Ralph Vetsch has served as VP of Sales for several B2B technology companies and is sharing his real-world experience with channel readiness. 

The primary role of the sales organization is to sell. The primary role of the product and marketing organizations is to make selling easier.  

Too often, product management and marketing teams simply toss their products, marketing materials, and sales leads over the wall to the sales team. There is insufficient regard for how easy the product is to sell (or even if it is ready), whether the sales materials effectively accelerate the customer’s buying journey, or whether the leads are qualified.   

A reliable sign of lack of sales channel readiness is finger pointing and poor relationships among sales, product and marketing teams. 

It’s vital first to understand what it means to be “channel ready.” Based on our experience with dozens of B2B companies, organizations that treat product readiness and sales readiness as separate, linear components of the process are typically not as successful as organizations that see product and sales as a collaborative effort to ensure that the sales organization (either direct or indirect) is channel ready. 

While the details determining channel readiness will often differ from organization to organization, we have identified eight key action items that make up the minimal list of elements that should be in place.   

The Channel Readiness Action List

1.Defining the target customer(s):  

Identify the ideal customers. Define the target customer and the characteristics that make up that target customer. The more granular, the better. Channel ready organizations go beyond industry sector and firmographic data. They include psychographic and behavioral data to understand the customer’s decision journey, what motivates them and how they make decisions.

Learn More: Definitive Guide to Buyer Personas 

2. Aligning the sales process with the customer buying process:  

Have you defined (and documented) the sales process that maps to the buyer journey? Do you understand how marketing can increase sales’ effectiveness at each stage of the journey? Do you know which customer journey stages are most likely to slow the sales cycle—and do you have the right sales tools to address those?

Read: Mapping Your Sales Tools to the Customer Journey

3. Defining and addressing the competition: 

Do you know who or what your actual competition is? Are you losing most business opportunities to other vendors? Or to the status quo? Or to the customer’s decision to do it themselves (in-house)? Do you have the strategies and tools to address all of your competition?

Learn More: [Distinctive Competency] What Companies Can Learn from the Tennis Elbow Queen

4. Understanding and addressing customer objections:  

Do you have a documented list of common objections with how and when to handle them? Are your sales teams amply trained and rehearsed to identify and combat objections effectively?

Learn more:  Advanced Strategy For Building Effective Sales Battle Cards

5. Defining effective pricing:  

Does your pricing make sense? Is it easy to understand? Can sales correctly price the opportunity on their own? Are your sales teams too prone to drop prices to win business? Do they have sufficient training and tools to reduce the need to discount?

6. Generating mindshare and interest:  

Do you know how to get target customers to pay attention and truly understand your offering and its differentiation? Do you have a list of (magic) questions the sales team can use to establish the need and urgency and define the solution?

7. Building credibility and reducing perceived risk:  

Do you have a documented list of customer success stories that sales can use to show the customer that you can be trusted to be their business partner. Do you have the processes and tools to ensure that sales can quickly identify the best customer success stories and reference that best align to their specific sales opportunities?

8. Offering supporting technical details: 

Do you have documented product specifications that tie back to benefits that can validate your product with the customer and thwart the competition? Do you have the processes and tools to ensure sales can quickly access the most applicable and valuable technical details that best align with their specific customers’ needs and the competitive situation. 

Of course, collecting and communicating this information is not easy. Data collection and consensus building is needed to arrive at the answers. That consensus building starts with the collaborative alignment of product/marketing and sales teams. While this may be daunting for many organizations, ensuring a channel ready sales channel should be one of the product and marketing teams’ top priorities.   

Find Your Next (Or First) Pragmatic Course 

Pragmatic Institute offers eight product courses to help you take your career to the next level: Foundations, Focus, Market, Build, Design, Launch, Price and Insight. Use our course selector tool to help you identify which course will help you achieve your goals. 

Utilize the Course Selector Tool

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It would typically start like this: 

“I appreciate your recommendation to focus on a more specific target market…” 

I knew what was coming next. I’d heard it before—too many times before. But I let them continue.

“…but I don’t want to miss any chance to sell our products to the largest number of possible customers.”

Yep. That’s what I knew he would say. 

As a strategic consultant for years, I was far too familiar with FOMO – the fear of missing out on growth opportunities.

As a consulting firm that works with B2B companies to accelerate profitable growth, one of the biggest myths we need to help overcome is the concern that getting specific can limit growth.  

After all, there are so many markets we can serve that we would be foolish to turn down revenue. 

In fact, the reverse is true. Research from leading business schools has shown that the leaders delivering differentiated customer value outgrow competitors by 1.5 to 3 times. As Pragmatic Institute teaches, we want to select markets where there is an urgent need that is pervasive and there exists a willingness to pay.  

This article originated as an email I send to clients who are afraid to define their markets with enough granularity that it matters.

I am a tennis fanatic and play competitively as often as I can. Recently, I attended the virtual global tennis summit. 

To give you a sense of the event’s magnitude, Rick Macci (the coach who helped develop Venus and Serena Williams, among other superstars) was one of many famous speakers. 

In addition to this line-up of world-renowned coaches, a physical therapist from the US, Emma Green, gave a very well-received presentation. 

