Value Proposition

What’s this all about

Sometimes called an “Elevator Pitch” a value proposition is a summary used to quickly and simply define a process, product, service or organization.

The name 'elevator pitch' reflects the idea that it should be possible to deliver the summary in the time span of an elevator ride, or approximately thirty seconds.

The phrase “value proposition” is credited to Michael Lanning and Edward Michaels, who first used the term in a 1988 staff paper for the consulting firm McKinsey and co. In the paper, which was entitled “a business is a value delivery system”, the authors define value proposition as “a clear, simple statement of the benefits, both tangible and intangible, that the company will provide, along with the approximate price it will charge each customer segment for those benefits”.

Key points about a value proposition

• Creating and delivering value is a significant issue that organizations need to consider in all its planning strategies.
• Value propositions vary across industries and across different market segments within an industry.
• Once defined a value proposition should drive all decisions.
• The value proposition helps the organisation understand what their primary focus and goals are to the business and help to understand the consumer’s needs.
• The value proposition is to differentiate the brand from competitors.

 

When creating a value proposition, it’s important to think about these key questions: What is the product or service? Who is the target market? What value does the product or service provide? How is this different from competitors? Many organisations that can answer these will have a relatively strong value proposition as they know how their product or service differentiates from competitors.

But it’s more than just understanding and recognizing what makes them different; it’s about creating a statement that engages your customers to purchase goods or service.

There are many benefits that the value proposition can have on a business:

• A strong differentiation between the organisation and its competitors
• Increase in operations efficiency and in revenue.
• A “northern star” to guide you in all business decisions

 

Creating a more personal and honest relationship with your customers through the value proposition also gives them another reason to choose your organisation.

These benefits will help your organisation grow and succeed in the market.

A organisations value proposition communicates the number one reason why a product or service is best suited for a customer segment. Sometimes a value proposition will be displayed prominently to the public, usually, it will be kept “in-house” to keep it a secret from competitors. It should always be communicated to the senior executives. It also must be intuitive, so that a customer can read or hear the value proposition and understand the delivered value without further explanation.

Value propositions can follow different formats, providing they are unique to the company and beneficial to the consumers it is servicing. However, all effective value propositions are easy to understand and demonstrate specific results from a customer using a product or service. They differentiate a product or service from any competition; avoid overused marketing buzzwords, and communicate value within five seconds of reading it.

 

How long will it take?

A value proposition workshop will take at least a full day, providing all participants have done some homework beforehand. (see the workshop notes)

If you are running the workshop it is a good idea to send out the Workshop Paper and ask all participants to watch the videos beforehand and to attempt the questions. This way the debate can focus on the palue Proposition.

 

Why we are doing this

A great value proposition is a statement which identifies clear, measurable and demonstrable benefits your customer receives when they use your product or service. It should convince your customer that your product or service is better than others on the market. This proposition can lead to a competitive advantage when consumers pick that product or service over other competitors because they receive greater value.

 

When to do

You should create your value proposition:

• In the planning stages before you launch your organisation
• When there has been a major change to your organisation- such as a merger, acquisition, new product development, new competitor, new technology etc
• Or, you simply don’t have one

 

DEFINITION

The Culture Firm value proposition definition is:

“What is it that your organisation does (or could do) better or different than its competitors, and is valued by your target market”

 There are many other definitions of a VP, including:

• “The reason why an organisation (Government, company, agency etc) should choose us instead of a competitor”
• “What unique value does the organisation's product or service provide an organisation”
• “What superior benefit does our organisation offer”

These definitions contain three essential implied or overt sentiments:

• How is the organisation different from competitors in benefits that matter?
• What does, or can the organisation do that is better than its competitors
• Who are the customers that the organisation is targeting, that would benefit from their solution?

So the value proposition should address the target market and how your organisation is better or different and is valued by customers. If you complete this exercise and discover that your organisation does not have a competitive advantage, then redo the exercise with a view to the future and how you could re-engineer the organisation.

 

EXAMPLES

Career Step

Career Step offers its students a more effective educational path to a higher income, while avoiding student-loan debt. And they do it with passion. Career Step leaders have a clear and enthusiastic vision, employees are in full support of that vision, and customers get the value proposition instantly. As for the competition, let’s look at a few statistics.

CEO Steve Tober explains, “There are now 38M student debtors in the US with an average of $29,000 in debt, and 25% of them owe more than $50,000. Yet, 44% of those with traditional degrees are un- or under-employed.”

Tuition costs have increased 500% since 1985. That’s two times the rate of healthcare cost hikes, and six times the rate of food price increases. Because of this diminishing return on investment, students are rethinking the conventional practice of taking on substantial education debt in order to land a well-paying job.

Career Step’s value proposition makes sense for many. “Our certificate programs can be completed in under one year, cost less than $3,000 in tuition, and raise our students’ annual income from $20,000 to $35,000 on average,” explains Tober. “We only offer education in high-growth areas like medical coding, transcription and billing. This has led to a job placement rate of 90% for our graduates.”

Source : forbes.com

 

RESOURCES

DOWNLOAD WORKSHOP AGENDA TO GET STARTED

Download the workshop exercise below, this exercise should take a day to complete and will require executives from all relevant departments; finance, marketing, sales, human resources, product, operations etc.

The workshop notes contain the agenda to conduct a one-day session with your team. Notes from the library will help. If you prefer to use a Culture Firm endorsed consultant click here.

Value Proposition Workshop