Our earlier posts discussed the advantages of up-sell and cross-sell and the essential skills that are needed in a value management culture. This week we talk about four ways that benchmarking can support your value management culture.
For a long time now, benchmarking has been used in the processes of big business matters and decision making, because it gives companies the means to compare themselves against key players in their industry. For companies who face massive competition, benchmarking is already a commonly used tool. And if benchmarking doesn’t come into business decision making, now is the time to start using it.
Essentially, benchmarking helps to discover the best practices in an industry. If you know an industry’s best practices, it is easy to replicate a peer companies’ success. And when you mix benchmarking with value management, the benchmarks will help you to work out where a company is against their peers. The main thing here is to make sure that you are comparing like with like; companies need to be very similar to your customers or target customers, to see where it is best to make any improvements.
Where does your business stand up in your industry? Do you know where your customers stand too? And do you know if your customers are outperforming or underperforming, compared to their peers or direct competitors? Are you able to set clear goals for a company’s future, backed up by data? Well, benchmarking is one of the key pillars in facilitating all of this.
Understanding the connections between your customers’ needs, your product capabilities, and the benefits that you can bring to their business isn’t an easy task; but it is the key to effectively manage value and realise fruitful sales opportunities. Here are four ways that benchmarking can help you in value management:
1. Know where your customers stand
First, we need to think about how a business gains competitive advantage and stays at the top of an industry for many years on end. Well, this competition really is all about awareness. And to be aware, knowledge is necessary. Benchmarking is knowledge.
Tracking performance with trustworthy key performance indicators (KPIs) allows businesses to make informed decisions. With the most relevant KPIs and solid data they can trust, companies can work out if it is best for them to move one way or another. Our experiences in value management have taught us that decisions made on solid reasons are always more productive. It really is important to understand what is happening in your customers’ industry or marketplace and to know what moves direct competitors are making to stay competitive. This remains true, even when a company gets to the top and is an industry leader. We’ve all watched leading companies crash and burn, with lack of innovation and a shortage of relevant data. And we all saw what went down with Nokia and Blackberry. But so many of these weaknesses could have been prevented, with very little effort.
In a value management culture that has been properly implemented, your business decisions will always be based on reliable data. With this data, you can build a reliable business case that clearly shows if an offering is worth the investment. Do you evaluate the performance of your software with solid data? Wouldn’t it be great to track your progress: to know where you started off and where you are after a year to see if the software implemented has delivered on its promises?
2. Set clear goals
Benchmarking is also really important in value management when it comes to setting clear goals. Are you aware of the improvements that your customers should make to succeed in their business? Are your customers tracking their performance actively so they can compare themselves with their industry peers? Because if they aren’t, they really should be!
Here’s some more detail on this point. You see, value selling always aims to show a viable improvement; by looking at the gaps between industry benchmarks and your customers’ it is much easier to understand where they can improve. Let’s imagine that your customer is a fashion retailer, and they want to invest in some new commerce software. First off, they want a business case that can show the potential operational and financial benefits.
The perfect approach here is value selling, because then you can prove the benefits your software will bring to this customer. And benchmarking is the secret for you to win this sale. If your commerce solution will affect, for example “sales conversion rate”, “days sales of inventory”, “average units sold per sales transaction” or “number of finance function FTEs”, you can show your customers the industry benchmark or a peer reference to support your claims and show the improvements you will make. This will also support your credibility enormously.
You can give customers a clear-cut view of all the great business benefits they can win with your solution, when you use data processed by a value management company. So, using our retail customer from earlier, with the support of trained value specialists, you find out that in previous benchmarking the retail industry’s top quartile is performing at 52% conversion rate, but your customer only has a 40% conversion rate.
With an improved commerce solution, you can now easily see how your customer can improve their conversion rate, turn potential customers into customers and decrease the 23% gap. Another perk is that value management companies will have great data and the best tools, which makes it easier for you to compare your retail customer with their nearest industry peers. And if their direct competitors are achieving a higher conversion rate you will know that this is a sure space for improvement.