Emma bills herself as the “tennis elbow queen.”  If Emma was “just another physical therapist,” I doubt she would have had a speaking slot at this prestigious event.  

So what has this got to do with B2B companies? 

Given that so many companies struggle to differentiate themselves, they can learn much from Emma.

1. Focus is a competitive advantage: Rather than focus on all types of injuries that PTs address, Emma chose a specific focus area that aligned well with her expertise.

2. Your product should be in a space where people will pay to solve their problem: Tennis elbow is a persistent, nagging, painful problem many people have. It has a serious negative impact on their lives.  As a result, people want to resolve this issue urgently and are willing to pay to resolve it. 

3. Authenticity is the best brand: Emma has done a great job of marketing herself. Fortunately, her last name Green and queen rhyme. Phrases in that verse are much easier to remember. I had no issue remembering her name. However, I can’t imagine many executives wearing a purple robe. Instead, promote yourself in ways that work for you.  

4. Specializing will help you stand out: She was not afraid to “restrict” her marketing and practice to tennis elbow. Most PTs are trained to treat feet, backs, legs, etc in addition to elbows. However, if Emma decided to treat all potential issues, she would be “just another PT.” And not someone sharing the virtual stage with Rick Macci and others.  

5. People love brands that are generous with their specific knowledge: On her website is a ton of content on tennis elbow. She gives away a free secret exercise in exchange for an email address to build her list. 

6. Excellent customer experiences lead to excellent reviews: She also has lots of testimonials from satisfied clients. She told lots of success stories during her presentation. 

7. Passion for the problem is key to engaging with prospects: She truly has a ton of expertise on tennis elbow. She easily and compellingly spoke about tennis elbow for 90 minutes and could have gone much longer.

8. Being specific doesn’t mean you can’t be creative in defining your customer: Emma seems to restrict herself but not really. Tennis elbow afflicts thousands of people. And she has “expanded” beyond tennis elbow to address golfers’ elbow (pain on the inside of the elbow). Tennis elbow impacts tennis players, golfers, throwers, drummers and other musicians. The market is pretty large in actuality.

9. Being specific also doesn’t mean you can’t explore the entire environment affecting the problem: She also views the solution to tennis elbow as requiring treatment for things beyond the elbow. She talked about how shoulder and neck issues can exacerbate elbow problems, so treating these body parts is essential too. She also talked about the mind-body connection to tennis elbow. All of this gives her permission to talk about other things besides the elbow.  

10. Partners are key to growth: she didn’t have to put on the event herself, but she made herself known to the right people, so she got invited to speak at this premier event. Participation cost her nothing besides the time to present and follow-up leads.

I’m sure that she got lots of leads from her talk. And the other speakers have contacts and students with tennis elbows. I forwarded her to talk to a couple of my friends. I didn’t do this to help Emma, I did it to help my friends and they both thanked me a lot. 

At Baron Strategic Partners, we talk to our clients about the four steps of customer value creation.

1.  Identify the value beneficiary- namely those people and organizations that get the most value from your offering. For Emma, it is the thousands of people who suffer from tennis elbow.
2. Articulate your value proposition to the value beneficiary- Emma’s value proposition is that she helps people with tennis elbow get their life back and enable them to rejoin the activities they enjoy.
3. Design your value delivery system- Emma ensures she can deliver her promised value proposition by becoming an expert in treating tennis elbow.
4.  Communicate your value proposition to the value beneficiary- Emma, through her writings, her book and her presentations at events like the tennis summit, has spread the word about her tennis elbow expertise. Her presentations are a win for the summit, a win for the attendees and a win for Emma.

Most companies fail to articulate the four steps of customer value creation as effectively as Emma. As a result, they struggle with the perceived commoditization of their offerings and resort to discounting as a source of differentiation. They also fail to achieve and promote a distinctive competency.  

There is a lot to learn from Emma’s positioning and target market selection. If you ever have tennis elbow, you know who to contact.

Foundations 

Learn how to develop an understanding of your market and effectively share that information throughout the organization. 

Students learn how to become market-driven by exploring concepts such as how to uncover strategic opportunities, define product team roles and responsibilities, prioritize actual vs. desired business goals and how to talk to and observe the market in action. 

Learn More and Enroll Today 

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During an economic downturn caused by a crisis like the COVID-19 pandemic, hunkering down and waiting for better times is a natural response. It’s comfortable. However, challenging times present a significant opportunity to build a long-term competitive advantage—as long as your organization is built on a foundation that allows for flexibility and adaptability in its products and services.

As companies prepare for the future, they are asking how product management and product marketing professionals can help. Payfactors, a B2B compensation technology company that helps organizations ensure they attract and retain the best talent, is a case study in how established product offerings and client-experience best practices can allow a company to adapt and pivot.

Since its founding in 2014, Payfactors has provided tools for companies to understand how their employee pay trends against an ever-changing market and how they should adjust. These insights drive employee retention, ensure pay equity, and help manage companies’ No. 1 expense: payroll.

More than 20% of Payfactors’ customers are Fortune 500 companies. They span 22 industries and represent more than 12 million employees with combined salaries of more than $466 billion. Its customers typically have a dedicated staff of compensation analysts.

