Value First then Price: Quantifying value in Business to Business markets from the perspective of both buyers and sellers

Winner of the Overall Case Award 2014

The Case Centre best selling case 2013 - 2017

Value-based pricing—pricing a product according to its value to the customer rather than its cost—is the most effective and profitable pricing strategy. Buyers need to evaluate the monetary benefits of a product against the price of its competitors. Sellers justify their price points through documenting the value of a product, emphasising its superiority against competitors and therefore justifying the premium price.

Value First then Price is an innovative collection which proposes a quantitative methodology to value pricing, and road-tests this methodology through a wide variety of real-life industrial cases. It provides a state-of-the art and best practice overview of how leading companies quantify and document value to customers. In doing so, this book provides researchers with a method by which to draw invaluable data-driven conclusions, and sales and marketing managers the theories and best practices they need to quantify the value of their products to demanding, hard-nosed industrial purchasers.

With contributions from global industry experts this book provides cutting edge research on value quantification and value quantification capabilities with real-life, practical examples. It will be essential reading for sales and pricing specialists as well as business strategists, in both research and practice.

Part I: Introduction 1. Introduction: Quantifying and Documenting Value in Business Markets (Andreas Hinterhuber and Todd C. Snelgrove) Part II: Selling Value—Value Quantification Capabilities 2. Interview: Processes and Capabilities for Value Quantification (Andreas Hinterhuber and Robert Russell) 3. Muddling Through On Customer Value In Business Markets? (Todd C. Snelgrove and James C. Anderson) 4. Interview: Nurturing Value Quantification Capabilities in Strategic Account Managers (Andreas Hinterhuber, Todd C. Snelgrove, and Bernard L. Quancard) 5. Salesforce Confidence and Proficiency—The Chief Cornerstone of Effective Customer Value Management (Gary Kleiner) Part III: Selling Value—Best Practices in Value Quantification 6. Value Quantification—Processes and Best Practices to Document and Quantify Value in B2B (Andreas Hinterhuber) 7. Quantifying Your Value so Customers Are Willing and Able to Pay for it (Todd Snelgrove) 8. Best Practices for Defining, Quantifying, and Sharing Value (Pekka Töytäri and Risto Rajala) Part IV: Buying On Value—Value Quantification and B2B Purchasing 9. Interview: Selling Value to Purchasing (Todd C. Snelgrove and Bo-Inge Stensson) 10. Using Best Value to Get the Best Bottom Line (Kate Vitasek) 11. Value Selling: The Crucial Importance of Access to Decision Makers from the Procurement Perspective (Rob Maguire) 12. The Sourcing Continuum to Achieve Collaboration and Value (Kate Vitasek) Part V: Value Quantification and Organizational Change Management 13. Interview: Implementing Value Quantification in B2B (Andreas Hinterhuber and Matthias Heutger) 14. Interview: The Ring of Truth—Value Quantification in B2B Services (Andreas Hinterhuber and Pascal Kemps) Part VI: Buying and Selling on Value—Value Quantification Tools 15. A Question of Value: Customer Value Mapping Versus Economic Value Modeling (Thomas T. Nagle and Gerald E. Smith) 16. Why Start-Ups Should Consider Using Value Propositions (Lennart Foos and Markus Kirchberger) 17. Creating and Sustaining Competitive Advantage Through Documented Total Cost Savings (Tim Underhill) Part VII: Epilogue 18. A Call To Action: Value Quantification in B2B Buying and Selling (Todd C. Snelgrove)

Andreas Hinterhuber is a Partner of Hinterhuber & Partners (www.hinterhuber.com) and a Visiting Professor at the University of Bolzano, Italy. He has led consulting projects in pricing in B2B and B2C companies worldwide, including Lufthansa, Tieto, International Paper, Continental, SPX, Fercam, Swarovski, Würth-Hochenburger, Ecolab, British American Tobacco, and many others. He has published articles in Industrial Marketing Management, Long Range Planning, MIT Sloan Management Review, Journal of Strategic Marketing, Business Horizons and other journals.

