A corporation that employs an "outside-in" startup program needs to screen a large number of potential startups and assess each time: What is the value of the startup's offering to our business, and what resources and support will the startup need so we can actually obtain its offering? However, many startups are not very good at communicating their customer value proposition in a way that helps the customer firm making such assessments. This article recommends that startups construct two sequential value propositions. The Innovative Offering Value Proposition communicates how the startup's offering creates superior value for the customer. It answers the question: What is extraordinary about the startup's offering that will enable the customer to solve a significant problem it has or achieve a top priority it has? The Leveraging Assistance Value Proposition conveys what the customer firm will get in return for providing support and resources to the startup. It answers the question: What will make it worthwhile from the customer's perspective to support the startup to realize its innovative offering?

In B2B markets, suppliers of nonstrategic products and services tend to assume they have only two options for landing sales: stressing their offerings' unique characteristics and competing on price. The problem is, the features touted often don't matter to purchasing managers, and neither do price concessions. How, then, do you win their business? The authors' research with 46 companies points to a solution: After meeting the customer's basic specs within an acceptable price range, give the purchasing manager "a justifier"--an extra that provides obvious value to the business. A car-leasing company, for instance, might offer the option to cancel a number of contracts without penalty, or a delivery service might print customers' logos on their envelopes. The justifier provides a clear-cut reason to select one supplier over others and breaks the tie among the finalists on the short list. To uncover justifiers, you should explore how customers use your offerings, learn about their priorities and those of their customers, and look at ways to integrate your offerings with other suppliers'. The right justifier can win you more business--and even help you launch a new one.

Innovative companies fund internal research and development to gain an edge in the marketplace. They also work closely with their suppliers in an effort to offer greater functionality and performance for their customers. However, some critical new product insights don't come from suppliers and customers working together but from the customer's customers. When suppliers and customers cooperate, the authors write, they can "tweak"the technology to provide big gains in value for the customer's customers. In contrast to recent research on how suppliers and customers cooperate to save on costs, the authors examine the innovation process to understand how to achieve outcomes for the end user that otherwise would not occur. Drawing on numerous examples from technology companies, they look at how suppliers and customers become open to tweaking the supplier's offering to better serve the customer's customers; what makes for successful tweaking; and various ways parties can share the fruits of collaboration so that everyone benefits. Although some progressive suppliers and customers saw the potential benefits of working together, many of the businesses the authors examined regarded this kind of cooperation as a last resort. Small suppliers saw large prospective customers as slow to make decisions and overly aggressive about claiming intellectual property that came out of collaborations; large customers also tended to withhold information about how they used the suppliers'technologies and their customers'applications. However, the authors found that some technology businesses consciously seek opportunities to cooperate with their customers and customer's customers. This was particularly true with small and medium-sized companies. The authors explore two key issues: the extent to which contact between the supplier and the customer's customer needs to be direct; and how businesses bridge across different partial understandings to improve their chances of success.

This is an MIT Sloan Management Review article. Many suppliers serving business markets believe that practicing value-based pricing means finding out what the value of their offerings is relative to alternatives for their customers and then charging as high a price as they can. But the authors suggest that "charging what the market will bear" isn't always the right strategy. Instead, they argue that an organization should tailor its pricing to a more robust market strategy. "Unfortunately," the authors say, "when stripped of jargon and word-speak the ' 'market strategy' for many businesses is simply' 'Sell more!'" To counter this problem the authors suggest several questions that an organization should ask to improve its pricing strategy, including: What is the marketing strategy in this segment? What is the differential value that is transparent to target customers? What is the price of the next best alternative offering? What is the customer's expectation of a "fair" price? By asking these questions and others, an organization can choose a price point that provides the largest long-term value to the supplier. The benefits of this approach include improved relations with customers that often lead to longer-term, more profitable relationships. Using this approach, customers are also more willing to collaborate with suppliers, which can lead to shared data and improved products. According to the authors, suppliers that practice this kind of value-based pricing boost profits not only in the present, but they also set themselves up to profit over the long term.

