Successful businesses often seem to have a quasi-mystical connection with their audiences.
It is an emotional connection that offers a deeper resonance, has greater cut through, and creates more loyal customers than their peers could ever hope for.
These companies all share one thing: a strong value proposition.
A strong value proposition is why people turned FedEx into a world leader in logistics, based on its offer of fast, reliable deliveries.
It is why drivers flocked to Tesla for innovative, sustainable transport; why Google became the search engine of choice for finding relevant information on the internet; why customers chose PayPal as their go-to solution for secure, slick online payments …the list goes on and on.
But just what is a good value proposition, why does it matter so much, and how do you discover your own?
Buckle up
Axel Thoma, managing partner of the boutique Swiss marketing accelerator TurbineOst, and SmplCo’s Swiss partner, is an expert in discovering and defining value propositions.
So, he’s just the right person to give you the answers to biggest questions around this crucial topic, including:
- What is a value proposition?
- What isn’t a value proposition?
- Why does this matter so much?
- How can I craft my own value proposition?
- How do I bring my value proposition to life and reap the rewards?
… And, of course, the one big question that could make or break your business, which we teased you with in the headline.
All strapped in? Good. Because Axel’s guide could be about to change the way you look at your business.
Q1: What is a value proposition?
Simply put, your value proposition reflects who you are from an audience perspective (Axel says).
Your value proposition answers the most important question that your customers will ever ask.
It is the one question that will make or break your business, depending on how you choose to answer it.
It’s the question we all ask whenever considering buying anything:
‘What’s in it for me?’
Companies often confuse a value proposition with a business plan, a product or service description, persona analyses, or any number of other things. It is not any of those things.
It is essence of the value you offer customers; the reason they will come to you – and keep coming back.
A great value proposition comes from looking at everything you do through lens of the customer and being guided by what you see through their eyes.
Q2: How much does this matter?
It matters A LOT. It really can make or break your business.
You see, to get people excited about something (i.e. your business, products and services), you must understand who they are and what they value.
The better you understand that, the more relevant you will be to them and the more likely it is they will engage with you.
‘People don’t buy what you do, they buy why you do it’, to borrow the phrase famously coined by Simon Sinek.
In other words: they buy based on the amount of value you create for them through your activities.
Through the looking glass
Get this right and the result will be (amongst other things):
- strategic clarity
- better, more consistent decision-making
- a laser focus on what customers need
- greater relevance and the ability to cut through a noisy business landscape
- winning the hearts and minds of customers
And so I’ll say it again: value propositions really do matter!
Q3: Wait, this all sounds obvious, doesn’t it?
Maybe it does, but companies get this wrong all the time. They get obsessed with the brilliance of what they have created and presume ‘if we build it, they will come’.
Sorry to be the one to say it, but ‘No they won’t’.
A few years ago, I was on stage at a German chemical company’s innovation day.
During the day they talked a lot about science and R&D paths, and how these had delivered amazing products.
Unpopular message
At the end of the day, the Chief Technology Officer asked me how I thought it had gone.
My answer was: “Great stuff you do, but there’s one key thing you have totally left out of the agenda …where are your customers in all this?”
Their answer was, “That’s what salespeople are for.”
This was a huge mistake because it meant the audience was an afterthought. And it meant there was a big disconnect between the clever things they were making and what their customers needed.
It was a disaster and company was forced into a merger two years later.
Q4: Is defining a Value Proposition different from to talking about the benefits and features of my services?
Marketers always talk about putting benefits before features (i.e. prioritising the benefits customers get over the cool widgets that your product or service uses to deliver them).
This is correct, but this can only be done if you’ve got a good value proposition to guide you.
A strong value proposition puts value above simple benefits by placing you squarely in your customers’ shoes.
If you don’t do this, it’s easy to offer benefits that aren’t anchored in what customers value most.
Such benefits are often rooted in what’s good for the company – or good for the finance department! – rather than the customer.
This can cause enormous pain for customers and damage to the business.
I don’t want your baristas!
Take my bank, for example.
What I want my bank to do is handle my money safely and let me manage and access it whenever I want.