Though relatively young, Payfactors has seen 40% annual growth since it was founded. To sustain this growth, the company has kept a close eye on the market and stayed adaptable. Specifically, Payfactors took several proactive actions prior to 2020 that enabled it to adapt when the pandemic hit.

Action 1: Focus on Solving Market Problems

The Payfactors founders are self-described “compensation geeks.” As a result of their deep understanding of compensation, they realized that large organizations struggled with issues such as centralizing their internal employee compensation data—which was largely managed in spreadsheets—and reconciling this data against market surveys.

Compensation professionals don’t want to be considered a back-office function. They want a seat at the leadership table to help drive business strategy via compensation strategy. But if they spend too much time on small, transactional tasks, they have no time left to think about compensation as a strategic tool.

From the start, Payfactors focused on providing tools to reduce tedious activities and enable compensation leaders to connect the dots between compensation and talent management strategies. This market need–driven message resonated, and the company grew rapidly.

Payfactors’ senior management team recognized the reason for this success: fostering a culture that continues to ask, “What is the biggest market problem in compensation, and are we solving that problem?” This market-problem focus served them well at the onset of the COVID-19 crisis.

Action 2: Challenge Assumptions and Value Outside Expertise

Payfactors’ senior leadership has a combined 60 years of compensation experience, making it easy to fall into the trap of thinking “we know everything.” What made them successful since the company’s inception could blind them to future opportunities.

For example, the company achieved explosive growth selling to compensation departments of large, enterprise-scale organizations. Leadership believed there was an opportunity to expand into the middle market (companies with 250 to 1,000 employees). Initially, leadership believed that middle-market companies were simply smaller versions of large enterprise organizations—and that the same messaging and sales approach would mean success. However, under the Payfactors culture, these assumptions about the middle market needed to be challenged.

In summer 2019, Payfactors engaged with a B2B market expert, Neil Baron of Baron Strategic Partners, to objectively identify potentially dangerous assumptions. Together, they listened to sales calls, spoke with salespeople, reviewed client case studies, and interviewed customers. Through these exercises, it became obvious that what was successful with large enterprises would not resonate with the mid-market.

The key insight from this work was realizing smaller companies do not have a compensation department and, thus, the buyer need is different. In smaller companies, compensation was included among other tasks on the HR team’s plate. These HR generalists wanted compensation data, but they didn’t have the time or desire to become compensation experts. Armed with these insights, Payfactors revised its value proposition and organizational structure for the mid-market.

Within nine months, they restructured their sales organization to introduce a dedicated leader, business development representatives and sales approaches targeting HR-generalist buyers. This new team came back with more learnings around specific market problems for this segment. These learnings helped Payfactors to expand its “Payfactors Free” offering, which originally targeted only small businesses.

The impact was substantial. In the quarters after the team restructures, the company reduced the time it took to close new deals by more than 10% when compared with prior years. And the insights gained during the mid-market project proved valuable during the pandemic.

Action 3: Establish the Role of Chief Client Experience Officer (CXO)

As Payfactors grew, senior management wanted to ensure that the company maintained its laser focus on the customer as well as the market problems that needed solving. As vice president of product management, Russ Wakelin approached his role by going into the field, interacting with clients frequently and measuring the success of product improvements with direct-use metrics.

The founders appreciated Wakelin’s approach. He created processes that connected with customers and related to them on an emotional as well as business level. His approach caused management to ask, “What if this process could be extended beyond product research into a more holistic, cross-functional look at optimizing the client experience?”

In fall 2019, Wakelin was promoted to the newly created Chief Experience Officer (CXO) role—something that has emerged in many organizations in the past decade but was a new concept for Payfactors. Together, Wakelin and Payfactors CEO, Jeff Laliberte, looked at what a CXO role generally looks like, then refined it to fit the company’s specific needs. They established three broad goals for the role:

1. Monitor client health through metrics such as net promoter score
2. Encourage client and employee interactions and engagement
3. Drive thought leadership.

Shortly after establishing the role, Wakelin traveled to dozens of clients and spoke at regional compensation conferences and gatherings. Working with client success managers, he visited clients onsite, listened as they explained the value they got from Payfactors, and discussed future challenges they were facing. Customers were carefully targeted for visits based on renewal dates, risk, and complexity.

Discoveries from these interactions were shared with the broader Payfactors organization via weekly impact summaries. These reports, which included session recordings, were used to improve features currently in development, generate product upsells, schedule follow-up training to re-engage clients who were underutilizing the system, and shape thought leadership and market hypotheses. Retention for clients with CXO-driven interactions increased by more than 15%.

Adjusting for a COVID-19 World

The actions Payfactors took in 2019 allowed the company to adapt quickly when the pandemic hit.

Leverage the CXO

Centralizing ownership of the client experience into the CXO role enabled Payfactors to quickly pivot how it interacted with clients. This was especially true for clients in hard-hit industries (e.g., hospitality, restaurants, airlines). The CXO quickly established virtual meetups with clients as well as prospects in similar industries. Wakelin structured the format so participants could engage with each other and discuss the various challenges facing their compensation and HR teams.

It was a cathartic experience that strengthened Payfactors’ client relationships by demonstrating empathy and support. Additionally, Wakelin quickly learned how COVID-19 affected different industries, how to adjust client risk profiles, and which specific market hypotheses needed to change.

