I’ve learnt some great things from my bosses over the years, but by far the best is to clearly define the value proposition for your product or service before you develop it. At the time I knew it was important but I didn’t recognize just how crucial it is.
I recently led Manchester based Money Controls through significant growth and the eventual sale of the business, as the company integrated under its new ownership I noticed that one key question kept coming up – ‘What’s the value proposition?’
So why is it so important?
Your value proposition explains why your customers should choose to do business with you, get it right and you create huge competitive advantage.
It also forms the basis for your whole business model, in Alex Osterwalder’s Business Model Generation it is the centre of the canvas because everything is based on this.
A strong value proposition for your product or service identifies:
- Your target market
- A set of benefits which are aligned with the needs of your customer
- Unique differentiation from the competition
- Evidence to justify your claims (quantified wherever possible)
But it turns out that developing a strong value proposition is hard, that’s why it’s the best question my boss ever asked me.
So this is how I build the basis for a value proposition
- Time with customers – understand their strategy, their problems and what they want to achieve.
- Talk to customers who buy a lot from you and those that buy a lot from your competition.
- Approach customers with a view to developing a trusting relationship, you are not always selling.
- Identify your customers’ needs and rank them in order of importance
- How do they measure success
- What outcome do they expect
- What does their ideal supplier look like (and how do you measure up?)
- Understand the different buying influences within your customer and identify their individual needs and their personal objectives. Miller Heiman strategic selling is one of the best approaches to complex sales, defining buying influences as Economic, Technical, User and Coach. For a summary of buying influences take a look at their knowledge bank
- Based on your deep knowledge of your markets and customers, what customer insights do you have? – these may well be things that they do not articulate
- What risks do they fear taking
- What would go beyond their expectations
- What makes their job easier
Gathering this information is a continual process and should be part of everyone’s role, not just sales and marketing. Identify all the customer touch points within your business and make sure everyone understands their role in developing a deeper understanding of your customer.
To structure value proposition development I use a team approach with a canvas as part of a 7 step process, this gets everything on the wall and allows you to create a picture of your customers’ needs. This takes time, but once you have this it becomes a whole lot easier to define how your product or service both satisfies your customers’ needs and delights them.
This is just the start of building your compelling value proposition, but if you are obsessed with understanding your customers’ needs and how you can fulfill them, you have the basis for a very strong business model.