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Developing a Compelling Value Proposition
Jean-Claude Balland,
Ph.D.
(Coauthor of
Capture and Use the Voice of
the Customer for Product Development and the
Obtaining
and Using Customer Requirements workshop)
Whether it is for your company,
for your department or even for yourself, expressing your value
proposition is one of the most important activities you should engage in.
Your value proposition is your promise of performance and value. It is
expressed in a short statement that is aimed at creating and occupying a
space in your prospects’ mind called “best buy for this type of problem.”
In order to create and occupy such a space, your value proposition must be
compelling and differentiated. To be compelling it needs to address some
recognized hot buttons of your targeted customers (customer value
drivers). To be differentiated it needs to clearly state how your offering
is better than your competitors’ in the few value drivers that are the
most important to your customers. Therefore a value proposition is
segment-specific, and eventually customer-specific.
WHAT SHOULD
YOUR VALUE PROPOSITION DESCRIBE?
In its full development, a value
proposition contains ten elements.
1. Offerings
What is it that you offer? The obvious answer is a product. But is it
actually what your customers buy? Understanding what your customers buy
will help you define your offering. And customers buy more than products.
Think about the 5 dimensions of benefits (technical, operational,
economic, emotional, and network) and the 5 dimensions of cost (money,
resources, troubles, risks, and lost opportunity) that your customers
consider. Think about what your customers want to achieve (the outcomes)
with such offerings. Often, it is a business result like increasing sales,
improving yield, reducing time to market, improving satisfaction, etc.
2. Customers
Profile the typical customer. Ideally, you want to write a scenario
picturing the customer and his/her problem. And sometimes you have several
types of customers, like for example a user and an economic buyer. Who are
your typical customers? Your targeted customers should identify with the
description. For example, “engineers” might be your target, but “engineers
who face time to market pressure” is much more evocative.
3. Compelling reason to act
Each customer has problems that affect its performance and its ability to
meet its goals and objectives. Some problems are bearable; others require
actions because they can profoundly affect business results. When a
company has a will to address a problem, and has a budget or can find the
money to do it, they have what we call “Compelling Reason to Act“1
(CRTA). These are the ones that should be spotted for your value
proposition to have strong impact. These CRTA’s should be expressed in a
customer language so that she can immediately say/think that it is her
that we are talking about.
4. Experience
What will the customer do or experience as a result of buying and owning
your product?
5. Benefits
What are the most important benefits the customer will derive from doing
business with you? Obviously, these benefits need to be expressed as a
direct response to the customers’ CRTA. As an extension of the benefits,
the total experience that the customer will have is becoming increasingly
important in particular for service-related offerings. An experience is a
sequence of events that will affect the customer emotionally as well as
professionally. What experience do you want to create?
6. Cost
What are the costs in term of money, resources, troubles, risk and lost
opportunity?
7. Time
When will the customer experience the benefits of your offering? Next
week, next month?
8. Alternatives
What are the competing alternatives? Defining the competition in
non-traditional terms will help you define a distinctive position.
Defining the competition might lead to innovative solutions. For example
Southwest Airlines defined its competition as the automobile (not other
airlines), the PalmPilot originally defined its new product as a connected
organizer not a PDA like the Apple Newton. Quicken defined its competition
as the checkbook.
9. Advantages
What are the key differentiators of your offering compared to your
targeted competition? What are the things you do and the things you won’t
do?
10. Engagement
This part is often forgotten and left to chance, but is an important part
of the value proposition and of the offering. It is particularly important
when you want to create a memorable experience. An experience implies that
the customer has an active participation in the offering. This involvement
creates feelings that might be positive or negative.
Customers, like everybody, want to
repeat good feelings and avoid bad feelings. So, you must not think of the
customer as a passive participant but as an active contributor. For
example, Amazon.com provides opportunities for its customer to contribute
readers’ comments. Many companies say they rely on word of mouth
advertising but what do they do to make it happen? How are they
facilitating the customers’ engagement?
PUTTING IT ALL
TOGETHER
When you have identified the
various elements of your value proposition, it is time to assemble them
into a statement that can be used to communicate your positioning and your
messaging to your audience, including your sales force. This is the DNA of
your product line/company.
Below is a template adapted from Geoffrey Moore that you can use to
develop a value proposition. It is not uncommon at this stage to have a
document of half a page to a page.
As a result of our (offerings),
customers (profile)
who are facing (compelling reason to act)
will (do, experience)
for (investment cost)
and enjoy (benefits, return) within or by (time)
compared to (alternatives) the advantages of using our offerings
are (advantages).
To improve the experience for all users, customers will (engagement).
Following the template might help
you at the beginning, but you will rapidly find (and your customers will
find even faster) that it sounds impersonal. Your value proposition must
express the “personality,” the strengths, the soul, the benefits of your
product and as such it must sound “personal.” So, try to get away from the
template and express your value proposition in your own way, making sure
that your customer’s compelling reason to act and your differentiated
benefits are clearly articulated.
EXAMPLE 1
-
HFS helps banks pursuing growth
through branch expansion to increase sales, productivity, and
profitability.