The feedback became a way to scale CXO client interactions from dozens per quarter to hundreds. In just one month of running two meetups per week, more than 200 clients had participated. And more than 90% of participants requested that the meetings become routine. Many themes emerged that proved as valuable as the client engagement:

• Furloughs and company layoffs reduced some industries’ compensation teams’ headcount to near zero
• Companies needed up-to-the-minute market data more than ever
• The desire to communicate with peers was high

Leverage the Mid-Market Project

The mid-market project exposed that selling to companies with a compensation team is different than selling to HR generalists who don’t want to be buried in compensation details. When the meetups revealed that many larger companies had furloughed their compensation teams, it was a problem that Payfactors already knew how to solve. It needed to talk to these lean clients as HR generalists, not compensation geeks.

Fortunately, the plays built by the mid-market team already included stories around the value proposition for HR generalists. The market need was pivoting to Payfactors’ strengths, plus the mid-market team’s messaging could be used to expand these stories back to the enterprise companies that had experienced compensation-team furloughs.

Modify Pricing and the Product Offering to Fit the Current Situation

Like many companies, Payfactors offered a free version of its product. In response to the pandemic, the company pivoted the value proposition of the free version from “Free for Small Business” to “Payfactors Community Free” for organizations of any size. In less than a month, Payfactors Free Community was adopted by more than 180 new, high-profile enterprise clients.

Before the crisis, Payfactors believed that enterprise clients would not see much value in a free offering. By staying true to its culture of challenging assumptions, Payfactors adapted to market changes, pivoted its offerings, and tried something new. As a result, a stable of strong future sales leads with marquee brands was generated.

Long-Term Planning and Adaptability Pay

The Payfactors case study is one model for converting smart investments into a strategy to remain relevant, regardless of the crisis. Organizations that made investments in building customer relationships and collecting customer insights have built a strong foundation to adapt to market shifts. For organizations that didn’t make those investments, it’s never too late to start.

Product management and product marketing leaders can begin by answering a few questions:

• How can we stay close to our customers, both intellectually and emotionally, when we cannot visit them in person?
• How do we use our customer insights to make the appropriate pivots to our value proposition?
• How do we keep our value propositions self-evident and easy to obtain?
• What are our processes for gathering routine market and client information to challenge our assumptions and answer the question “where am I wrong?”

Now is the time to execute product management, product marketing, and customer experience best practices to build the foundation for a successful post-COVID environment. As Payfactors has demonstrated, this effort will make your organization more resilient in challenging times. And hunkering down until the COVID-19 crisis ends is not an option.

Learn More:

Certification Courses

• Foundations: Uncover the secrets of creating a market-driven organization
• Focus: Strategic product planning
• Build: Because having a plan is not the same as having a product

The post Survive or Thrive: The Role of Product Flexibility and Adaptability in the Face of a Crisis appeared first on Pragmatic Institute - Resources.

The odds of survival never changed; it was always 90%. Yet, the percent of people who chose to go forward with surgery shifted dramatically depending on how risk was explained, interpreted, and processed. The way data was presented changed how people reacted.

While an interesting anecdote, you may wonder how it relates to product management and product marketing. The answer is, understanding how people process and react to information can make or break your product.

Our subconscious constantly filters all information we gather in some way, and it affects the conclusions we draw—this is true for everyone. Virtually every minute of our waking lives we receive information, process information, or give information, and it’s in each of these stages when cognitive biases arise.

Originally developed by social scientists Daniel Kahneman and Amos Tversky, cognitive bias is an umbrella term that refers to the systematic ways in which the context and framing of information influences individuals’ judgment and decision making. Simply put, cognitive biases—further articulated in Kahneman’s best-selling book, Thinking, Fast and Slow—are shortcuts to decision making that deviate from rational objectivity. They also have the potential to result in suboptimal decisions. And how people gather and use information in decision-making may be related to how they evaluate their options.

In product management, we constantly gather information from a variety of sources. And regardless of whether we like it, our perception is clouded by cognitive biases that act as filters through which we view and interpret the world. Yet, our job is to understand what current and future customers need, communicate those needs throughout the organization, and compellingly translate how our products address those needs to the marketing and sales teams. When we communicate, we must disseminate messages, value propositions, product strategy, roadmaps, and other concepts to internal and external audiences as effectively as possible—and we want our audiences to process this information in the way we intend.

For example, consider the term “power user.” When our minds conclude that someone is a power user, we’re likelier to give more credence to his or her comments. Or, if a user is viewed as “unsophisticated,” his or her feedback may be invalidated to some degree. Bias also manifests itself in unconscious ways, such as the proverbial “happy ears,” which leads to only hearing what we want to hear and disregarding the rest.

Wikipedia lists more than a hundred different types of cognitive biases, most of which affect our ability to make rational decisions. But let’s consider just three that certainly affect us as product managers.

Bias No. 1: We Hear What We Want to Hear

Known as confirmation bias, this has us believing and focusing on facts that support our beliefs while ignoring the facts that don’t. Perhaps you believe your product needs a new feature, so you visit with several customers. The customers talk and you listen, but your subconscious gives more weight to those customers who agree with you and dismisses those who don’t.

