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Everyone’s familiar with Maslow’s hierarchy of needs, right? The psychologist argued that “all human actions are motivated by an innate desire to fulfil needs ranging from the very basic (security, warmth, food and rest) to the complex (self-esteem and altruism).
Put more simply, you’re not going to give your last berry to the guy next door if you’re worried about where your next meal’s coming from.
Harvard Business Review (HBR) recently created a hierarchy of needs for the B2B industry. It layers different values that people in corporate roles use to make their decisions when it comes to finding, buying and using business products and services.
I’d recommend reading the full version here. But it’s pretty lengthy, and if you’ve only got a short train journey or two minutes while you wake up with a cup of coffee, we’ve put together this summary for you.
Using 40 elements that B2B offerings provide to customers, the team at HBR created a pyramid. The most objective elements are at the bottom and get more subjective and personal as you go up.
So, what does it mean?
Table Stakes and Functional Value
The table stakes and functional elements will sound familiar. Offering and delivering on these values is traditional in the B2B market. And it’ll continue to be: both buyers and sellers will still focus on these.
Ease of Doing Business Value
As it says, these aspects make it easier for customers to do business.
Some are objective, like increasing productivity (time savings) and improving operational performance (simplification).
More subjective aspects are introduced, such as building relationships between buyer and seller (cultural fit) and commitment.
This section is almost entirely subjective, addressing the individual an organisation wants to sell to.
It splits into personal priorities (reduced anxiety) and career-related priorities (network expansion, increased marketability).
These elements address highly emotional concerns – a word once forbidden from the B2B world. But when people need to spend large amounts of money or make decisions that will affect many employees, anxiety levels can skyrocket. Offering risk reduction or reputational assurance can help ease these worries.
From our point of view, at Enigma, we specialise in helping our clients on this level – so it’s interesting to see this appear in HBR’s pyramid. Our ABM approach concentrates on these values and emphasises where our clients stand out.
These aspects will help a customer define and create a vision for the future, such as helping a customer predict trends and changes in their market.
Likewise, they provide hope for the future, in that the customer can use next-gen technology easily and affordably.
It even looks at enhancing a customer’s social responsibility – something that will only grow in importance over the coming years.
The elements at the bottom of the pyramid are easy to measure and compete on. You either meet the specs or you don’t. You either offer the best price or you don’t.
But as you move up the pyramid, the emotional elements make it harder to measure and therefore harder to compete. How you can isolate and quantify someone’s emotional response? But “the battle for differentiation” (as HBR refers it) calls for more emphasis on these aspects. And when it’s harder for a business to improve a customer’s total experience (“the service, support, interactions and communications wrapped around an offer”) than making an offering “faster, cheaper, or more durable”, then what?
Putting the pyramid into action
It’s all well and good to use the pyramid as it is and to try to improve your organisation’s offerings off the back of that alone.
But HBR’s next step was to “understand how delivering on the elements affects company performance and…customer loyalty”. The team surveyed 1,050 decision makers in IT infrastructure. They gathered information about how sellers perform on the elements in the pyramid (with the exclusion of the table stakes – these are a pre-requisite for being in the sector, not a way to differentiate).
What matters most to B2B tech buyers?
The first – and most important – point to consider is this:
“excelling at multiple elements pays off.”
It strongly correlates with higher customer loyalty. To the point where HBR found a nearly one-to-one statistical relationship between ‘performance on elements’ and ‘customer loyalty’.
Makes sense, right? If you do well at all the services and products you offer, you’re going to have a loyal customer base. And, as you’d expect, customers are more likely to recommend an IT infrastructure company if they provide more high-value elements.
An ‘excellent’ element: one that received a score of eight or above.
A ‘strong performer’: rated well on six or more elements by at least 65% of respondents.
The average Net Promoter Score (NPS) of strong performers was 60% higher than that of companies excelling at one to five elements. And it was several times higher than that compared to companies excelling at no elements. Plus, 43% of respondents said they’d be highly likely to buy from strong performers again, compared to 21% saying they’d do the same for companies without excellent scores.
The elements that matter most
As you can imagine, cost reduction topped the list when the decision-makers had to rank the importance of each element.
But after further analysis, it seemed what the respondents thought was important, actually wasn’t.
The elements driving customer loyalty the most are:
Cost reduction didn’t even make the top 10. Or the top 20. (It crawled in at 27th place).
The rest of the top 10 include:
Seven of these 10 elements are in the pyramid’s ‘Ease of Doing Business’ level. Which means for B2B tech sellers, there’s plenty of opportunity to differentiate. What’s required are stellar objective and subjective offerings.
What can you do next?
Follow a piece of advice that we chant religiously, day in, day out:
Look at everything from your customers’ perspective.
For example, your product or service might be great. But what about the wrappings: the purchasing? The support team? The order tracking? If a customer doesn’t get a good experience from those elements, you’re unlikely to retain them.
So, analyse your elements. Compare your self-assessment with customer opinions. And then try to close the gaps.
HBR set out five steps you can follow to help improve your value proposition and enhance your offerings:
Survey your customers about how your products/services compare to your competitors’. Base the elements on the 36 in HBR’s pyramid.
Talk to your customers. Conduct follow-up interviews to see their frustrations and the compromises they make when using your services. Figure out who’s involved in the buying decision – and speak to people across the entire spectrum. Pro tip: conduct the interviews through a third-party to get honest answers.
Imagine ways to increase value for customers. Once you’ve found the elements that need work, hold sessions with participants across the business to see how you can improve them.
Refine, test and learn. Go through your best ideas, scrutinising them over their appeal to customers and the likelihood of following through on them. See how they’ll fit into your overall customer experience and identify any real benefits that customers can expect from them.
Apply the acid test. After you introduce your ideas, re-do the initial research. In fast-moving markets like tech, your competitors are likely doing the same as you – so you need to make sure that your new ideas are working, and fast.
Or, you can get in touch with us for help. We’re experts in the emotional kinda stuff as well as the practical, old-school sorta stuff too.”