The B2B Value Pyramid

Eric Almquist, partner at Bain & Company has already popularized the Consumer Value Pyramid (super helpful framework if you are working in the direct to consumer business). In a recent Harvard Business Review article he now came out with his B2B Value Pyramid that I'd like to have a closer look at with you today.

I think most uf us accept that consumer products are bought based on subjective criteria and personal preferences. On the other hand, when we talk about business to business transactions, we often presume that a purchase decision of a product or service is purely based on rational, objective and economic factors. But is it?

Almquist makes an counter argument:

As B2B offerings become ever more commoditized, the subjective, sometimes quite personal concerns that business customers bring to the purchase process are increasingly important. Indeed, our research shows that with some purchases, considerations such as whether a product can enhance the buyer’s reputation or reduce anxiety play a large role. Recognizing the full range of both rational and emotional factors behind business purchases—and tailoring the value proposition accordingly—is critical to avoiding the commodity trap.

So Almquist and his team at Bain went to work and analyzed the business to business transactions of hundreds of their clients over a period of three decades and constructed the B2B Value Pyramid based on Maslows hierarchy of needs. Their elements of value approach extends those insights to people in corporate roles and their motivations for buying and using business products and services.

The B2B Value Pyramid

Bain has organized the 40 distinct kinds of value that B2B offerings provide customers into a pyramid with five levels. The most objective kinds of values are found at the base, and the higher a level is, the more subjective and personal the types of value it contains.

Almquist explains why the realm of B2B is still resisting the idea of subjective value:

Elements at the base of the pyramid have long been easy to measure, and competing on them has been straightforward. The more emotional elements at the middle and upper levels have traditionally been difficult to isolate and quantify and, therefore, harder to implement. But the battle for differentiation is shifting toward these less transactional aspects.

The issue is, for a product- or marketing manager it is much harder to implement and talk about the intangible parts of a customer experience, so they instead often opt for making the product or service faster, cheaper or more durable.

But when they went out and conducted a study with 2500 corporate decision makers, they found that both the Net Promoter Score and the rate of recurring customers rises in correlation with the number of high value elements (which are higher up in the pyramid). Not only that, but they also found that in every study they did with the end consumer (regardless of industry) the "ease of doing business values" and "individual values" in the pyramid above ranked considerably higher on average than the "functional" and "table stakes" values.

How to make use of the B2B Value Pyramid

Almquist stresses the point that implementing higher values in the pyramid requires "taking the customer’s point of view, not an inside-out, operational perspective" and that "..a product or service might function just fine, but if customers find the purchasing, order tracking, or technical support process terrible, many will seek out other suppliers".

There is often a big gap between a self-assessment and the actual customer opinions when it comes to the overall experience of purchasing and using a product or service. So Almquist and his team suggest the following steps to determine where and how your company might be able to improve:

1. Benchmarking - benchmark your company's value proposition against your competitors' by surveying your customers on how your products and services perform relative to rival offerings on the 36 non-table-stakes elements.
2. Talking with customers - try to understand how the overall experience of your customers. Explore their needs and sources of satisfaction and frustration, and the compromises they make in using your product or service.
3. Brainstorm, test and learn - out of the survey and interviews you'll see patterns of elements that warrant attention. Sit together with your team and ideate which core elements to focus on first and how. Then assess the best ideas and discuss their appeal with customers and your firm's ability to deliver on them.

Since I've been mostly working in B2B in the past (and still do), this article and framework was an eye-opener for me. After all, we still sell to people and people make decisions based on their values and internal convictions. If you acknowledge that and try to find ways to differentiate yourself this way, I think there's huge potential for your business to increase the bottom line.

The [full article](https://hbr.org/2018/03/the-b2b-elements-of-value](https://hbr.org/2018/03/the-b2b-elements-of-value)) offers some case studies and more results of their in-depth research on the topic.

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