey and interviews you'll see patterns of elements that warrant attention. Sit together with your team and ideate which core elements to focus on first and how. Then assess the best ideas and discuss their appeal with customers and your firm's ability to deliver on them.

Since I've been mostly working in B2B in the past (and still do), this article and framework was an eye-opener for me. After all, we still sell to people and people make decisions based on their values and internal convictions. If you acknowledge that and try to find ways to differentiate yourself this way, I think there's huge potential for your business to increase the bottom line.

The [full article](https://hbr.org/2018/03/the-b2b-elements-of-value](https://hbr.org/2018/03/the-b2b-elements-of-value)) offers some case studies and more results of their in-depth research on the topic.


🛠️ Tools of the Trade:

Educational Resources and Inspiration for Marketers

Marketing Education

SMS Marketing Examples - In the US, the direct-to-consumer market has seen a huge surge in SMS marketing (Whatsapp, Messenger, SMS, Apple Messages etc.) over the past years. It's still a largely uncontested marketing channel though and whether you use it for customer support or selling, I think there is big potential there. Check out this library of examples from large DTC brands.

High Output Founders Library - This is a treasure trove of useful guides and other resources, not only for founders, but also for product managers, leaders, marketers and pretty much any other business function.

Built to Last - Audio Conference - Buffer and Wistia host the first-ever (that I know of) free audio conference with a stellar lineup of speakers. Podcast-conferences, I like that. 🤔

Cohere Onboarding Tool - You know those annoying chat-tools at the bottom right of websites? Cohere developed their own version, but actually makes them useful by using them to onboard new customers, instead of selling through them. Win-win.

Brands and Products that caught my eye

Open - Online classes for meditation, breathing exercises and movement. Love the design, love the pricing model (pay as much as you want), the high quality feel of the brand (more athlete than new age) and the whole booking experience. Thumps up.

Nuggs - Last week it was a cereal brand, this week its a plant-based "chicken" nuggets brand. Or how they call it "The Tesla of Chicken". Stellar branding and tone of voice!

The Barisieur - A bedside barista? What a hilarious value proposition. But god its a beautiful, sleek and elegant product. Questionable utility, but damn pretty!


⛑️ Reflections From the Trenches

Optimism vs. Complacency

"A real optimist wakes up every morning knowing lots of stuff is broken, and more stuff is about to break."

I read this quote recently and as a self-identified optimist, it made me think. Isn't optimism about a frolicking outlook on the world? About the happy, happy go-getter?

I sometimes have a nagging feeling that there is a certain unhealthy aspect to my optimism: The danger of being "too optimistic" (the world is great!) and the resulting slide into turning a blind eye and complacency. So I went into a research rabbit hole to uncover what optimism actually entails and what its dangerous counterpart is that I feel lurking behind my enthusiasm for the world.

Optimism

The Dictionary says that optimism is:

"the tendency to look on the more favourable side of events or conditions and the belief that good ultimately predominates over evil in the world."

Okay so the first part is self-explanatory, but the second part is where the real treasure lies.

What this definition leads me to believe is, that while an optimist does have a positive outlook in the long-term, he actually expects the world around him to break. He knows that the bad stuff is necessary and normal and leads the way to eventual progress and positive outcomes. And he also knows that if he can survive the day-to-day realities of bad stuff happening in the world, it will eventually get better and his hard work pays out over time.

And following that train of thought, an optimist is someone who understands that the math of compounding interest doesn't mean the biggest wins necessarily go to those with the highest returns, but in fact to those who earn pretty good returns maintained for the longest period of time (whether in business, relationships, and personal life).

Opportunities and good outcomes come to those with endurance! His Plan B has a plan B. He knows that if he doesn't quit, he will eventually have good outcomes.

Complacency

So what about complacency then? I found this:

A complacent person is a dreamer masquerading as an optimist.

Interesting, so a complacent person somehow has a conviction that he’s smart and in control. Smiles when he gets up in the morning knowing that the world is just great. Then he takes risks, just like the optimist. But he doesn’t think they’re risky. He calls them opportunities. Until shit hits the fan.

He isn’t prepared for setbacks. When one arrives, his mindset of, “Be optimistic. Everything will be OK,” turns complacency into ignorance. The setback festers, compounds, and – since he has no room for error, no Plan B – eventually forces him into an action he doesn’t want to take. He has to sell his investment. Or quit his job. Scrap his lifestyle. Leave a relationship.

That makes him upset. Things he loved – jobs, friends, security, dreams – are taken away from him.

He becomes cynical. And cynicism turns him into a pessimist (someone who, like the optimist knows the reality of shit hitting the fan sometimes, but doesn't believe it ever gets better).

Moral of the story: So even if I am an optimist, it's healthy to reality-check my positive outlook. Stuff is going to break. That is how the world works. But all the while I keep my conviction that if I keep at it until the end, it gets better for those that don't give up. That's a liberating thought, isn't it?


That's it for this week.

Enjoy your weekend 🏡

See you next week,

Sandro