Developing Compelling Value Propositions
Excerpt from 'The Channel Executive's Bible'
What is a value proposition? I'm surprised how hard it is for people to answer this question. It seems pretty simple. In workshops around the world, the room goes quiet whenever I pose this kind of question. Experienced sales executives stumble around trying to find suitable answers. Part of the difficulty stems from the product-centric materials sales people are constantly bombarded with.
In the simplest terms a value proposition is a pitch or an offer. It is a proposal for an exchange, a promise to provide goods or services. More precisely, it is a specific offer for a particular action within a set time for a given price. The "value" part is a little harder. Value is what customers pay extra for. If a customer is not willing to pay for it, either it is not valuable or the value is not understood.
Value propositions are not about the product. Sophisticated advertisers have long understood this fact. Perfume is not scented water, it is sex appeal. Cars are not wheels and steel, they are an extension of one's personality. Clothing is not just fabric, it is fashion. The further the positioning is from the commodity product, the higher the price. Value propositions are about impact.
It is not so different in the business world. Successful sales professionals tie their pitch not to the fleeting product superiority or features, but to impact on business performance. It is the link to the customer's business model that creates value. The product is merely a tangible manifestation or case study that makes the business discussion specific, relevant and believable.
One of my favorite propositions was done by Siebel Systems in their annual report a few years ago where they created the Siebel Index. Without a single word, this chart showed that companies using Siebel outperformed the DJIA and S&P 500. I like this proposition because it sets up a great executive conversation. Consider how much more powerful this proposition is than one describing Siebel's individual software modules, technical superiority, world class support or corporate culture. Targeted squarely at the CEO, this proposition creates a discussion of business objectives and requirements.
The need to address business issues is even more obvious in channels. Since the channel customer is not going to use the product, you would think that it would be easier to avoid the product feature trap. Yet my observation of thousands of channel account managers at dozens of companies convinces me that the majority make product propositions not value propositions. Only a minority of account managers consistently address channel business issues. A quick scan of ads in Computer Reseller News confirms that my observations of field personnel also apply to channel and corporate marketing departments in general.
We repositioned a tape storage company's channel message from product to business issue. Most storage ads have as their core the threat of some kind of data disaster. An image of a mountain climber with a safely rope and a tag line such as "Now you know why backup is important." Our client was no different.
In a focus group, we were able to show that data loss was not the channel's issue; reputation, customer satisfaction and referrals are. The VAR/SI was not going to lose its data. Furthermore, none were interested in pitching a low cost "secondary snorage" solution, even at 100% margin. However, losing a customer was something all channel partners worried about almost obsessively.
I like this example not only because it clearly shows the product versus business issue divergence, but also because it shows how a tangential, low cost item still can be strongly positioned.
Below are seven steps for building better value propositions.
1. Understand the customer business
2. Know the specific business model for each customer
3. Use financial metrics to find executive pain points
4. Link the corporate resources that can bring pain relief
5. Carefully craft value propositions using the executive's language
6. Present the proposition to the account and get feedback
7. Formalize the offer and develop detailed joint action plans
There are no short cuts. The only way I know of creating value propositions is to really get thoroughly into the customers perspective and find a link. Unless the pitch connects to something the customer intimately cares about, it is not a value proposition, it's just an interruption.
Scott Karren, The Channel Pro