DMN3 Blog

"Price is what you pay.
Value is what you get." – Warren Buffett

I have previously blogged about the importance of a Unique Selling Proposition (USP). Today I want to discuss what the marketing industry calls a Value Proposition (VP). Since these are fundamental to effective marketing, a lot has been written about them. I would like to add my two cents.

If you do much reading on the subject, you will find that some people consider the USP and VP to be the same thing. Others depict them as two different elements of effective marketing. I think of them as different parts of the way we convey our marketing message.

Value Proposition = the resulting experiences and benefits of greatest value to your targeted market

Unique Selling Proposition = positioning message that differentiates your business from competitors

Because I have already shared my thoughts about USP’s, I would like to discuss some issues relative to creating an effective Value Proposition (VP). If you would like to read what I posted relative to USP’s you can find it here: Unique Selling Propositions.

Michael Lanning first coined the term "Value Proposition" in a 1984 white paper. Fourteen years later, in his book Delivering Profitable Value, he defined a value proposition as:

"The  combination of resulting experiences, including price, which an organization delivers to a group of intended customers in some time frame, in return for those customers buying/using and otherwise doing what the organization wants rather than taking some competing alternative."

The term has become distorted. Instead of basing value propositions on the results that customers derived from their products and services, organizations started using value propositions to describe themselves and the attributes of their offerings.

Let’s start by stating the obvious about creating a value proposition...

It is not about you. It is about them!

"Them" being your target market, potential customers, market segment or whatever else you may call them. Value is what your customers get from you after they have paid your price for whatever offer you make. Value is your answer to the customer’s question of “What’s in it for me?”

Despite what we know about effective value propositions, many companies still communicate lousy ones. Lousy ones typically have one or more of the following traits.

•                 They talk about themselves
•                 They are too general and too filled with hype to be believable
•                 They do not reflect solutions to problems as perceived by the customer

Talk about themselves: Too often organizations use “me language” to express their value proposition. What we see is a description of their offerings, features, capabilities, time in business, etc. The message is centered on what they are offering and why you need to buy it. They forget about the question the customer is asking: “What’s in it for me?”

Too general and self aggrandizing: We often see value propositions that are very general in terms. They are usually accompanied by glowing hype about the company or its offerings. Do you really believe that potential customers will believe generalities and hype? What do customers think about terms such as "high quality, fast or world class?" They have seen and heard this kind of marketing hype a zillion times before.

Do Not Reflect Customer’s Predicament: Organizations will often neglect the customer problem for which their offering is the solution. Even when they do address the problem, they often do not do it from the customer’s perspective. 

I have written many times about the need to be “customer-centric” in the design of offerings and our marketing message. All three of the traits of lousy value propositions suffer from not being focused on the customer and his or her problems and desires. They are talking about themselves first, and customers second. All of these would conjure up the “So What?” question immediately in the subconscious mind of our target market.

What a Value Proposition Should Be:  In the mind of our target market, value means the benefits of the offering delivered versus the price paid. A value proposition should be the a statement of the resulting value of our offering in terms of specific benefits that solves a critical problem the customer is facing. It also must be stated in words that the customer himself would use to describe the solution.

The value proposition statement should be both specific and tangible. It should reflect tangible business results, i.e. benefits, that your offering can deliver to your target market. It should satisfy an unmet need that your potential customers feel is important. It should demonstrate your knowledge of the customer situation and experience.

The VP should reflect a clear view of the objectives of the target market. What is it that they are trying to solve or achieve? Your VP offer should then be communicated to address those needs.

An effective value proposition can help you achieve your business objectives. Done right it can do a lot about affecting a customer’s mindset. It can connect a customer to your organization, rather than attempting to connect your organization to the customer.  

How would you rate the following as a value proposition?