Additionally, because we frequently search for evidence to support our ideas, we may subconsciously fall into the trap of asking questions that support our theories. For example, you hear a customer say, “That’s interesting,” in response to a potential new feature. Because this is something you’d like to see implemented, you may only consider a positive interpretation of the word “interesting.”

Confirmation bias also causes us to think we know answers before we’ve even asked the questions—if we even ask them at all! Our subconscious is telling us, “That’s silly! Of course, our customer needs this.”

Tips for Dealing with Confirmation Bias

• Before talking with a prospect or customer, create a list of questions to guide the conversation. Don’t assume that you know the answers to any of these questions. The goal is to engage your prospect or customer in an intelligent conversation. Asking what seems to be an obvious question sometimes can reap big rewards.
• When possible, conduct these interviews with a partner or third party, and then review what you heard immediately after the interview. This allows you to review the conversation with someone else, helps identify any biases, and validates the information you gathered. It’s amazing how often people can be in the same conversation and hear radically different things.
• Get your notes on paper as soon as possible. Relying on your memory alone could lead to reintroducing biases into the mix. (The verbatim bias tells us that memories aren’t exact copies; rather, they are representations shaped by our emotions.)
• When collecting responses and drawing conclusions, ask yourself two questions: “Are the conclusions I’m drawing supported by what the interviewees actually said?” and “If I were an unbiased third party, would I draw these same conclusions?” You also may want to involve an unbiased third party in the data analysis.

Bias No. 2: Laziness Is Human Nature

Known as the law of least effort, this bias states that if there are multiple ways to accomplish a task, it’s human nature to choose the one that requires the least effort … even if it’s the least effective. The effort we seek to minimize can be mental or physical, and it’s true for us and for our consumers.

We spend our working days thinking about our company and our products. We know our company’s history, mission statement, and office locations. We know our products’ features inside and out. None of these details take a lot of mental energy for us; it’s all top of mind. Meanwhile, our customers probably don’t care about the company’s history or office locations—they want to know how our products will solve their problems. But, because we know our products so well, at times we can overlook or forget to convey these details. We force customers to do a lot of the mental heavy lifting to figure out our products’ features. Make it easy on your customers. Instead of using jargon, use simple language, storytelling, and examples to make your point.

Conversely, it’s hard work for us to understand our customers’ business issues and challenges. This requires a lot of intellectual horsepower and emotional energy, and yet these are relatively easy issues for our customers to express. Their challenges and needs are at the top of their minds, and it’s our responsibility to make it easy for our customers to understand how our products and services will help them solve their day-to-day issues, drive their business and achieve their goals.

Tips for Dealing with the Law of Least Effort

• Mental work is tough, but you can use it to your advantage. Incorporate common metaphors to describe your products and services. Use stories to get your point across. Minimize the technical jargon and be aware of the curse of knowledge: The more expert we are, the more difficult it is to communicate with nonexperts.
• Always come back to the business problem your product or products solve. Go beyond taking the easy path (discussing features only) and help customers see how our products will help them address their issues. Show the connection between the product and the problem it’s solving.

Bias No. 3: We Don’t Like Change

A preference for the current state is known as status quo bias, and it is tightly coupled with another major bias, loss aversion, in which we fear losses more than we value gains. The current state is the reference point, and any deviations from that point are perceived as a loss. Kahneman and Tversky have demonstrated in numerous experiments that fear of a loss is twice as powerful as the satisfaction of a gain.

Remember: A customer may be reluctant to change—even if your product can deliver significant advantages or is a big improvement over the customer’s current state. Even if the customer is unhappy with how the current product works, time and energy already have been invested into learning it, and your customer may not be open to learning something new. Your company has its sights set on product success, but customers’ status quo bias often explains why your product fails to meet those internal expectations.

Tips for Dealing with Status Quo Bias

• Clearly document the reasons why your customer may want to consider making a change. Are those reasons compelling? How do you know?
• Take time to truly understand why a customer may prefer the status quo, and then document the true costs of implementing your solution. These costs must include standard financial costs—training, implementation time, product costs, service fees, opportunity costs—as well as emotional costs, such as the risk of failure, looking foolish, decision regret, and implementation delays. For each of these reasons, develop strategies for mitigating the risk of making the change.
• Because people are willing to pay more to avoid a loss than they are to achieve a gain, it’s important to convey to the sales and marketing teams how your products will prevent a loss for your customers.

Clear Your Preconceptions

As much as we think we are rational human beings, we are in fact flawed and biased. Unless we are self-aware and careful, bias will creep into the way we receive, process, and give information. While there are hundreds of biases to which we may subconsciously fall victim, confirmation bias, the law of least effort, and status quo bias each change the way original communication is received or understood, and therefore, are particularly critical for product professionals. And remember, it’s not just our own biases that we need to heed, but the biases of those with whom we are communicating.

The post It’s All in Your Head: The Effect of Cognitive Bias on Our Decisions and Our Products appeared first on Pragmatic Institute - Resources.

The only way to predict the market’s need for new technology is to get out of your insulated office and ask the right people the right questions. As Pragmatic Institute Rule #7 reminds us: “Your opinion, while interesting, is irrelevant.” If a product is truly going to change the world, it requires market insight, commitment to solving market problems and a plan to get there.

