Don’t Add More Capabilities. Add More Customer Value

Many of our clients have tried to improve revenue growth by adding new capabilities. Sometimes it helps.

Sometimes it just drags down profitability. Pitch win rate doesn’t improve. Jobs are lost as profits diminish. And the company’s brand suffers, which leads to more losing pitches.

So why do they do it?

They see prospects turn to providers with capabilities that these companies might lack. Maybe that capability is a digital platform. Maybe it’s analytics. Maybe it’s a manufacturing resource.

They’re missing the point. Winning Comes From Value.

Prospects award their business to the winners of pitches because they have truly established their “value.” Not the lowest price or the most efficient process. By “value” we are referring to the company’s ability to drive reputational or financial benefits to the client, at a fair price that delivers a strong return on investment for the client.

This HBR article says it well. Companies that have won in the marketplace have done so by improving what the author calls “CVP” – Customer Value Proposition. They’re able to do things that the client needs to get done at the right price while making a reasonable profit.

Many firms involved in new business pitches place little emphasis on the components that define customer value. Instead, they lead and then hammer to death their own capabilities. They think prospects care. Not really.

Prospects want to know you’ll do what they need to get done at a price they’re willing to pay. Yes, capabilities matter, but only those that can be brought to solve the prospect’s business problem. Prospects want to hear about your process, but only as reassurance that what you’ve done successfully for others can be done successfully for them. Not because your processes are, themselves, anything special or unique.

Again It’s About Context

If you have more or different capabilities to solve problems than the others in the pitch, you have an advantage. When the prospect believes those capabilities are relevant to their specific issues, it’s better. When the prospect then believes those capabilities can be used on their behalf, they’ll be willing to pay for them.

Customer value is a reasonable decision criteria for prospects in pitches. It doesn’t mean you have to be the cheapest. If your relevant capabilities are highly regarded, they might pay a surprisingly higher price for them. But only when you’ve proven that connection. Not just because you’re proud of them in your capabilities deck or your website.