Examples of consumer value propositions that resonate with customers are exceptionally difficult to find. When properly constructed, value propositions force suppliers to focus on what their offerings are really worth. Once companies become disciplined about understanding their customers, they can make smarter choices about where to allocate scarce resources. The authors illuminate the pitfalls of current approaches, then present a systematic method for developing value propositions that are meaningful to target customers and that focus suppliers' efforts on creating superior value. When managers construct a customer value proposition, they often simply list all the benefits their offering might deliver. But the relative simplicity of this all-benefits approach may have a major drawback: benefit assertion. In other words, managers may claim advantages for features their customers don't care about in the least. Other suppliers try to answer the question: Why should our firm purchase your offering instead of your competitor's? But without a detailed understanding of the customer's requirements and preferences, suppliers can end up stressing points of difference that deliver relatively little value to the target customer. The pitfall with this approach is value presumption: assuming that any favorable points of difference must be valuable for the customer. Drawing on the best practices of a handful of suppliers in business markets, the authors advocate a resonating focus approach. Suppliers can provide simple, yet powerfully captivating, consumer value propositions by making their offerings superior on the few elements that matter most to target customers, demonstrating and documenting the value of this superior performance, and communicating it in a way that conveys a sophisticated understanding of the customer's business priorities.

In this article, authors James Anderson, professor at the Kellogg Graduate School, Northwestern University, and James Narus, associate professor at the Babcock Graduate School, Wake Forest University, illustrate several ways in which suppliers can figure out exactly what their offerings are worth by creating and using what they call customer value models. Field value assessments--the most commonly used method for building customer value models--call for suppliers to gather data about their customers firsthand whenever possible. Through these assessments, a supplier can build a value model for an individual customer or for a market segment, drawing on data gathered from several customers in that segment. Suppliers can use customer value models to create competitive advantage in several ways. First, they can capitalize on the inevitable variation in customers' requirements by providing flexible market offerings. Second, they can use value models to demonstrate how a new product or service they are offering will provide greater value. Third, they can use their knowledge of how their market offerings specifically deliver value to craft persuasive value propositions. And fourth, they can use value models to provide evidence to customers of their accomplishments. Doing business based on value delivered gives companies the means to get an equitable return for their efforts. Once suppliers truly understand value, they will be able to realize the benefits of measuring and monitoring it for their customers.

No matter how much inventory a wholesaler carries, when a customer places a rush order, the essential item is often out of stock. No matter how many services a dealer provides, what a customer needs is often one that the dealer has never supplied. And no matter how hard a distributor tries to beef up its capabilities, when a customer has an emergency, the distributor often lacks the skills to respond. A number of companies are experimenting with ways to make their distribution channels more flexible and responsive. They have realized that by sharing resources in novel ways, they can take advantage of opportunities that they could not exploit alone. Business dynamics and emerging technologies make this new approach both essential and feasible.

Virtually all managers are aware that the key to winning in the market today is tailoring one's offerings to the needs of each customer while maintaining low costs and prices. But most manufacturers have focused only on the products themselves, largely ignoring another element that differentiates a company's offerings and has a huge impact on costs and profits: services. Instead of tailoring their packages of services to customers' individual needs, many suppliers simply add layers of services to their offerings. The authors have found that suppliers usually give customers more services than they want at prices that reflect neither their value to customers nor the cost of providing them. But some companies are realizing that they can lower the cost of providing services and use them more effectively to meet customers' needs, gain more business, and enhance profits. From the authors' study of the best practices of those companies, they have developed a model for providing flexible service offerings.

To improve distributor relations, manufacturers must start by understanding distributor needs. This is accomplished by monitoring distributors - getting into the field and talking with them. Field sales reps must also talk among themselves. Some companies conduct market research studies to zero in on distributor needs. Others establish distributor councils where distributors meet with manufacturing executives to talk about ways to improve distributor programs. Once manufacturers identify distributor needs, manufacturers must work to build partnerships with distributors.