Todd C. Snelgrove is the former Global Vice President of Value, and drove the creation, tools, processes, and results, of a 20 year value journey at SKF and supports executive MBA classes at Northwestern University, London Business School, and the International Institute for Management Development and others. Todd is now the founding partner at consultancy Experts In Value (www.expertsinvalue.com), and helps companies create, communicate, calculate, and get paid for value.

‘A ‘must read’ for any B2B marketer. These seminal cases not only illuminate the essentials of value based business marketing, but with detailed examples show you how to implement a value based approach in the turbulent world of today’s business market. Real, Good, Practical stuff from professionals who’ve done it.’ - Ralph A. Oliva, Director, Institute for the Study of Business Markets and Professor of Marketing, Smeal College of Business, Penn State University, USA

‘By combining an impressive list of expert analysts with real-world case studies, Value First then Price gives businesses the latest strategies and tactics needed to improve company margins and profit performance. Because the focus here is on customer quantifiable values, the book correctly shifts emphasis from a producer’s features to an end-user’s benefits.’ – Kevin Mitchell, President, The Professional Pricing Society, Inc.

‘Recent research shows that far less value (and cost reduction) is achieved through traditional negotiation than can be gained through understanding markets, needs and opportunities for creative collaboration. If you care about business and personal success, value must be your priority’ – Tim Cummins, CEO, International Association of Commercial and Contract Management

‘This book is an excellent guide of best practices on how buyers and sellers can focus on understanding, creating, and measuring value so both supplier and buyer win.’ - Gautam Mahajan, President, Customer Value Foundation, Inter-Link India

‘The war for value is today’s biggest business challenge. Value First Then Price is an invaluable, thought-provoking guide to this debate.’ - Nigel Barlow, international consultant on innovation and value

‘This guide will set you firmly on the road to find, secure, and deliver the right deals with the right customers and suppliers. More than a roadmap, the anecdotes and stories bring the nuances of the Michelin guide to your transformation voyage.’ - Nick Seiersen, President and CEO of Seiersen Enterprises and International Supply Chain Expert

‘In our work with some of the world’s industrial manufacturers, we’ve seen that companies that focus on value from both the buy and sell slide enjoy a competitive edge. Top-performing industrials are eight times more likely to take a value-based approach toward pricing, and companies that measure and buy based on total cost of ownership are 35% more profitable. Buyers have never been better informed on the total cost of ownership, and companies that are still talking about features and benefits are getting left behind.’ - Stephen Gold, CEO of MAPI – Manufacturers Alliance for Productivity & Innovation

‘My own research confirms McKinsey's, that only 5% of companies have value propositions. No wonder buyers have the upper hand! The world really needs this book and I congratulate Andreas Hinterhuber and Todd Snelgrove on putting together a truly fantastic piece of work.' - Professor Malcolm McDonald, MA (Oxon) MSc PhD DLitt DSc, Emeritus Professor, Cranfield University School of Management, UK

‘In business to business markets, managers must bridge the gap between those who say that it is only by value that firms can thrive in the long term and those who suggest that buyers will buy on price. Value can be created and captured. The bad news is that is it extremely difficult, but the good news is that a systematic approach is likely to yield dividends. In this important book Andreas Hinterhuber and Todd Snelgrove have harnessed the world's top value creation experts to provide an insightful and complete roadmap.' - John Roberts, Fellow, London Business School, UK and Professor University of New South Wales, Australia

‘What a comprehensive way to present value. From the discussions to the articles, a must have guide for professionals and companies that want to buy, produce and sell any product or services based on value.’ - João Ricciarelli, Head of Brazil Operations, Bombardier Transportation

‘The concept of investing to attain value over the total ownership cycle is powerful in that it generates a more meaningful dialogue with customers and it is the right focal point for value creation by companies.’ - Hugh Munro, Professor of Marketing & International Business, Wilfrid Laurier University, Canada

‘It’s not often you read a business book, learn from it and have fun doing so. Value first then Price by Hinterhuber and Snelgrove is one of those rare exceptions. I don't care whether you are on the buy or sell side of the equation, this book is for you. It is a fantastic engaging read. The material is thought provoking with great integration of theory: from value, to ROI and results. It is simply a very practical business book.’ - Stephen Kozicki is on the Advisory Panel for HBR and lectures at business schools including Macquarie University, University of Technology and The Australian Catholic University, Australia