A company called Renesys faced this challenge. Renesys had the ability to measure global Internet performance through a core technology that used a state-of-the-art global sensor grid to continuously monitor, collect, analyze and correlate Internet routing and performance data. Renesys’ customers understood how the Internet changed in real time and could make decisions to ensure their products and networks were continuously available to customers and connected in the best possible way. Although interesting, the information was squarely targeted at a particular set
of customers: the business development groups and network engineering staff at Internet service providers (i.e., Comcast and British Telecom) and network service providers (i.e., Level 3 and NTT).

Dyn, the leading Internet performance provider, acquired Renesys in May 2014 and leveraged years of research and development to bring the Internet Intelligence product line to market. Dyn knew it had something unique, but not all stakeholders in Dyn’s existing customer base understood the need for this technology, or what it would mean once the companies combined. Dyn’s challenge was to translate its value to the broader enterprise IT market as it prepared to transition to the cloud.

Dyn understood that simply rebranding the Renesys product wouldn’t be enough to create an immediate market demand for Internet Intelligence. While Dyn knew that its 3,000-plus customers needed the Internet performance products it could now produce to provide a comprehensive view of their Internet presence, their customers did not. Dyn needed to explain the value from the customer’s perspective; it needed to understand its customers in a new way.

Dyn immediately understood its challenges:

1. A few large design partners drove revenue and the roadmap. Renesys products typically targeted the service provider space.

Work on a market-expanding product was just getting underway, but the product roadmap for the new product suite was driven by a handful of key design partners that continued to drive revenue and requirements. Dyn needed to consider the needs of its larger customer base and how the product line would broadly appeal to them.

2. The product was designed for technical users. The Renesys Internet Intelligence product was regarded as a best-in-class solution. Technical users loved the information and detail, but to take full advantage of the solution required a high level of expertise and training. In order to gain value, non-technical users needed to have a base knowledge of the Internet’s inner workings and specifics on the product. Relatively few users had this type of knowledge.

3. Specific customer problems were not defined for a broader market. Just as enterprises needed the technical skill to use the original product, they also needed the technical foresight to understand how the new technology could help them. Refining current use-cases for broad market appeal became an immediate priority.

Dyn quickly recognized its need to create a process to overcome these challenges. Dyn contacted Neil Baron from Baron Strategic Partners to lead an objective, third-party effort to remove ambiguity and bias as it brought its new Internet performance products to market. The companies began work to reposition and establish customer-centric value propositions for the Internet Intelligence product line. Dyn’s leadership set an external launch date of September 16, 2014, which gave Dyn something to work toward and effectively raised the urgency on the difficult process.

The Approach: Refining the Value Proposition

Any product refinement process begins with identifying the key questions that will eventually impact customers. Unfortunately, companies often make assumptions about their potential customer market. This tends to differ from actual market data and prevent a company from developing a product or service that customers value.

For example, Internet Intelligence was an innovative product for Dyn because it could tell users how the Internet was performing at any given time in any part of the world. But the relevance of these analytics would be lost on most of the potential customers that Dyn already knew. It was not a commercially viable go-to-market strategy to assume that the prospect of a “cool” technology would impress customers. Dyn needed to focus on translating the technical features of a complex product into business value that customers and prospective customers could understand.

To develop a successful go-to-market strategy, the Dyn team established a process to answer the following questions:

• What customer problems does Dyn’s Internet Intelligence product line solve?
• Where is the best market fit for Internet Intelligence?
• What is the value proposition to Dyn’s existing customer base?
• What does Dyn actually know about its customers, and what assumptions has it made about them?

Stakeholders learned how to engage in objective conversations to identify ideal target customers and their reasons for buying. This was critical, because for a company to deliver superior value in a profitable way, it has to choose the right customers: those who will get the most value from a vendor’s offering. These customers are most likely to buy a new product and become loyal customers, with minimal discounting required by the sales team.

A company must also be absolutely clear about what value customers will receive when they buy the product and the entire organization must understand its role in profitably delivering this value.

Steps to Providing Superior Customer Value

Customer Interviews

Options for collecting customer information include surveys and sales anecdotes. But nothing is better than actually talking with customers who have used a product. By leveraging his third-party status, Neil managed to avoid common barriers and ask tough questions that he could translate back into unbiased data for Dyn. He also encouraged Dyn to sit in on his interviews to get a feel for this unbiased approach. The interviews were crucial to knocking down organizational silos by ensuring that Dyn put customers at the center of the conversation.

Segmenting and Targeting Customers

Segmenting a market typically starts by focusing on the vendor. However, Dyn honed in on market need for its Internet Intelligence product line. It segmented customers based on urgency of need. This was an important distinction, because at launch, the Internet Intelligence product line was a future technology for many potential customers. Segmenting by urgent need, non-urgent need, no-need and need already met helped Dyn articulate its go-to-market strategy.

Iterative Workshops

Neil and Charlie Baker, Dyn’s director of product management, conducted workshop sessions where they used market segmentation data to refine the customer value proposition for the product line. Dyn looked at which customers needed the product line and examined whether there was a value proposition for those with no current need. This allowed Dyn to make critical decisions that tailored the product to true market demand.

