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Topic: Strategy

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Value Proposition

Posted by Anonymous on 100 Points
Who developed the thinking behind the concept of value propositions? What are the best works discussing or developing this concept?

  • Posted by DavidatHaley on Accepted
    I have a friend who tells me he was trained by the creator of the concept of Value Proposition. Here's a quote from my friend's web site and a link to a whitepaper on the subject:

    "In 1984, Michael Lanning created the concepts of Value Proposition and Value Delivery System while working at McKinnsey & Co. He now runs a successful consulting company, The DPV Group, helping companies around the world apply these concepts. The DPV Group has authorized Paul McAfee to deliver consulting services based on these principals."

    The following white paper is Michael's explanation of the concepts of Value Proposition and Value Delivery System:

    http://www.paulmcafee.com/services/white_papers/Delivering-Profitable-Value...


  • Posted by ReadCopy on Member
  • Posted on Member
    The best value proposition format I've found is from the book Crossing the Chasm...here is the reader's digest version, so you don't have to read the book. I've added my own editorials to clarify. There is a very specific format to follow:

    For: (bulls-eye customer)
    Who: (key purchase motivation insight)
    Our product is a: (customer-language)
    That: (key benefit)
    Unlike: (key competitors)
    Ours: (key differentiators)
    At a price: (less than, equal to, or higher than competitors).


    Let’s look at each individual element.

    For: (Bulls-eye customer)

    The most common error in writing a value proposition is to not be clear about who is your target market. Ask yourself: “What is the one customer segment which, if I don’t succeed in satisfying, I will fail to achieve my marketing objectives?” There may be others that you’ll try to satisfy. But if you have to make a decision on features to trade off, what is the single, most focused set of customers that you’ll use to make trade-off decisions? That’s your “bulls-eye customer.”

    Try to think beyond simple demographics like job titles and industries. Can you describe it terms of specific behaviors (example: "purchasing agents in large accounts who ask for product demos")?

    Who: (key purchase motivation insight)

    Notice this is NOT supposed to be a demographic description of the bulls-eye customer. You may need to include a “who…” clause in the description of the bulls-eye customer, but don’t confuse that usage of “who…” with this one.

    This is where you identify the key insight you have learned about what frustrates the customer or causes them problems. Ideally, you will have found a customer “hot button.” At a very simple level, it could be about their usage of the product. For example, in researching the market for oscilloscopes, the “hot button” turned out to be the frustration that R&D engineers felt in using digital oscilloscopes. These were people with Master’s Degrees in engineering, who felt like idiots when sitting in front of a high-performance digital scope. Notice the emotional content of the insight. A really good insight captures that emotional response in the customer. Try to look beyond the obvious left-brain, analytical responses you get from customers. When you find that “hot button,” you’ll usually find emotion behind it.

    Our product is a: (customer language)

    This section is pretty straightforward. Identify the types of words the customer uses to describe the product. Try to use language as close a possible to what the customer uses, not your own internal jargon.


    That: (benefit)

    This is where you identify the key benefit – not feature – that your product or service will deliver to the customer. While it’s tempting to identify multiple benefits you’re going to deliver, try to stay focused on the single most important benefit. Your marketing copy can talk about other benefits, but for the purposes of the value proposition, stay focused.

    This is key: The benefit should flow logically from the key purchase motivation insight. For example, if the key insight is the frustration users feel in using advanced features of your product, then the benefit you’ll deliver is ease of use.

    Unlike: (competitors)

    Here, you should identify the “reference competitor” that customers think about for this type of product category. Ideally, you should have no more than two reference competitors. You might have profiled more than that, but for the purposes of the value proposition, limit yourself to the key competitors you typically find on the customer’s short list. These are the ones that you are trying to position yourself against.

    Keep in mind that the reference competitor could be either a specific vendor or it could be a substitute product (eg, custom equipment built by the in-house engineering staff).

    Our product: (differentiators)

    What are the specific, unique product features that deliver on the benefit? Here, it’s OK to identify multiple product features. However, make sure that they logically tie back to, and reinforce, the key benefit. For the oscilloscope example, the key differentiators were: an analog scope’s look and feel for the basic functions, combined with a Windows-like GUI for advanced functionality, plus an extensive, intelligent HELP system with detailed instructions for making complex measurements. (Sorry, all my examples are from high-tech; but the value proposition format works for anything.)

    At a price: (less than, equal to, or higher than the competition)

    Finally, you need to indicate how you intend to position the product relative to the price points of your competition. Is the benefit you’re delivering so powerful that you can charge a price premium? If so, is it a 5% or a 10% premium? On the other hand, you may have decided that the best strategy is a “value” strategy of twice the performance at half the price. Or, you may simply have decided to make sure that price is a non-issue by pricing at competitive parity, counting on your obvious superiority to win sales.

    That's it....a bit long, but now you don't have to read the book!!


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