Three Keys to Creating an Extraordinary Value Proposition

by Mike Schultz on September 30, 2009

Value Proposition Three Legs

 

Every business pundit has said at one time or another, “There’s no more misunderstood, argued about topic in business than <insert topic here>, but it’s really not that complicated. Here’s the secret to understanding it.” The concept of value proposition falls into this same category.

On the one hand, it’s a pretty simple concept to grasp. But like all simple, important concepts, it takes some thinking to understand it deeply and use it to your advantage. Let’s first look at a definition of a value proposition, then we’ll look at the three major components that comprise it so you can put it to work for you…

A value proposition is the collection of reasons why a person or company benefits from buying something.

This, at least, is my definition, and we put it in Professional Services Marketing. Not everyone agrees.

From Investopedia:

What Does Value Proposition Mean?
A business or marketing statement that summarizes why a consumer should buy a product or use a service. This statement should convince a potential consumer that one particular product or service will add more value or better solve a problem than other similar offerings.
 
Investopedia explains Value Proposition
Companies use this statement to target customers who will benefit most from using the company’s products, and this helps maintain an economic moat. The ideal value proposition is concise and appeals to the customer’s strongest decision-making drivers. Companies pay a high price when customers lose sight of the company’s value proposition.
You’ll note that in the Investopedia definition and explanation they reference a value proposition as a statement. Thinking of a value proposition as a statement does more harm than good for services firms. With these definitions in mind, firms head down marketing messaging and communication paths that just aren’t helpful, leading to Quixotic and circuitous journeys by marketing and firm leaders to find a sentence or two that encapsulates value of the firm while, at the same time, is different from all competitors. They invariably end up with some pap about how they’re experienced, client-focused, results-focused, trusted partner, yadda yadda yadda (example – nickelharpa).
 
If you think of a value proposition not as a statement, but as a concept about why people buy something, then you’ve got a lot more to work with. It’s from that concept—the collection of reasons why people would want to buy from you—you can put your marketing to work for you much more effectively than if you’re trying to boil it down so far there’s little substance left.
 
The collection of reasons why people buy typically fall into three major buckets that, in sum, form the value proposition:
  1. Potential buyers have to need what you’re buying. It has to resonate with them.
  2. Potential buyers have to see why you stand out from the other available options. You have to differentiate.
  3. Potential buyers have to believe that you’ll be able to deliver on your promises. You have to substantiate.
Value Proposition Graphic

What happens when a leg of the value proposition stool is missing.

As you can see from the ”Three Legs of the Value Proposition Stool” graphic above, take any one of these away and it makes it much more difficult to sell.

Remove resonance and people just won’t buy what you’re selling.

Remove differentiation and they’ll pressure your price or attempt to get it someplace else.

Remove your ability to substantiate your claims and while clients may want what you sell (you resonate), and may perceive you to be the only people on the planet that do what you do (you differentiate), if they don’t believe you, they won’t risk working with you.

Now, don’t get me wrong, I’m not against statements that encapsulate the mission and value of a firm. Wellesley Hills Group helps professional services firms grow. You can see the message right there on our website. And this message may resonate to some degree (perhaps you want to grow your revenue) and differentiate (it’s a small percentage of firms that focus on professional services firms), but it doesn’t do anything for substantiation (we do that elsewhere).

Regardless, if you want to resonate, differentiate, and substantiate you need to do much more than write a short sentence…or a long sentence, or a paragraph, or a page. While you can sum it up, the summary itself doesn’t carry much weight. It just stands to do a little positioning for you. Your actual value proposition—the collection of reasons people buy from you—is woven into the fabric of the firm and your relationships with clients, and then communicated through the collection of messages you bring  to the market.

Instead of trying to come up with a brilliant, simplified value proposition statement, you should focus on understanding all of the components that make up the three legs of your value proposition stool. Then you can really get your value across using a variety of marketing communications vehicles. You can sum it all up in a short statement, too, but you’ll be way ahead of your competitors that stop there and think they’re done.

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4 comments »

{ 4 comments… read them below or add one }

Robert Lesser, Direct Impact Marketing September 30, 2009 at 2:22 pm

Good post…very clear on a complex topic.

Two other considerations: conviction and conversion.

It takes conviction to lead with a value proposition that may not be appealing to all customers but reflects your distinct competencies. You can’t be all things to all people.

What you lose in broad appeal, you gain in a higher close rate.

Robert Lesser
http://www.twitter.com/RobertLesser

Mike Schultz September 30, 2009 at 2:32 pm

Yes, indeed. The temptation to become all things to all people is strong, but should be resisted.

That’s where the conviction comes in. I’ve always thought about it in relation to Wickham Skinner’s Focused Factory writing: http://www.enotes.com/management-encyclopedia/focused-factory.

Basically, the more you do something the better you get at it (providing more value) and the more efficiently you can do it (making you more competitive in your operations).

Service firms sometimes shift their strategic energy on whatever kind of business has been coming in lately as well as what opportuntites have popped up. Then follow the low hanging fruit and lose focus. Their delivery suffers. As goes the delivery, so goes the reputation, the revenue, and the profit.

John Marden September 30, 2009 at 5:29 pm

For my business-to-business clients, I ask them to internalize three things about their brand’s value proposition:

1. How do we help customers achieve their business objectives?
2. How do we do this better than anyone else? (Look at Porter’s 5 Forces)
3. How do we demonstrate #1 and #2 to customers in a compelling way that they believe and remember?

I like your model. “resonate, differentiate, and substantiate” is a great mantra. I also like how you encourage clients to show it in the customer experience, not just some value prop statement.

Mike Schultz October 1, 2009 at 8:58 am

The marketing can get the message across, but it’s the experience that truly brands a firm. In 2003 Fleet Bank was rebranding as the “customer service leader” bank. Their customer service had always been less than stellar.

I asked an audience at a speech if Fleet’s huge campaign to rebrand was going to work. She said, “Well, if I go into a branch and they treat me well, it’ll work.”

She might have seen 100 ads, but it’s from the experience she would form her opinion of what the bank’s really like. And that’s how brand happens.

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