-
Only HFS offers an extensive
catalog of proven, integrated, industry-leading solutions that will enable
your bank to identify and pursue cross-sales opportunities, expedite
processing of new accounts and loans, automate teller and call center
transactions, and reduce staff compliance training expenses.
-
Our software leads your employees
through an easy-to-understand series of transaction screens, and then
automatically produces the proper documents in the appropriate format
based on the transaction information. As a result, you are assured that
the documents are accurate and enforceable.
-
HFS products are competitively
priced and are available through traditional, subscription-based, or “per
transaction” licensing options. In addition, HFS Professional Services
staff is available to manage your implementation in accordance with your
schedule, which can take place in as little as four weeks.
-
Once our software is in
production, your branch employees will identify sales opportunities and
process loans more efficiently.
-
Between 2001 and 2002, the asset
growth for banks that utilize HFS software was more than double the asset
growth for banks that did not use our software.
-
We continue to support our
customers’ growth strategies by soliciting suggestions from our 3,000
banks and incorporating these recommendations in our semi-annual product
releases.
EXAMPLE 2
-
LucidBlend’s ReactorMovie
offerings help increase the selling efficiency of companies that rely on
sales people to sell products or services that require demonstration
and/or significant education for a customer to make a buying decision.
-
ReactorMovies are short, high
quality, interactive presentations, which integrated in the customer’s
electronic communication materials, shorten the selling/buying cycle.
-
For the cost of a single print
advertisement or direct mail campaign and a few interactive sessions with
a LucidBlend expert, companies experience immediately a significant
increase in the volume of qualified leads and a corresponding reduction in
the time and number of calls needed by sales people to engage in
substantiated needs analysis conversations with prospects.
-
In addition, companies gain access
to behavioral analytics that provide actionable insight into the trends
and patterns that result in sales lead conversation activity.
-
LucidBlend has developed unique
processes to enable rapid production and integration of ReactorMovie’s in
the customer’s selling materials. Its noteworthy advantage is to be based
on Flash - a nearly ubiquitous technology. It loads rapidly over varying
connection speeds and integrates animation, sound, video and interactivity
to deliver a company message, and to provide an excellent, engaging user
experience, without the need to install special plug-ins.
THE ELEVATOR
PITCH
The “elevator pitch” is something
that you should be able to tell a person in an elevator between the first
and third floor so as to create a high and memorable interest. Once you
have developed it, personalize it and make it sound natural and personal.
Then, test it with your real customers. They are the ones who need to
resonate with it. If you do not feel like you have generated a strong
interest, try again until you do, eventually asking the customers
suggestions for improvements.
EXAMPLE 1
HFS is in the business of helping
banks pursue growth through branch expansion. We enable banks like yours
to identify and pursue cross-sales opportunities, expedite processing of
new accounts and loans, automate teller and call center transactions, and
reduce staff compliance training expense thanks to an extensive catalog of
proven, integrated, industry-leading solutions. Between 2001 and 2002, the
asset growth of banks that utilize HFS software was more than twice the
asset growth of banks that did not utilize it.
EXAMPLE 2
LucidBlend’s ReactorMovie
offerings increase the selling efficiency for companies whose customers
require product demonstration and/or significant education to make a
buying decision.
Our proprietary processes enable us to rapidly develop short, high
quality, interactive presentations, which integrated in the customer’s
electronic communication materials, increase the volume of qualified
leads, and decrease the time and number of calls needed by sales people to
qualify prospects. In addition, companies gain access to trends and
patterns on sales lead conversion activity, which allows them to
continuously improve its selling approach.
USE AND
ABUSE OF VALUE PROPOSITION
Your value proposition is not another marketing gimmick. It is your
promise of value. Therefore it is directing all your promotional and
product development activities. It is what you commit to do. As such it
comes with some obligations: the obligation to deliver on the promise. Do
not fall into the trap to make promises you cannot keep or to consider
your value proposition as a marketing gimmick.
Marketers often think of developing a value proposition when the product
is ready to launch or even is already on the market. To be really
effective the value proposition should be part of the product/market
requirement document. As such it drives the whole product development
effort.
ABOUT THE
AUTHOR
Jean-Claude Balland is a marketing
executive, consultant, keynote speaker, and instructor specializing in
technology products and systems, with extensive management experience in
Europe, the United States, and Japan. Dr. Balland is coauthor of
Capture and Use the Voice of the Customer for
Product Development and the
Obtaining and Using Customer Requirements workshop.
Capture and Use the Voice of
the Customer for Product Development
Your illustrated electronic guide to create winning
products in fast-paced environments
Product Description
1Geoffrey Moore, author
of Crossing the Chasm, and Inside the Tornado originally introduced the
expression “Compelling Reason to Buy” to describe that urge that customers
have to solve his/her problem. Our experience is that product marketing
people rapidly interpret this expression as meaning “the features or
benefits that make our product compelling.” For this reason, we use the
term “Compelling Reason to Act,” which is less prone to such change of
meaning. Let’s restate this another way: a compelling reason to act is a
burning problem your customers have. It has nothing to do with your
offering.
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