Crafting a Value Proposition 1-0-1

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A captivating melody draws listeners to a song, a striking cover attracts readers to a book, and in business, a compelling value proposition magnetically draws customers to a product or service. But what exactly is this value proposition?

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At its core, a value proposition is a clear and concise statement that defines the unique value a business offers its customers compared to its competitors. It answers the fundamental customer questions: “Why should I choose your product or service?” and “What’s in it for me?”

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Through the lens of a value proposition, companies convey how their products or services can solve customers’ problems, fulfill their needs, or improve their situation, essentially articulating why their solution is superior to others in the market.

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What makes a good value proposition good?

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A value proposition serves as a promise of value to be delivered, a statement that reassures customers about the benefits they can expect from your products and services. Clearly communicating the results customers will achieve gives them compelling reasons to choose your offerings over others. This ultimately boosts customer retention and loyalty, laying the groundwork for sustained business expansion.

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Several leading companies across diverse industries have leveraged the power of compelling value propositions to carve out their unique niches. For instance, Slack, the workspace communication tool, uses the concise and enticing value proposition “Slack is where work happens,” encapsulating the idea that it’s more than just a chat platform; it’s a comprehensive workspace solution. Uber, the ride-hailing giant, revolutionized transportation with its promise to “Get a ride at the tap of a button,” highlighting its unprecedented ease and convenience. Zoom, a leading video conferencing platform, sets itself apart with “Flawless video. Clear audio. Instant sharing,” promising high-quality communication and collaboration features.

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In the music streaming industry, Spotify’s inclusive statement, “Music for everyone,” underlines its vast, accessible library, inviting all music lovers to explore its platform. Finally, Warby Parker disrupts the eyewear industry with “Designer eyewear at a revolutionary price,” appealing to style-conscious, value-driven customers. Each of these companies demonstrates how a clear, compelling value proposition can effectively communicate a business’s unique benefits, setting it apart.

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That being said, a good value proposition effectively strikes the chord of clarity, relevance, uniqueness, and credibility, clearly articulating how a product or service solves customers’ problems or improves their circumstances. It highlights why customers should buy from or deal with a specific business and communicates the tangible results a customer can expect from a product or service, building credibility and trust. Of course, a value proposition should not resort to bragging or talking about yourself too much– it must focus on the customer, showcasing an in-depth understanding of their needs, preferences, and pain points.

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Harvard Business Review identified three types of value propositions:

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• All Benefits. This is the most common type of value proposition. When asked to construct a customer value proposition, most managers simply list all the benefits they believe their offering might deliver to target customers. The more, the merrier. This strategy necessitates the least research about target audiences and rival businesses. However, benefit assertion is a significant potential drawback despite its relative simplicity. It’s not uncommon for managers to tout benefits for features that don’t genuinely help the target audience.

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• Favorable Points of Difference. This value proposition acknowledges that the customer has alternatives, necessitating differentiation from the next best option. This requires a deep understanding of the alternative’s features and benefits. However, knowing that an offering is different from the next best choice doesn’t automatically convey the value of that difference to the customer. The product or service might have several points of difference, making it complex to identify the most valuable ones. Without detailed knowledge of the customer’s needs and preferences, companies may emphasize points of difference that hold minimal value for the customer. This can lead to ‘value presumption,’ the mistaken assumption that all favorable points of difference are valuable to the customer.

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• Resonating Focus. This type of value proposition is considered the gold standard, aiming to deliver a simple yet powerfully captivating proposition superior to the few elements most important to customers. This approach differs from the ‘favorable points of difference’ in two ways: firstly, it concentrates on one or two points of difference that deliver the most significant value, and secondly, it may include a ‘point of parity’ when necessary. The example of Sonoco, a packaging supplier, demonstrates the ‘resonating focus’ approach. Despite having six favorable points of difference, Sonoco chose to emphasize only one point of parity and two points of difference in its value proposition. Intergraph, an engineering software provider, utilized a ‘resonating focus’ value proposition by addressing a mistaken perception about its product being inferior to a competitor’s and positioning it as a point of parity. Crafting a resonating focus value proposition requires customer value research to gain insights into customers’ needs and problems, but it proves highly effective when done right.

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How to craft your value proposition

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In the contemporary business landscape, “We can save you money!” has almost become a generic catchphrase for value propositions suppliers deliver to potential customers. We advise against following this approach. Instead, it could be wiser to consider the following guidelines when creating your value proposition:

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1. Substantiate your claim. Substantiating your value proposition is critical. Use hard data and evidence to back up your claims. One way to do this is through ‘Value Word Equations,’ a tool to express how your offering differs functionality or performance from the competition. Best-practice firms use these equations to demonstrate how their offerings can lower costs or add value.

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2. Demonstrate value in advance. Show prospective customers the cost savings or added value they can expect from using your offering instead of the next best alternative. This can be achieved by sharing case studies of previous successful clients or by using tools such as value calculators. If necessary, go the extra mile to gather data firsthand on the performance of your offering, like conducting an on-site trial.

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3. Document customer value. It’s no longer enough to simply demonstrate superior value; you also need to document it. Work with your customers to define how cost savings or added value will be tracked and report the results over time. This builds credibility and helps you refine your customer value models.

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4. Guarantee savings. Once you have gained experience and knowledge about how your offerings deliver value, you can confidently predict the cost savings and added value prospective customers will receive. Some best-practice suppliers are willing to guarantee a certain amount of savings before a customer signs on.

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5. Keep it distinctive, measurable, and sustainable. A value proposition should be distinctive, offering a superior solution to that of the competition. It should also be measurable, with quantifiable benefits in monetary terms. And importantly, it should be sustainable - the company must be able to execute this value proposition for a significant period.

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In Conclusion

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Your value proposition is part of your business’s DNA, contributing to what makes you unique in the marketplace. And as with all good things, it’s not about big empty claims or slick sales pitches. Instead, it’s about truly understanding your customer’s needs, offering a viable solution, communicating the solution concisely, and then delivering on your promises. Crafting a compelling value proposition is no walk in the park, but when done right, it can be your business’s ticket to standing out. Now, isn’t that a proposition worth considering?

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