Value propositions are proven to help businesses grow faster and can even boost marketing campaigns, yet they're often overlooked and underestimated in the marketing mix. Here Nick Couch of brightnewthing.com explains their true worth...
According to the research agency, Millward Brown, their analysis of top brands over a 10 year period showed the brands that combined strong propositions with marketing campaigns achieved an average growth of 168 per cent, compared to 27 per cent increase for brands that had ‘excellent advertising’ but weak propositions.
So what is a value proposition? It’s a short statement that sets out the benefits (value) of a business, product or service to customers. Or more simply, it helps to answer the essential question on every customer’s lips: "Why should I choose you?".
The term ‘value proposition’ first appeared in an internal McKinsey report in 1988 called, ‘A business is a value delivery system’ (Michael J. Lanning and Edward G. Michaels). It stated, "We believe that behind every winning strategy must stand a superior value proposition - a clear, simple statement of the benefits that a company will provide."
Writing a value proposition starts with the customer and an understanding of their needs. Each customer group (segment) might have a different value proposition highlighting the benefits that are most relevant to them. The success of any value proposition is ultimately whether the benefits (of the product or service) outweigh the cost to the customer. The aim is to maximise the benefits that customers value most. The more differentiating, the better.
With this in mind, the best value proposition are often based around tangible benefits. A current example of this is Amazon’s Prime Now: "Prime Now offers 2-hour delivery on thousands of everyday essentials and household items plus the best of Amazon, delivered straight to your door."
Here, the benefit of a two hour delivery is clear and measurable. Weak value propositions tend to do the opposite, focusing on factors that are vague, undifferentiated and at worst, fall into the bucket of "so what?". Saying, "We deliver great service" or "We’ve got the best team" might be true, but rarely cut through to customers and don't make good value propositions.
Being focused on the needs of the customer has helped Fitbit, the wearable tech brand, continue to grow market share against some mighty competition in recent years. "At Fitbit, we’ve stayed true to our mission, continued to listen to what our customers want on their health journeys, and remain focused on delivering products that help our users reach their goal," says Tim Rosa, SVP and Chief Marketing Officer at Fitbit. "It’s this focus that gives us a deep understanding of our customers and enables us to deliver real value."
Having a differentiated product offering also makes for a winning value proposition. This is the case for Nest, a leader in smart devices for the home. "Nest is creating highly differentiated products that are disruptive in the categories we compete. A thermostat that learns what temperature you like or a smoke alarm that notifies you of an emergency (via your phone) are unique to Nest," says Doug Sweeny, Nest CMO.
Unlike many of the products in the category of smoke alarms, thermostats and security cameras, Nest products also differentiate on design and user experience. These are words more commonly associated with smartphones than the white boxes most of us have on our walls.
"Because of the position we sit within these categories our products are highly desirable. Our customers gift Nest products for Father's Day, Mother's Day, and even Valentine's Day!" says Doug.
Having a clear value proposition matters, even for businesses that are just starting out. Alex Brunicki of London based venture capital firm, Backed, is frequently on the receiving end of pitches from start-ups. He talks about the importance of having a clear, customer-orientated proposition, "We get excited when we meet start-ups that are doing really innovative work in the world of gaming, SAAS, or fashion for that matter, but are still able to talk about what they’re doing from the perspective of their customers and the problems they’re solving," says Brunicki.
Here are my five tips for writing a value proposition. It takes time and care, but it needn’t be rocket science. Remember to maximise the benefits that appeal most to your customers, and set you apart from the competition. Putting yourself in your customer's shoes isn't as easy as you might think, but Harvard professor Theodore Levitt sums up the perspective you should take: "People don’t want to buy a quarter-inch drill. They want a quarter-inch hole."
1. Understand what customers want most.
2. Maximise the benefits and differences.
3. Use everyday language.
4. Keep it short, no more than four or five sentences.
5. Test it.