That should be at the heart of their value proposition.
But recently two things have happened.
- The online offering hasn’t been developed sufficiently and tends to collapse at peak times, meaning I can’t do what I want with my money, when I want to
- Someone has decided that as they reduce staff and close banking in branches, they still need to leverage their costly estate, so are creating ‘exclusive’ lounge areas – with coffee bars – for people with the right kind of card
A huge mistake
OK, yes, providing free barista coffee is a benefit. But it has little value.
As a customer, I just don’t care. It’s not what I need.
Better use of the estate might make financial sense in terms of short-term P&L, but it doesn’t create much value for customers.
If the bank had its value proposition right, the execs making these decisions would know not to spend money on baristas.
Instead, they’d focus on making it easy for me to quickly and securely use their services – without them falling down when I want them most.
Doing that would add long-term value for both the bank and for me.
Q5: In the end, doesn’t value proposition really just come down to how much you charge?
No, absolutely not. Beware of falling into this trap.
People buy for all sorts of reasons, and they are often emotional, not rational (where finance ranks highly).
In fact, studies repeatedly show emotional decision-making trumps rationale decision-making (even if we often make rational justifications afterwards).
Remember, people are humans first and customers second.
For example, Apple will never sell the cheapest computers, but people will keep buying them because they want to be part of Apple’s ‘think different’ innovation agenda. (Apple got their value proposition wrong initially, incidentally.)
Alternatively, your audience might place a lot of value on lowering risk or anxiety. Then again, perhaps speed is crucial to them.
Maybe it’s the social impact of their decision to buy your product? (The ultimate example of the latter is Ferrari’s or Rolex’s value proposition being to sell ‘status’ rather than cars. In a similar vein, Harley Davidson sells a lifestyle, not motorbikes.)
Beware presuming you know what people are thinking or why they behave in a particular way. If in doubt, always ask them.
Q6: How do I create my own value proposition?
I’d recommend you start with these three questions, as they’ll get you off to a flying start:
- Who is my customer?
- What does he or she value?
- What are they willing to pay for?
Once you’ve answered them – ideally with as much feedback as possible from your customers themselves – go back to what you’ve got and ask:
- Is the customer I’ve identified distinct enough?
- Who influences them and/or who do they rely on to buy?
- What is the value of my business to any new decision-makers / buyers / budget holders that have been thrown up in my research?
Again, if you struggle with any of these answers DO NOT GUESS OR MAKE PRESUMPTIONS. Ask your target audiences.
Put it all in context
Next, take the answers to those questions and:
- put them at the centre of the work you do – using them to strip everything out of your services that don’t fit with your value proposition
- compare what you’ve got with competitors and constantly challenge yourself
To make sure you’re making the right choices (and not using setting up barista lounges where they’re not needed!) I recommend using an Eliminate-Reduce-Raise-Create (ERRC) Grid.
It is a simple matrix-like tool that makes you focus on what to:
- Eliminate: Which factors that the industry has long competed on should be eliminated from your offer?
- Raise: Which factors should be raised well above the industry’s standard?
- Reduce: Which factors should be reduced well below the industry’s standard?
- Create: Which factors should be created that the industry has never offered?
Do all this and you’ll nail you value proposition and give yourself the best chance of success.
Q7: How do I bring my value proposition to life?
Discovering value is one thing, but packaging it up in ways people want is another thing entirely.
If you want their hearts and minds then you’ll need to deliver your value proposition in a way that is easily absorbed by your target audience.
You are going to need authentic stories that turn your value proposition into convincing value messages.
This is where I can’t recommend SmplCo’s 5-Day Prototypes enough.
Prototypes establish touch and feel, make your idea/vision tangible, and build trust in you and the idea.
They allow you to test how customers perceive things and offer feedback on where and how you will create most value.
Next, take that prototype and combine that with a storytelling-deck that caters to all your stakeholders and target customers, creating immediate relevance and summarising “What’s in it for me?”
Do these things and you will be better prepared to take on the world than the vast majority of start-ups, scale-ups, or even established companies in the market right now.
Good luck!
