Know-How Exchange : Strategy

Michael,

The value proposition is completely from the customer's point of view and should be completed in the development phase of your product or service. Your company has to look at the customer's pain and problems and how much that's costing them today to solve it through competitive means (both direct competitive products and services and substitutes) or ignore it or whatever they do to get over it. The process to establish the value needs to include collecting information from "real customers," not in a board room with a bunch of management sitting around putting themselves in their customers' shoes. Management needs to get out and talk with customers on their turf to understand the cost of the pain the customers are feeling today and how they remedy it.

So, the process would start with creating a set of questions management needs to ask and then set travel plans to customers. Then, the answers are compiled and analyzed to get a sense of what the "average" looks like.

The next part of the process involves how you use the data. A message needs to be crafted given the data so that you express the benefits of your solution (emotional and functional benefits) in terms that the customers can identify with. The terms include words and images. When that's ready, then this can be tested versus the same customers as the initial work to see if you got it right.

Finally, you take that message and review versus vision, mission, brand identity and rules, product/service strategy, competitive analysis, etc. If required, you work those to create a higher degree of alignment.

I hope this helps.

Wayde

I've been through this drill dozens of times with different clients. The hardest part is to get everyone to focus on the task for long enough to make meaningful progress.

There are few different approaches you can take. Here are the ones I'd recommend:

1. SWOT Analysis -- Go through a SWOT analysis to get everyone comfortable discussing what's good and what's not so good about the company. Don't rush through the exercise. Part of the value is getting people to open up and acknowledge that things aren't perfect, but that many things are really good.

2. Brand Audit -- It would be great if you have some consumer/customer research that quantifies objectively how your customers perceive your company today. If you don't have this, you might consider a simple survey or a series of interviews conducted by a market research professional. You need to know where you stand now in terms of perceptions and brand image before you can really articulate a useful value proposition.

3. Positioning Statement -- This is the most difficult if you haven't created a positioning statement before. It's a largely creative process that matches the important consumer (or customer) need with the unique benefit your product or service provides. The Positioning Statement itself has a specific format and a set of characteristics you need to embrace.

Starting on page 187 of Rasputin For Hire I've included a cleaned-up version of notes from a seminar on positioning, and there's a clear explanation of how this is done, including the checklist for 7 guidelines, or requirements, of a good Positioning Statement. You might want to get your hands on that book, if possible. (It's available through Amazon.com, or you can get it online by clicking on the link above.)

I agree with many of the suggestions above. I have facilitated many value proposition exercises, and I've found the following has worked well:

a) be sure that a working version of a vision and mission are in place before working on the value proposition - other wise the work will be unfocused.

b) in developing a value proposition, you are really trying to build a statement in the customer's words: " I spend my time and money with (insert company name here) because........."

c) to accomplish the above, I like to think about customer benefits and break them down into a few buckets:

1) emotional benefits - how does the customer feel when the interact with your brand and what does interacting with the brand say about your customer? For example, owning a Volvo might make me feel safe and that I'm doing the responsible thing to protect my family
2) rational benefits - these are tangible or functional benefits. To use the Volvo example again, it might mean that the car has extra airbags or a frame that holds up well in a crash.
3) relationship benefits - these are benefits that grow over time and deepen loyalty - the most obvious of these are the traditional loyalty or "points" programs offered by retailers, but it could be something like a hotel keeping track of your personal preferences for room type, or your Nordstrom salesperson calling you when something arrives that she thinks you'll like.

Ideally, doing some customer research ahead of time is helpful, as customers will give you insights as to what THEY see as the current benefits of your brand and the sorts of things they would like to see you do in the future. That said, I have conducted successful exercises without research and relied on the insights of the internal team.

By asking the team to work through the benefits in the discreet buckets above, it usually becomes clear that there is at least one benefit group that is underdeveloped - for example, many technology-based products have great functional benefits but are void in the emotional or relationship benefits that are needed to have a strong/healthy brand.
From there, you can develop a value proposition statement that not only helps with current positioning but also provides an aspirational compass for the organization in terms of benefits that need to be prioritized and developed.

I also agree with the above suggestion that having someone help with leading/facilitating can be useful - an outsider will free you up to participate in the process and provide healthy outside perspective.

The cold hard fact of the matter is that you already have a value proposition - in fact, you have unique value propositions for each of your product lines within each of the market segments that buy them (or those of your competitors). The challenge for you is to (a) find out what that value proposition is (this requires measurement), (b) determine what you would like that value proposition to be in the future, then (c) design a competitive marketing plan to achieve that value proposition.

I'm afraid that you (and several others in this thread) are confusing a value proposition (that exists in the mind of the beholder) with a sales proposition.

There's a really good book available by Reidenbach - "Competing for Customers and Winning with Value: Breakthrough Strategies for Market Dominance" - that describes this distinction in detail. There's also a really good description of this distinction at the following blog: https://valueproposition.wordpress.com/2007/09/21/value-propositions-versus.... You'll find additional information about value propositions at www.MarketValueSolutions.com.

Good luck!

There's a lot of expert advice and opinions here and it should serve you well. I would like to add is this:

90% of the value props I encounter offer little to no real value.

They are summations of benefits, features, and fluff.

I asked a potential client who was in earlier this month what his value prop was (this is critically important as my firm is charged with delivering it hundreds of times a day through calls and emails). His answer: “we dramatically improve the speed and ease of collaboration”. They worked on that; rolled off his tongue. Over what? By how much? Why is that important? What’s in it for me…etc. etc. etc.

A value prop should always be the end of the story, not the beginning.

We encourage clients to incorporate one or more of the 3 Reasons Management Buys: Increase Revenue, Decrease Costs, and Minimize Risk. My potential client would have been better suited by following his improved collaboration theme to one of these 3 ends. That could have been - increase revenues by speeding time to market, decrease costs associated to project lag time or travel, or minimize the risks of lost or stolen data…so on and so forth.

Ultimately, the value prop is a front end (POTENTIAL) customer facing tool. Polling actual customers will help you to understand the value they derive from your product NOW; not necessarily what prompted them to buy.

I bought Sirius for Howard Stern. I LOVE Sirius and would recommend its value to anyone who’ll listen. However, the reasons I love it now would not have convinced me to purchase Sirius in the first place; they weren’t compelling until I was already a customer. I experience this frequently with potential clients who tell me that reporting is a huge component of the value. This may be very true to their current customers who are feeding their reporting addiction several times a day – but try selling great reporting as the value of your product to upper management…seriously go…I’ll wait here…you’ll be back in a minute.

My last point, (if you’ve nodded off by now I understand) is the outlook for ’09 is bleak. Most people are only concerned with, “how do I secure my place in the company”. If at all applicable, then that’s the value we should be striving to communicate and deliver.


-Terry

p.s. (I won’t exclude my own value prop from criticism. I’m never happy with it either. Revise your revised revisions)