Quite often in business, you hear a lot of jargon that people assume they know the meaning of but often don’t. The Value Proposition is one of those ‘jargon’ statements. As a concept, it’s really quite simple. The Value proposition is a statement of what value you bring to the marketplace, it’s the thing that determines whether people will bother reading more about your product or service and eventually buy it from you.
So what exactly is a value proposition?
A value proposition is a promise of value to be delivered. It’s the primary reason a prospect should buy from you.
In a nutshell, your value proposition is a clear statement that:-
- It explains how your product solves customers’ problems or improves their situation (relevancy),
- It highlights how you deliver specific benefits (quantified value),
- It informs the ideal customer why they should buy from you and not from the competition (unique differentiation).
You have to present your value proposition as the first thing your prospect sees, whether this is on your website, on social media or in print. It’s not just for aesthetics, or to placate the business owner or copywriter, but ultimately, to improve your prospect’s understanding of why they should choose you rather than anyone or anything else.
It’s for people to read, listen to, or watch, but most importantly understand. The Value proposition is something real people are supposed to understand. Here’s an example of what a value proposition is NOT supposed to be like:
“Revenue-focused marketing automation & sales effectiveness solutions that unleashes collaboration throughout the revenue cycle.”
I don’t know about you but I’ve absolutely no idea what they are selling here or what it means. Would you be able to explain to your Mom what the offer is and how she’d benefit? Didn’t think so. Unfortunately, it’s no joke. Such meaningless jargon-loaded propositions are all too common.
It’s important to use the right language, your value proposition needs to be in the language of your prospective customer. It should join the conversation that is already going on in their mind. In order to do that you need to know the language, your customers use to describe your offering and how they benefit from it. You cannot guess what that language is. The way YOU speak about your product or service is often very different from how your customers and or prospects describe it. The answers are outside of your business. You have to get out and interview your customers /prospects to find it out.
Look at your current value proposition and check if it answers the questions below. If it doesn’t then follow the five steps I’ve detailed below to create a new one:-
- What product or service are you selling? Is it comprehensible to your prospects?
- What is the end benefit of using it? What problem does it solve for them?
- Who is your target customer for this product or service? How does it improve their lives?
- What makes your offering unique and different? Could they get the exact same from your competition?
How to craft a unique value proposition
A key role of the value proposition is to set you apart from the competition. When people buy they go on a journey (check out my blog on the buyer journey here) and during this journey, they will check out 4-5 different options, everything from your competition to alternatives to your product or service before they decide and buy. You need your offering to stand out in this important research phase. So how do you make your offer unique?
Often it’s hard to spot anything unique about your offering. It requires deep self-reflection and discussion. If you can’t find anything, you better create something. Of course, the unique part needs to be something customers actually care about. No point in being unique for the sake of being unique (“Our power cords are blue instead of the standard grey”). The key thing to remember is that you don’t need to be unique in the whole world, just in the customer’s mind. The closing of a sale takes place in a prospect’s mind, not out in the marketplace among the competition.
The five-step process to building a great Value Proposition.
Step One:- DEFINE the problem you solve, and whether it’s a problem worth solving.
Inventor, Charles Kettering, once said, “A problem well stated is a problem half solved” and many business owners make the mistake of diving headlong into the solution before really understanding the problem they’re looking to solve. They end up with a solution looking for a problem, which is not where you really want to be.
So how do you define whether it’s a problem your prospect needs to solve? Have a look at these four questions and if you find yourself answering a definitive yes to the majority of these questions, then you are on the right path toward a compelling value proposition. If not, consider re-evaluating and revising your new venture.
- Is the problem Unworkable? Does your solution fix a broken business process where there are real, measurable consequences to inaction? Will someone get fired if the issue is not addressed? *If the answer is yes – then that person will likely be your internal champion.
- Is fixing the problem Unavoidable? Is it driven by a mandate with implications associated with governance or regulatory control? For example, is it driven by a fundamental requirement for accounting or compliance? If the answer is yes – then that group will likely be a champion.
- Is the problem Urgent? Is it one of the top few priorities for the business? In selling you’ll find it hard to command the attention of your prospect and the resources to get a deal done if your problem is not urgent. If the answer is yes – then you know you’ll have the attention of the bosses.
- Is the problem Underserved? Is there a conspicuous absence of valid solutions to the problem you’re looking to solve? Focus on the GAP in a market or segment. If the answer is yes – then you know the market is primed for the solution.
Step Two:- QUALIFY the Problem: Is it ‘Explicit and Gap related’?
Is the problem your qualifying explicit, i.e. is it obvious to your prospect and does it address a GAP in the market, allowing you to capitalise on an open area of opportunity? You want to be in the position of addressing problems that are explicit and mission-critical, as they are far more urgent than those that are implicit and aspirational. Explicit and mission-critical problems stand in the way of business. They put businesses at risk. Implicit problems are by their very nature unacknowledged and maybe even unknown, which means they often require a different selling process which could be more expensive. Aspirational problems are optional, which means that they often don’t make the cut when it comes to budget-setting time.