3. Develop a data-driven value culture
We have witnessed a huge hype on data in the last few years. And “data is the new gold” is something we have probably all heard by now. Having great data at your fingertips is amazingly valuable. And right now, this data is boosting revenue streams for many companies.
Companies like Instagram, Facebook and Amazon rely on the data they collect. The main sources of revenue for these companies comes from knowledge of their users. And from knowing what users want to see, they can help their customers to increase their conversion rates. This is the real power of data.
Data is so important in value selling. And the more data that we have, the more accurate our benchmarks will be. To be effective, benchmarking needs to be based on data that is as accurate as it can be. We know that being confronted with lots of data can be somewhat intimidating; but there is no need to worry. Benchmarking has been a useful tool in business for quite a while now, so you’ll be on your way to success with the oodles of available data and all the great analytics tools and solutions out there.
A well-organised database will support informed business decisions, so nowadays reliable data is fast becoming important in every industry. So, value selling depends on benchmarking to be successful, and great quality data is what will make your customers choose your offering.
Would you buy from a company who are just guessing the value they can deliver? Or would you buy from the seller who is showing you the value they have delivered in the past or that they have delivered to your peers?
4. Empower your employees: setting goals they can reach
When employees inevitably leave your company, do you know why they choose to go? And do you know whether your employees feel empowered in their current roles? Well, a really good way to find out is to apply benchmarking. It’s not the only way to answer these questions, but it’s a good one. The point here is that benchmarking can be a really valuable tool for measuring employee satisfaction and ensuring retention.
Do your employees feel empowered and are they motivated to make sure that your business is a success? An employee’s performance is usually measured with goals. When you have targets that your employees can more easily and visibly achieve, they will want to hit them. It fuels their motivation. Because with visible goals, employees will understand what their expectations are and why the different parts of their role are so necessary, and as a result they will want to work towards their own and your company’s success. You raise the incentive and then you empower your employees. The success of any company rides considerably on the motivation of employees.
Motivation is also the key to employee retention, it’s pretty logical that if your workers are happy, they will want to keep working for you. And in this ever evolving and competitive landscape of value management you ought to be inspiring all of your greatest workers to make them want to stay with you and help your business thrive.
To sum up
Our blog this week has outlined how valuable benchmarking is in value management. In brief terms, benchmarking is the best way to manage the quality of any company. With trustworthy and dependable benchmarks, you can lay out clear improvement possibilities, gain competitive advantage, continue to improve data quality, and increase your employee satisfaction and retention rates.
When you set out realistic improvement possibilities for your customers, you will be aligned with their needs and can help them to clearly see the core areas for improvement. They will trust your offering and they will know how much value, in terms of money, they can gain from your solution (in dollars or any currency) and also, they will know where they stand next to their peers and competitors, within their industry. By being aware of the top industry KPIs, it is much easier to reduce the gap between your customers and and their industry leaders, so you can ensure they stay competitive.
The success of benchmarking relies on great data. Your benchmarks should be the best quality possible – reliability and relevance is what you need to keep in mind here. Experience has shown us that trustworthy benchmarks support companies to make profitable business decisions. Great data ensures viability, as decisions can be measured and quantified before any changes are implemented.
Lastly, your employees are a big part of your long-term business strategy. They need to be continually motivated and rewarded so they want to keep playing in your team. Benchmarking is such a valuable tool for checking in with your employees’ job satisfaction. And it is better to be dedicated to maintaining your workers’ satisfaction than facing the cost of losing one of your top employees.
To finish, benchmarking is the axis of value management. The right benchmarks help you find your customer’s weak points and provide feedback opportunities for in-depth discussions. Additionally, they will optimise your offerings and ensure your sales process is transparent and they will help your customers to envision, to prioritise, to strategize and to find value. We believe that in 2021, benchmarking is fast becoming the key to success in any line of business.
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At The Value Search Team, we can build, operate, and scale your value management practice. At any time, and from anywhere.
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