Building your Value Proposition

WHAT IS A value proposition? It seems like a straightforward question. However, ask any number of sales and marketing executives to define their product’s value proposition and often they have a hard time coming up with a clear, concise and compelling message. Sure, they have a number of colourful and dynamic PowerPoint presentations that explain the unique selling point, how the product is different from the competition and the benefit the customer will receive, but this is only part of a value proposition equation.

Put simply, a value proposition is the promise that a product makes to a customer that outweighs its total cost. “That outweighs its total cost” is the part of the value proposition that most people overlook. This is important, because many products offer great value, but value is relative to the cost, risk and effort required to make a product useful.

One of the easiest ways of explaining a value proposition is by associating it with a see-saw where the left side represents the “promise” of your product or service, the right side represents the “costs”, and the fulcrum in the centre is the “customer”. How the two sides balance out will determine whether your product or service has a good or poor value proposition.

The success of your business requires that the value proposition of your product is positive in the eyes of your customers. To do this, take a two-pronged approach. Define your value proposition as it is today, then identify ways to improve it.


Step 1: define your value proposition

The left side of the see-saw answers three key questions your customers will have of your product. The first is “what’s in it for me?” This is also known by the acronym WIIFM. Basically, this is the promise you are making to the customer. If you are, the promise may be a great selection with a very high level of convenience and a low price. For Hilton Hotels, it could be “a home away from home”. Or, for Oracle, words to describe the firm’s promise include scalability, security and reliability.

The second question the left side answers is “why is it better?” In other words, how is your product unique or different from the competition? Price, quality, service and customer experience – all of these are just some of the many ways successful products differentiate themselves from the pack.

The third and final question on the left side of the see-saw is “why should I believe you?”. This is the evidence required to support your promise. Visit any corporate website and chances are you will see your fair share of evidence such as case studies, testimonials and user ratings just to name a few.

The right side of the see-saw also answers three key questions that customers may have. The first is “what is the price?”. This is all about the cost or fee required to obtain the product. Whether a one-time payment, monthly instalment or delivery and installation fee, it’s the direct cost associated with the product.

The second question is “what could go wrong?”. This is the risk associated with buying or using your product. When putting together your value proposition, think carefully about how you should answer this question. Many companies are reluctant to admit that anything can go wrong. However, by identifying possible risks up front, you can put in a plan to minimise the impact the risk can have on a customer. So what can go wrong with a product? If you are in the software industry, there is a possible risk of a data breach caused by a hacker or bugs in a version update. If you are an airline, a possible risk is that the flight is delayed or cancelled.

The third and final question on the right side of the see-saw is “what do I have to do to use it?”. Another way to look at this is by examining the cost and effort required to make the product useful. For instance, when upgrading your computer’s operating system, the costs of getting the most potential out of the software might include buying new hardware and the learning curve to become familiar with the new interface.

By comparing the relative weights of the left side, promise and right side, costs, you get a visual representation of the strength of your value proposition. If the right side of the see-saw is down and the left side is up, the image is representing a poor value proposition. Basically, the price, risk and effort outweigh the value, differentiation and evidence. On the other hand, if the left side of the see-saw is up and the right side is down, you have a strong value proposition where the value, differentiation and evidence outweigh the price, risk and effort.

After you have mapped your value position as it exists today, the next step is to work to improve it. Even if your value proposition slants to the right, there are probably some steps you can still take to make it even better.


Step 2: improve your value position

One way of improving a value position is in the hands of the product engineers. For example, with a laptop computer, they could make it faster and smaller, fix any bugs that may be present in earlier versions and upgrade the hardware. Granted, these changes take time and money, but taking the results will improve the value, and possible differentiation, and reduce the risk and effort required.

Another way of improving the value position is in the hands of the marketers. There are a number of actions that can be taken here. For example, instead of a customer relationship management programme offering the promise of “knowing your customers”, the promise can be enhanced to “driving your business forward” – a more compelling message to business executives.

Another option is to offer testimonials from satisfied customers or create case studies that demonstrate how your product has helped your customers. The final option is to reduce the cost of the product by lowering the price or even offering additional support to help the customer get started with your product.

When combining both the engineering and marketing changes, the result is a value proposition that should slant to the left. And, the more the product slants to the left, the easier it will be for you to sell your product or service.

When defining your product’s value proposition, it’s important that you step back and take an objective view of your promise and the costs. By comparing the two, you will get a good picture of where you stand. It then becomes necessary to improve upon the value proposition. In the end, it’s not only about making tangible changes to the product. In the business world today, perception can be as powerful as reality. Use your sales and marketing team to create the right perception of your product. By taking the time now to create your value position and making sure it is clear, concise and compelling, you will be able to separate your product from the competition.


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