Alekshi
April 26, 2024
The B2B value pyramid is an essential theoretical framework that sales leaders can apply to their operations to identify their value proposition.
With over 40 subcategories, the pyramid is a comprehensive guide to figuring out the baseline value to the overall value of your product.
What is the B2B Value Pyramid?
The B2B Value Pyramid is a framework made by Bain and Company that categorizes the types of value products provided into five levels.
It organizes these elements based on their objective or subjective nature, with objective value at the base and subjective value at the top.
Furthermore, the goal is to help B2B companies deliver the full range of value that their products can provide to their customers.
The purpose is to guide companies in identifying the elements of value most important to their customers. This enables them to differentiate themselves in the market and enhance customer loyalty and satisfaction.
What are the 5 Categories of the B2B Value Pyramid?
These are the 5 main categories of the B2B value pyramid. It’s a comprehensive bottom-up chart that provides a detailed explanation of the various parts.
Table Stakes
At the baseline of the pyramid, the table stakes are the regulatory compliance and variables you need to account for your product. They fall into four subcategories, these are:
Meeting specifications: Ensure that products meet the agreed-upon requirements and standards set by the customer or industry.
Regulatory compliance: Adhere to laws and regulations relevant to the industry to avoid legal issues and maintain credibility.
Acceptable price: Offer prices that are considered reasonable and competitive within the market.
Ethical standards: Conduct business that complies with ethical guidelines and principles.
Functional Value
Functional value refers to a company’s economic or product performance needs. This includes cost reduction, scalability, reliability, and efficiency.
Moreover, functional value is crucial for companies as it directly impacts their ability to meet the requirements of their customers and compete effectively in the market.
There are two main categories underneath the functional value: the economic and performance category. These two categories branch out into 5 subcategories:
Improved top line: Strategies that directly increase revenue for the business.
Cost reduction: Efforts to decrease expenses in operations.
Product quality: Ensure that products meet customer expectations in terms of performance, reliability, and features.
Scalability: The ability to handle growing amounts of demand to accommodate growth.
Innovation: Introduce new ideas or methods that bring significant improvements or create new value.
Ease of Doing Business Value
The ease of doing business value focuses on enhancing the overall customer experience and reducing friction in the business relationship. This is crucial for building and maintaining strong customer relationships.
These are the 5 main categories of the second layer of the pyramid:
Productivity: Enhancing customer productivity by providing tools, services, or solutions that help them achieve their goals more efficiently and effectively.
Relationship: Building strong, collaborative relationships with customers based on trust, transparency, and mutual understanding.
Access: Providing customers with easy access to products, services, information, and support when they need it.
Operational: Streamlining operational processes and procedures to make it easier for customers to do business with the company.
Strategic: Aligning with customers’ strategic objectives and goals to create value and drive mutual success.
Individual Value
Individual value is essential for building strong relationships with key decision-makers. It refers to the elements that cater to the personal needs, aspirations, and concerns of buyers within an organization.
Here are the seven subcategories of the individual value category. It focuses on the subjective improvements that you can make for your business:
Network Expansion: Provide opportunities for buyers to expand their professional network. This can lead to career advancement and new business opportunities.
Marketability: Enhance buyers’ marketability by providing products or experiences that improve their professional skills.
Reputational Assurance: Offer products or services that enhance buyers’ reputation within their organization or industry.
Design & Aesthetics: Provide products or services that are aesthetically pleasing and enjoyable to use.
Growth & Development: Support buyers’ personal growth and development through training, mentorship, or other learning opportunities.
Reduced Anxiety: Address buyers’ fears or concerns, such as the fear of failure or making the wrong decision, by providing reassurance and peace of mind.
Fun & Perks: Offer rewarding experiences, such as exclusive events, gifts, or incentives that enhance buyers’ overall satisfaction.
Inspirational Value
In the B2B value pyramid, inspirational value represents the highest level of value offered to customers. It encompasses elements that go beyond meeting basic needs or providing functional benefits.
This value is important for building strong emotional connections with customers and fostering loyalty. Three subcategories fall under the highest point of the value pyramid. These are:
Vision: Provide customers with a clear vision of the future. This helps them anticipate changes in markets.
Hope: Offer customers hope for the future of their organization. This could be adopting new technologies or achieving significant growth.
Social Responsibility: Demonstrate a commitment to social responsibility and environmental sustainability.
How to Use the B2B Value Pyramid?
Improve your value proposition
Improving your value proposition using the value pyramid involves understanding the different levels and aligning your proposition to meet customer expectations. Here’s how you can do it:
Identify Customer Needs: Research to understand your target customers’ needs. This will help you tailor your value proposition to address specific pain points.
Map Your Offering to the Pyramid: Evaluate your current value proposition against the value pyramid. Identify which elements of the pyramid your proposition already addresses and where there are gaps.
Communicate Value Clearly: Once you’ve enhanced your value proposition, communicate it to your target audience. Use compelling messaging and examples to demonstrate the value you offer.
Benchmark with your competitors
You can benchmark your value proposition with your competitors by using the value pyramid. Here are the three key points that you need to take into account:
Understand Competitors’ Value Propositions: Analyze your competitors’ value propositions. Look for information on their websites, marketing materials, and customer reviews to understand how they position themselves in the market.
Assess Strengths and Weaknesses: Compare your value proposition to your competitors’ across the different levels of value. Identify areas where your proposition outperforms theirs and where theirs may be stronger.
Identify Opportunities for Improvement: Use the benchmarking exercise to identify opportunities to improve your value proposition.
Apply the acid test
According to Investopedia, the acid test is a financial metric used to assess a company’s ability to cover its short-term liabilities with its most liquid assets.
This is the formula for the acid test:
In relation to the B2B value pyramid, the acid test is a way to evaluate the financial health and stability of a company. This is important for B2B companies because it helps them ensure they have the financial resources to fulfill their commitments to customers.
