“You can’t be all things to all people. Define a focus for each value proposition and for your overall business”
Having considered the needs of our customers and consumers, and why this is important, the third blog in this series on Building a Strong and Compelling Value Proposition will focus on how to develop your value proposition. But what do we really mean by a value proposition?
What is a Value Proposition?
Let’s first of all consider a definition: “A value proposition is a promise of value to be delivered and acknowledged and a belief from the customer that value will be delivered and experienced. A value proposition can apply to an entire organization, or parts thereof; customer accounts, products or services” [4].
The two words that are repeated are of course ‘value’ and ‘proposition’; so let’s break these down a little further. ‘Value’ is more than a price/cost; it is the pain saved or the benefit gained from consuming your product. A ‘proposition’ is both a promise, a commitment to do something or not do something, as well as a statement of ‘why’ [5] a customer/consumer should use or buy your product. This considers how your product is different (and more importantly, better) than that of your competitor, but what are its unique characteristics?
Defining a focus for your value proposition: Can there be too much choice?
There is a need to define the boundaries of a given value proposition: what it does, for whom, and how. The point to note here is that you can’t be all things to all people. [6] There is a need to define a focus for each value proposition, and for your overall business.
It’s important to consider the effect choice has from a customer perspective. In his talk on the ‘Paradox of Choice’ [7], Barry Schwatz presents the notion that there is a belief in today’s society that to have choice is to have freedom. He does this for a reason. As his story unfolds, Barry highlights how too much choice can actually become a quandary for customers, who now have the responsibility of being ‘connoisseurs’ or ‘experts’.
That’s not to say that we don’t do this in life. I myself like classic cars; I have previously subscribed to magazines and attended the odd rally. However, this doesn’t mean I actually know how a car works, and that I would be able to diagnose what was wrong if it broke down, the part I required and how to fit it. I would be completely at a loss without an expert!
Barry goes on to argue that choice can actually lead to paralysis in decision making whereby customers will feel less satisfied with the choice they make as they end up doubting ‘the right choice’ and inevitably we regret missed opportunities – ‘I could have bought that one’. Overall, our expectations are so high, that they often cannot be met.
The key point here is we need to consider how we, as business owners, help customers navigate the purchasing minefield, so they make the right choice.
A Story of Pain and Gain: Understanding Needs and Articulating Value
In order to articulate the value that your product, service or organisation provides to the market we need to understand the needs of our customers and consumers. To illustrate this, our expert told a story of pain and gain, and we within this blog we will explore how this example can inform the way we choose to develop a (set of) value proposition(s). The story goes something like this…
The expert had purchased a lovely old Oast House in Kent, UK. It was the house he and his partner had always dreamed about; exposed wooden beams, land, backing onto open fields, sheep aplenty. It was a property and move from North to South that had broken the bank. They moved into the house, and everything was perfect…until! One day the expert woke up to the sight of human sewage filling the garden. On further inspection he realised the house was not on the mains drainage!
His immediate reaction was anger…anger against the estate agent and the surveyor who had taken their fees, and towards the vendor. The expert cursed the fact that all parties had not been open and honest during the purchase. Where were they now he thought?
He sought to resolve the issue and, to cut a long story short, he chose a quick and dirty solution at the cost of £6.5k. All was good…until it broke, and the expert had to spend another £6.5k putting it right!
And then it came time to sell the property. The buyer, whose offer had been accepted, approached the expert at point of exchange and pointed out that the sewage system was inadequate, and would need to be replaced. Unlike the expert, this buyer had diligently researched the marketplace and the property and had identified a ‘Rolls Royce’ solution with aftercare. The expert couldn’t believe what he was hearing, and that such a system would cost £20k.
In the end a deal was struck and the money to replace the old quick and dirty system was taken off the sales price. What this example highlights is the distinction between the purchasing behaviour of the expert and that of the buyer who he ultimately sold the property to. These differences are outlined in the table below.
| Role | Purchaser (the expert) | Purchaser (new) |
| Motivation | I want a quick job | I want a quality job |
| Cost | £6.5k, but had to pay twice! | £20k |
| Outlook | Short term | Long term |
| Service | Morris Minor | Rolls Royce |
| Delivery | You manage | They manage |
| Supply chain | Fragmented | Integrated |
| Solution | Quick and dirty | No hurry, aftersales important |
| Left feeling | In Pain! | Gain! |
In reflecting on this case study, the group acknowledged that this had changed the way they think about developing a value proposition in the following ways:
- Timing is crucial: it is interesting to think how we ‘intercept’ customers at different points of the sales process, and the impact this has on their pains, gains and how we orient our offer.
- Recognising the need: some customers/consumers want a quick and dirty (literally!) solution to take away immediate pain, and are not looking for a longer term fix. Whilst others are looking at the longer term solution, with aftersales and maintenance being important, for peace of mind.
- Pains and Gains: can be presented as opposites, and you need to know which attract your customers/consumers. Often taking away a pain can be more important initially than providing a gain. Rating/ranking how important elements of your product/service are can be helpful.
- One size does not fit all: this case study highlights how customers/consumers pay attention to different elements of an organisation’s value proposition(s), and require different solutions.
- Spotting the opportunity: it’s about identifying what you can supply, when and to whom.
A model to help you analyse your Value Proposition
Once we have given thought to what we mean by a value proposition, we considered how we can each build our own (set of) strong and compelling value proposition(s). To build their value proposition, businesses owners were provided with a process [8] that challenged them to reflect on specific elements, in the context of their value proposition:
‘Why’ – focusing on what your customers/consumers need
- Gains: the benefits your customer/consumer expects, desires or would be surprised by.
- Pains: the challenges your customer experiences before, during, and after getting their jobs done.
- The jobs they are delivering: what the specific segment that you are supplying is trying to achieve/deliver.
‘What’ – focusing on what you provide and deliver
- Your products/service offer: the products and services your proposition is built around.
- Gain creators: how your products/services create gains.
- Pain relievers: how your products/services relieve pains.
In going through this process our business owners recognised the power of starting with the customer perspective first (i.e. the ‘why’) before moving onto ‘what’ you deliver. There was a feeling that through doing this, business owners were better able to identify where their current value proposition is not quite hitting the mark and where it/they could be strengthened.
Make a Difference (MAD) challenge from this blog: In reading this blog, we challenge you to focus on one of your products/services and use the above model to appraise an existing value proposition.
To read the blogs that form part of a series on Building a Strong and Compelling Value Proposition click on the following links:
For further information on the BIG Network or any of the Business, Improvement and Growth (BIG) programmes for ambitious owner-managers, and their teams, please get in touch with Simon on 01227 824740 or S.O.Raby@kent.ac.uk
References
[4] Wikipedia, search: “Value Proposition”.
[5] Sinek, Simon. 2009. Start with Why: How Great Leaders Inspire Action, Penguin (also available as a short YouTube video).
[6] This is a point alluded to in Youngme Moon’s 2011 book “Different: Escaping the Competitive Herd”. Within this book, Youngme refers to the fact that competition is actually driving greater homogeneity rather than heterogeneity amongst firms’ offers. This is because firms are seeking to replicate all of their competitors’ points of difference, and in so doing they become more like each other and less distinct.
[7] Barry Schwartz, the Paradox of Choice, available through YouTube.
[8] this process was adapted from the Value Proposition Designer™ from www.businessmodelgeneration.com