Though it should be noted that many successful products are based on exposing implicit aspirational needs. Facebook is a great example of this. There is no real explicit need for Facebook but it does fill both an implicit social need and an aspirational need.
Or consider more obviously, Evernote and its value proposition. The company set out to “help the world remember everything, communicate effectively and get things done”. From saving thoughts and ideas to preserving experiences to working efficiently with others, Evernote’s unique collection of apps makes it easy for users to stay organized and productive.
Step Three:- EVALUATE whether your product or service is unique and compelling.
After you determined the problem you’re solving and validated its criticality, ask yourself: What is unique and compelling about your product or service? Simply having a product or service that is faster, cheaper and better is not enough to make it compelling, but evaluate using this 3D model and you can really open up the potential for a breakthrough.
This approach is to think of your product in the context of the 3Ds: What unique combination of (D)iscontinuous innovation, (D)efensibility, and (D)isruptive business model are you bringing to bear and what makes it truly compelling — not just to you and your colleagues, but to your most sceptical prospect?
Discontinuous innovations – offer transformative benefits over the status quo by looking at a problem differently. The HP Inkjet printer is the classic example here, having displaced earlier impact printhead technologies with a new and better way to put ink on paper. How can you displace current solutions with your product or service?
Defensibility– offers intellectual property and a business strategy that can be protected to create a barrier to entry and an unfair competitive advantage. “Competitive advantages” help your company become successful. “Defensibility” helps you stay there. Both add value to your business. What stops others from competing with you?
Disruptive business models – yield value and cost rewards that help catalyse the growth of a business. Think about UBER and Airbnb, they both disrupted existing business models. Here is a quick precise of the UBER value proposition:-
One thing Uber most definitely does right, however, is its unique value proposition. Without explicitly saying so, Uber expertly highlights everything that sucks about taking a traditional taxi and points out how its service is superior. The Uber homepage excellently conveys the simplicity and ease that lies at the heart of what makes it such a tempting service:-
- One tap and a car comes directly to you
- Your driver knows exactly where to go
- Payment is completely cashless
Everything about this directly contrasts the typical experience of getting a taxi – no phone calls to disinterested dispatchers, no painful conversations trying to explain to a stressed-out cabbie about where you need to be, and no fumbling for change or worrying you’ve got enough cash in your wallet. Just a fast, efficient way to get where you’re going. This is reinforced by the aspirational messaging toward the top of the Uber homepage, which states that “Your day belongs to you.”
Step Four:- MEASURE potential customer adoption using the Gain/Pain Ratio.
Most business owners are so focused on the features they deliver they forget to examine how hard it will be for their customers/prospects to learn how to use their product to benefit from the features offered. So the Gain/Pain ratio involves measuring the gain you deliver the customer vs. the pain and cost for the customer to adopt. Look for non-disruptive disruptions: products or services that offer game-changing benefits with minimal modifications to existing business processes or environments. Simply put: disruptive innovation would ideally be non-disruptive to adopt.
Being non-disruptive is critical to early startup businesses since the gain you deliver will also be discounted by the risk associated with betting on you as a young company. A successful business delivers an order-of-magnitude improvement over the status quo. If you can’t deliver a 10x gain/pain promise, customers will typically default to “do nothing” rather than bearing the risk of working with you.
Step five:- BUILD the Value Proposition
Once you have gone through the defining, evaluating and measuring steps, you are ready to BUILD your value proposition, for which I recommend the following kind of framework. (Note – this is not original. It is intentionally typical of positioning statements to be consistent and reusable as such):
Step 1. Define who you’re for (target customers)
Step 2. Who are dissatisfied with (the current alternative)
Step 3. Our product is a (new product)
Step 4. That provides (key problem-solving capability)
Step 5. Unlike (the product alternative).
If you look at the UBER example above it pretty much hits all of these points.
Well, those are the five steps. However, there is one more thing and it may be the most important of all. It’s YOU. Do not lose sight of the fact that you are core to your business and its value proposition. What problems do you understand uniquely well? What solution can you deliver uniquely well? What kind of disruptive business model you can bring? Be true to yourself as a business leader and with the right value proposition you will go far.
Little ‘bolt-ons’ for your value proposition
Sometimes it’s the little things that tip the decision in your favour. If all major things are pretty much the same between your and your competitors’ value proposition, you can sometimes win by offering small value-adds. I call them ‘bolt-ons’.
These things work well against competitors who do not offer them. They can be things like:-
* Free shipping
* Fast shipping / Next day shipping
* Free bonus with a purchase
* Free setup/installation
* No setup fee
* No long-term contract, cancel any time
* License for multiple computers (vs 1)
* (Better than) Money-back guarantee
* A discounted price (for a product)
You get the idea. Think what small things you could add that wouldn’t cost you much, but could be attractive to some buyers. Make sure the ‘bolt on’ is visible with the rest of the value proposition.
So there you have it, a five-step process to building a value proposition that will actually add real value to your business.