Objective Customer Interviews

It’s sometimes difficult to speak objectively with customers; you can become excited by a customer’s reaction to the product, or defensive if the product doesn’t impress. But it’s critical to building a successful go-to-market strategy. Much time was spent honing these skills on Dyn’s product team. Post-launch, Dyn continues to cultivate a stable of customers who are open to honest conversations and educate its employees about how to conduct these interviews.

Process Results

Dyn successfully launched its Internet Intelligence product line in September 2014 with a SaaS-based product that provides real-time visibility into critical Internet connectivity and routing data. The go-to-market process identified similarities between Internet service providers and the largest enterprise businesses in the world. The target company size for the initial Internet Intelligence products, therefore, was Global 2000 businesses, because these companies fit into the urgent need segmentation category.

Urgent Need Example—A Global 2000 company is growing globally and expanding its current data center footprint. These enterprises dedicate a tremendous amount of energy in the decision-making process and execution of network expansions. What information is available for them to make a decision? Will the new data center location serve their target customers and critical business partners well? Will performance meet expectations? Which transit providers are key to consider?

By identifying the potential customers based on their current and future needs, Dyn knew where and whom to target.

Market Results

More than 10 publications—spanning business, tech and trade publications and top analyst firms—wrote about the launch of the Internet Intelligence product line. These included reviews in Network World, in additional IDG publications and a feature story in Quartz about the need for tools like Internet Intelligence. If Dyn had not changed its product focus to address customer pain points, a value-focused review like Network World’s would have been impossible.

Slow Internet links got you down? It’s Dyn to the rescue. Internet Intelligence is an interesting product and has solid value. Before it was available, if you wanted to ping any IP address or Internet provider, you would have to know the location of either and try to piece together what is happening from the results. It was time-intensive and tedious. Internet Intelligence makes this process easier by having several basic troubleshooting routines that are available.
—Network World

Customer Results

Beyond coverage, Internet Intelligence saw success where it matters most: with customers. Large brands looking to grow their international footprint, such as LinkedIn, became Internet Intelligence customers. Fitting in with Dyn’s initial strategy, existing enterprise customers, like Ustream and Interxion, also bought the product. Now, almost a full year after its launch, interest and sales are driving key initiatives across the business.

To begin the process, Dyn acquired a unique, state-of-the-art technology from a highly talented team at Renesys. Partnering with a third-party consultant, Dyn objectively determined the exact market need for its product, based on hard data. With a customer-centric focus, Dyn successfully launched its Internet Intelligence product line, spoke to actual market demand, and transformed a specific market technology into an important tool, applicable to a broad market.

The process, however, remains ongoing. Dyn understands that its product line is useful to new market verticals with specific use cases and is using these customer-first, unbiased methods to determine exactly who these customers are and what these uses include. As the progression of Internet Intelligence products unfold, Dyn will unveil them to an even larger audience.

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Facing increased competition and a rapidly changing technology environment, Acme felt margin pressure in its core markets. Increasingly, price determined deals. The dreaded “C” word—commodity—was used to describe Acme’s core offerings.

To its credit, Acme management recognized the need to change while things were still going well. To maintain growth and margins, management decided to differentiate Acme by offering a portfolio of value-added services (VAS). The VAS offerings enabled Acme to engage with customers at a more strategic level and deliver unique business value.

Acme successfully pivoted, despite external and internal challenges. The end result was a lucrative acquisition by a multi-billion dollar company. Acme’s journey—from struggling with commoditization to providing a robust suite of value-added offerings—contains several lessons for companies eager to differentiate themselves. The antidote to commoditization is to increase the value delivered to customers, and prove that value through exhaustive reporting and performance measurement.

But if a business isn’t in crisis, people will resist change:

• Salespeople may push back on changing how they relate to their customers, particularly when they’re still successful selling the old way. They must now sell solutions, which requires new tools and a deeper level of engagement.
• Marketing needs to shift its focus to communicate value instead of features, and must start by understanding customer needs at both holistic and granular levels.
• Engineering must identify process inefficiencies and opportunities to deliver untapped value, instead of focusing on technology advancements.
• Other functional groups will resist changes to their well-hewn processes.

Most companies lack the experience and expertise to lead this effort, and there’s no roadmap. However, the following six-step approach helped Acme in its quest to focus on selling value.

1. Establish a Team to Focus on Customer Value

Acme took the critical step of investing in a customer success organization and creating the role of customer success manager. The customer success manager role included:

• Pre-sales: to support sales’ efforts to discover and present opportunities to sell value
• Post-sales: to ensure that customers realize the value they expected when they purchased VAS

To convey and reinforce the value it delivered, Acme scheduled semi-annual business reviews with each customer. In these in-depth sessions, Acme presented a thorough, quantitative impact analysis—using the customer’s own data—of the VAS the customer had adopted, and a prospective look at other services that may not have been considered. These analyses also yielded success stories for marketing, and provided feedback to the product team about potential enhancements and new VAS. They created a virtuous cycle. The business reviews helped Acme uncover new ways to add value by:

• Increasing customer revenue
• Decreasing customer costs (e.g. by finding and correcting inefficiencies)
• Mitigating customer risks

2. Uncover Your Hidden Value

Most organizations already provide differentiated value to their customers. However, because they are so focused on promoting their technology, they can’t recognize the value they actually deliver.