‘Much has been said and written about value in industrial markets. But how to put the idea to practice? This book focuses on what matters most: to "challenge" customers and help them rethink their assumptions, vendors need data and value quantification. The authors provide a practical, hands-on roadmap for value pricing that both buyers and sellers can follow for achieving better business results.’ - Dr. Wolfgang Ulaga, Research Professor & Co-Executive Director, Center for Services Leadership (CSL), Arizona State University, USA

‘Value First then Price is a much-needed work and deserves a place in most CPO and sales offices.’ - Keld Jensen, Author of ‘The Trust Factor - Negotiating in SMARTnership’, Professor and Advisor in Negotiations

‘SAMA research emphasizes that most companies are significantly lacking in internal processes for value-based negotiation, value creation, value-based pricing and value monetization. Snelgrove and Hinterhuber provide great insights and methodologies for companies to fill these gaps.’ - Bernard Quancard, President and CEO Strategic Account Management Association (SAMA)

‘Written from the view of both buyer and seller, this book highlights the importance of quantifying value and making smart decisions based on value instead of price. Leaders of sales and procurement teams can use the concepts in the book to improve their results and increase their value to customers and to their own organizations.’ - Tim Underhill, Strategic Business Solutions

‘The Editors and their authors have tackled a problem that has faced buyers and sellers for years: how to define the concept of value that aligns with two different views of the world. Sales claims to sell based on value, and purchasing claims to buy based on value, yet both parties view this concept from fundamentally different viewpoints. This book articulates these differences, and creates a framework that can help resolve the issues, creating a mutually compatible lens for understanding this often misunderstood concept.’ - Robert Handfield, Bank of America, Distinguished Professor of Supply Chain Management and Director of Supply Chain Resource Cooperative, North Carolina State University, USA

'Quantifying and understanding the value proposition is key to business success. This book gets directly to the bottom line by taking both a buyer and seller perspective and presenting value based purchasing in a way that all purchasing professionals need to understand.' - Wendy L. Tate, Ph.D., Associate Professor of Supply Chain Management, University of Tennessee, USA

‘I have heard Todd speak at a number of meetings talking about ‘life time value’ over cost. And it makes sense. Now the cost restricted healthcare systems of Ireland and the UK seem to be looking more on ‘value’ than on the upfront costs (April, MRII Annual Conference, Athlone, Ireland). This book is a must read!’ - Colin Hurst, UK Healthcare Learning Professionals Network and Founder Member of the Sales Leadership Alliance

‘Value First then Price is a timely and rare contribution, providing not only invaluable insights, but also a practical methodology of how to perceive, quantify and capture value. From the perspective of emerging and new market economies, it offers the ultimate answer on how to escape the enduring "lower cost - lower price" trap, and how to shift towards a sustainable, value creation driven path that leads to business and economic development.’ - Modestas Gelbūda, PhD in International Business, Aalborg University, Denmark; Managing Director, Baltic Institute for Leadership Development, Lithuania and Associate Professor, ISM University of Management and Economics, Lithuania

‘Snelgrove and Hinterhuber have written a compelling book that brings together the two sides of business relationships - buyers and sellers - and challenges many of the assumptions that exist in inter-organizational relationships. It truly is possible to achieve win-win outcomes that drive mutual value and shared risks and rewards. Snelgrove and Hinterhuber explore this proposition in detail, providing a great read for practitioners.’ - Robert Handfield, Bank of America University Distinguished Professor of Supply Chain Management, North Carolina State University, USA

"At a time when both customers and suppliers are over focused on product prices as a determinant of business transactions, this book offers a fresh way out by arguing for a new way of looking at the economics of exchange between buyers and sellers where price is just one element in determining the true value of what is bought and sold. More specifically, the book informs purchasing officers about the often ignored actual cost and inherent value (in total savings, returns on investment, etc.) of what they buy, and provides suppliers with tools to quantify and communicate the hidden value in what they sell. I highly recommend this book to professionals in procurement, sales and marketing, and general management." - Professor Kamran Kashani, IMD, Switzerland