Creating a Value Proposition

In this guide to creating effective value propositions, we will explore the anatomy of a value proposition, what it needs to say and the importance of understanding your customer’s business. We’ll also look at how to write and communicate one, before ending with an example of a value proposition executive summary.

 

What is a Value Proposition?

 

A value proposition is an offer to a customer that outlines how your business will help them achieve a better commercial outcome by working with you than they would achieve alone, or through working with any of your competitors. Backing up this claim with credible support forms the crux of any value proposition; you need to clearly explain what you can best deliver against the customer’s specific needs.

Value propositions can focus on different levels of the business:

  • Organisational level: why you’re the best organisation for them to deal with
  • Solutions level: why you offer the best solution to their particular need
  • Individual product / service level: why you offer the best product or service

A value propositions may focus on your ability to deliver superior service levels or through collaboration to improve the customer’s productivity, reduce their energy costs, drive innovations or provide them with high returns at low – or no – risk.

 

Understanding what your Customer’s Value

 

Every organisation is different and will weight differing value to different things. Some businesses may be driven primarily by price (looking for the cheapest solution), whilst others will be driven by offering the best possible product to their own customers. This is a fairly polarised pair of examples and the truth is most organisations will want a healthy balance of benefits across several parameters.

Before crafting a value proposition, it’s essential that you understand your target market and gain insight into what your customer’s value. Questions you should be asking will include:

 

  • Does the customer want to drive efficiency and simplify procurement by dealing with only one or two suppliers across all their global sites?
  • Is the customer particularly motivated by reducing risks and the chance of critical incidents to their IT infrastructure or project timelines?
  • What are consequences of something going wrong?
  • What would be the outcome of a process or system being twice as efficient or effective?
  • Is the area you deliver in one where the customer lacks expertise or experience?

 

Truly great value propositions seek to deeply understand your customer’s situation and needs. Your expertise may enable you to identify opportunities they haven’t seen. This may involve applying your technical or subject matter ‘know-how’, or through gaining insights about your customer’s customers or forthcoming regulations and their consequences.

Your customer may evaluate suppliers based on the total costs of ownership, above and beyond the initial acquisition costs of products or services. This could include related future costs such as ongoing service, maintenance, downtime and the need for upgrades. It’s also important to consider how customers evaluate their options. Do they for financial consideration use payback periods, return on investment or internal rates of return?

Such understanding will help you appreciate and cater for the challenges your customer must deal with and then to craft a value proposition that addresses these concerns head on. The more specific and tailored your value proposition, the more attractive it is likely to be.

 

Communicating your Value Proposition to Key Accounts

 

It’s essential that key account managers have good communication skills and nowhere is this more important than in communicating a value proposition to your key accounts.

Like pretty much all communication, the art in producing a powerful value proposition (and it is part art, part science) comes down to knowing your audience. You should avoid making the proposition too complex, as it will invariably come under scrutiny from individuals with less product knowledge who work in departments that could include finance, procurement, supply chain and health and safety departments.

Here are some key considerations to bear in mind when communicating your value proposition:

  • The need to communicate with the right people (ie decision makers and influencers).
  • The need to build advocacy and arm people with all the materials they need to convince others in their own organisation that your approach is the best approach.
  • The need to communicate at the right time (ie when the customer is scoping their requirements, making decisions).

 

How to Write a Value Proposition

 

Each value proposition should be tailored so it is unique to the business or organisation it is being aimed at. That being said, there are some guiding principles and rules of thumb that should be adhered to.

When you’re confident you have put together a strong business case and have researched and understood your customer’s business then you can complete your value proposition. During this process you need to ensure your proposition satisfies five principles:

 

  • Motivational: Your value proposition needs to meets the customer’s specific needs, including financial returns, risk profile, impact on future business.
  • Differentiated: It’s not only different but better than other options available.
  • Credible: It’s substantiated; that is you present evidence that it will work
  • Quantified: A low risk proposition that creates a high return on investment is compelling.
  • It’s customer focused: Your proposition must demonstrate a deep understanding of your customer’s business and their decision criteria.

 

Whilst the proposition itself can, and should, be supported by the detail necessary to put your case across, it must always contain an executive summary that summarises your main points and arguments in just a few words.

An example of a value proposition’s executive summary would be along the lines of:

“We are confident that you will achieve (YOUR BUSINESS INITIATIVE) resulting in (MEASUREABLE £/$/€ BENEFITS) by implementing our unique (KEY ELEMENT) solution. We have delivered such results in XXX similar installations.”

When convincingly written and well communicated, a good value proposition will present the customer with a clear understanding and create a powerful motivation to act.

Brightbridge brings real expertise in Key Account Management and Value Selling. They have partnered effectively with my team to initiate and drive better customer strategies and stronger implementation. They develop programs that raise customer focus and business performance.

Lorraine Wiseman, President Spirax Sarco USA
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