For example, Neil worked with a successful chemical company that developed a new way of removing toxic materials used in certain manufacturing equipment. The chemical company focused on promoting the technology and specifics of the cleaning agent’s molecular structure. After all, why wouldn’t everyone want to use xenon difluoride in their equipment?

Unfortunately, by focusing on how the toxic materials were removed, the new technology’s true value was hidden from the chemical company and its customers. A fresh pair of eyes helped the company realize that the real value was in reducing toxic waste, limiting employee health risk and improving equipment performance, not in the use of xenon difluoride. Once the company uncovered and articulated this hidden value, product sales took off.

3. Refine Your Value Propositions

Most companies have a false sense of security about how effectively their value propositions resonate with customers. In a fascinating research study, Bain & Company surveyed hundreds of seasoned executives. A resounding 80 percent answered “yes” when asked “Do you deliver a superior value proposition to your customers?” When they asked customers for their opinion, only 8 percent agreed.

This survey is a few years old, but things haven’t changed. A company’s value proposition often isn’t what executives think it is.

Companies must objectively challenge assumptions about their value proposition and place customer interests first. Using a value proposition refinement process can help achieve organizational consensus and create a more powerful value proposition. In Acme’s case, they used Baron Strategic Partners’ value proposition refinement process. The process began with internal and external assessments of the company’s value proposition and included several cross- functional working sessions to refine that value proposition.

4. Validate Your Value Proposition

It’s vital to test the refined value proposition with your target market. Companies frequently assume they know what their customers value. And yet we are amazed at what we learn from in-depth customer interviews.

For example, the CEO of a contract manufacturer was convinced that its value proposition was simply “we make things at lower cost” and that his company won because of its low prices. When Neil spoke with a couple of customers to validate the CEO’s assumption, he discovered that customers loved the contract manufacturer for another reason: its expertise enabled customers to enter new geographic markets faster and bring new products to market quicker. Low prices weren’t even a consideration! By misunderstanding why customers bought its services, this company focused on providing the lowest prices, and left a lot of money on the table with suboptimal pricing.

5. Align Your Organization to Deliver the Value Proposition

Many organizations work in silos. And while each department does what it believes is most important for the company, departments rarely agree on what that is. Deliverables are thrown over the wall from development to marketing to sales. According to innovation guru Clay Christensen, this “over the wall” process fails more than 90 percent of the time. Revenues disappoint and the vice president of sales gets blamed.

Placing customer needs first addresses the failings of this approach. Each functional group must be involved in developing the value proposition. Once groups achieve consensus, it’s critical that each one understand its role in delivering the value proposition.

After we emerged from this process at Acme, the head of engineering stated: “From now on I’ll prioritize our development projects based on the value they each deliver to our target customers. The projects that deliver more value will get a higher priority.”

6. Sell Value Not Price

The primary reason salespeople fail is their inability to articulate a strong value proposition, according to several recent studies. That makes it critical to establish a value proposition that the sales team understands.

Too often marketing creates sales tools and training based on what it thinks the sales team needs. The net result is that 75 percent of all sales tools go unused and most training gets poor grades, according to Forrester Research.

Acme recognized that selling value required a new approach. It began by documenting steps in the customer buying process. It then mapped the sales steps required to move customers through the buying process. With a strong value proposition and the buying process map as its foundation, the company created a sales enablement playbook. The sales reps loved it. According to Acme’s vice president of enterprise sales, the playbook cut in half the time it took for sales reps to become comfortable selling VAS.

After providing sales with the tools to be successful, Acme turned to motivation. Because salespeople are competitive by nature, Acme celebrated the initial successes at selling VAS, and subsequent successes for each deal closed at a higher price point. When salespeople who may have been dubious about selling VAS saw the success of their peers, they changed their own approach to book more business and get higher commissions. Over time, the entire team recognized that selling VAS made their jobs easier.

When Acme began its journey from emphasizing commodity technology to selling value, it was uncertain how things would turn out. However, with the support from top management and the right outside expertise, Acme followed these six steps and continually sought out value-selling best practices. Results exceeded expectations. VAS now account for more than 25 percent of the company’s revenues. And because of VAS, Acme had many suitors, eventually selling for 2.5 times more than comparable companies received.

Key Takeaways

Engaging customers at a more strategic level is never easy, but keeping these lessons in mind will help.

Change is harder than you think. Expect pushback from parts of the organization that are afraid of change.

There is no roadmap for doing this. Although we outline steps that are key to this successful migration, there’s no cookie cutter recipe to follow. Tailor your approach for your specific situation. Consider your organization’s readiness to change, the market pressures you face and internal politics.

Question assumptions about your value proposition. You can kill your value-selling effort if you assume you already know what your customers value. As the Bain & Company study highlighted, many executives incorrectly believe their companies provide superior value to customers.

Leverage outside expertise. If you need help, find an outside firm with the track record, framework and expertise to help guide you through this effort.

Establish the right metrics. Companies may view their value-selling effort as the company savior and set unrealistic expectations. Change takes time. While we applaud setting stretch goals, companies that set unreachable targets risk demoralizing their teams.

You are never done. This effort must be viewed as a continuous process. Market and customer needs change over time. New competitive threats appear. Companies make a big mistake when they complete the process and don’t revisit it once or twice a year.

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