Improve Your Results with Clear Value Propositions
Let’s say that you work for a beer company and are trying to figure out how to increase revenues. Sales is pitching to distributors that the beer is “Less Filling”, while Marketing is advertising that the beer “Tastes Great” and Operations is delivering “the Lowest Cost Light Beer.” If you could get everyone aligned around a common understanding of the product’s value proposition, each team’s actions would reinforce (rather than contradict) one another for maximum impact.
When I worked at larger companies, we often struggled getting everyone on the same page — and we would lament that as the price we paid for working at a larger organization. “Things would be much better at a startup…”
It turns out that — just like at larger companies — people at a startup don’t automatically have a common understanding of their products’ value propositions either. And lack of alignment at a startup is more painful, especially in early stages when you are looking for that elusive product-market fit.
Note that I have no personal knowledge of how the Miller Lite value proposition came to be defined and my favorite beers tend to be San Diego craft IPAs…
What is a value proposition?
A value proposition is a clear articulation of who the product will benefit, what benefit they will receive, and why it is better than alternatives from competitors.
A value proposition is not something that will ever be on a billboard. “The ultimate driving machine” is not a value proposition — it is a message or tagline that is consistent with the value proposition.
A value proposition (aka, a value prop) is a plainly-written building block that informs the marketing messages, pricing strategies, partnership priorities, development roadmap, etc.
How do you formulate a value proposition?
If you search around on the internet, you will see all kinds of different value propositions. To effectively capture all the data elements necessary for a solid value proposition, I strongly believe in — and recommend — using the following madlib-style structure based on the formula Geoffrey Moore shared in Crossing the Chasm, modified slightly based on what worked best running hundreds of value props through it:
This same syntax in a less madlib-style visual (in case you want to copy-paste):
For <user or buyer> who <motivation>, <product> is the <superlative> <product category> because <reason> unlike <competitor(s)>, which <competitor behavior/feature>.
Key elements:
- It starts with the user/buyer and what they care about.
- It forces you to clearly articulate why your product is the best for that user/buyer- whether that be due to features, brand association, convenience, price, etc. Figuring this out is often harder than you would expect.
- It explicitly includes competitors by name and requires you to provide your rationale for how the competitors’ products do not measure up.
Note that a single product will often have more than one value proposition — especially if the user and buyer are different people or if the product is used by more than one persona. To make it easy to capture lots of different value propositions and to make sure you don’t get lazy and start leaving key elements out, I highly recommend putting the madlib into a spreadsheet. It can also be really helpful to map out the value proposition of key competitors, to help you understand whether your value prop can I am sharing a value proposition template to help you get started.
Here is an example value proposition for one of my favorite products: For people that work on presentations with other people who don’t like to manually merge content from team members, Google Slides is the best presentation creation tool because Google Slides allows multiple team members to work on a presentation at the same time, unlike Microsoft PowerPoint, which does not have good support for multiple people editing a document at once.
Don’t forget the other 3 Ps!
A classic marketing framework is the 4 Ps: Product, Price, Place, and Promotion. Most people will instinctively focus on the first P (Product), and delivering a product that with capabilities that users/buyers cannot get anywhere else. But those other 3 Ps can be drivers of your value proposition as well. For example:
- Your product might be the most convenient one for the user to purchase (e.g., if it is sold through a distributor that customers are using for other purchases <- Place.
- Your product might be the best known and/or have the strongest brand <- Promotion. A few years ago I was working with a company that had a product that was better in every way than one of its competitors, but that competitor bought the biggest tradeshow booths, took out the most ads online and in industry publications, and created the impression in the market that they were the absolute kings of the market (despite their outdated technology). Buyers wanted to have the product that they kept hearing about and the company acquired a lot of customers and revenues based on their marketing efforts. The lesson: having both a great product and great promotion is clearly ideal, but you can make up for a mediocre product in the short term if you put enough energy into the promotion of it.
- Your product might be the cheapest to purchase or the one that offers the best discounts for certain segments of the market, etc. <- Price. I generally think of the “lowest price” value proposition as being the value proposition of last resort — since competitors can easily negate your value prop by lowering their prices below yours, eroding value for everyone in the market — but in some cases it is the right value prop to leverage.
The limited situations where a“lowest price” value prop can be useful for a startup include: 1) when the startup’s cost structure allows them to deliver a product for a lower cost than competitors; or 2) when the startup believes that the price and profitability of later products will be better than the initial product (e.g., a loss leader). But be careful when choosing a lowest price value prop as a startup — you may not yet have a clear handle on what your cost structure will be as you grow and raising prices later may be difficult.
When should the value proposition be formulated?
Ideally, the value proposition for a product is created when the product is just an idea — before work to create the product has begun. At this point, you should have identified a customer need/pain point for the segment your product will be serving.
Why should the value proposition be formulated before the product has been created?
Defining the value prop early is important for (at least) three reasons:
- Thinking about the value prop early in the process allows you to validate with real people in your target segment that they will want to buy and/or use the product you describe. It is really easy to talk yourself into building a product that will work well for people just like you, but that misses the mark when available in the wild. (Look for more insights into collecting and incorporating user/buyer feedback in a future post.)
- Defining the value prop early also allows the team to define the features of the product to be consistent with the value prop. It is really easy to add a bunch of “good-to-have” features to a product that do not reinforce the value prop and may ultimately just cost more time and money to build without an expected payback.
- We can use the value proposition to help inform/communicate our go-to-market strategy — how we are going to find those user/buyers, how many of those users/buyers there are, how much that customer acquisition will cost, what the pricing will look like, and ultimately what revenue and expenses are expected for the product. This is great for planning (and budgeting for) the Marketing and Sales activities necessary, and helps to ensure that when the product is launched, that the rest of the organization is ready and able to make the most of it.
What about the products that were created before I read this post?
Note that while creating the value prop before building the product is ideal, defining it for an existing, in-market product is valuable too. There is just more sunk cost associated with an existing product — so determining that the value prop isn’t compelling for an existing product may help you to see that you need to make a change in the product (e.g., to invest in additional differentiators), the pricing (are you selling a premium product for a lower price than all competitors?), or the marketing strategy. Being honest about the value prop of an existing product may also help you to better identify products that are in more of a harvest/sunset phase of life (or that should be shut down as soon as possible).
How can I start using value props?
With an investment of as little as a couple of hours, you can start getting value out of value propositions. Here are the concrete steps that I recommend:
- Create value propositions for your product(s) using the madlib-style structure above — at least one value prop for each product per user/buyer persona. Bonus points for creating value props for your key competitors. Time required: less than an hour per product.
- Review your draft value props with internal experts at your company (especially those that are frequently working with your users/buyers) and refine the value props where needed. Time required: less than an hour per product.
- Validate the value props directly with buyers/users as part of other customer research activities you have underway. You may have more than one value prop that could apply to a user/buyer — figure out which one is most impactful to them. Asking people which value prop best resonates with them — in focus groups, 1:1 interviews, web surveys, etc. — is a good way to determine if you have the right value prop identified. Another good way of determining which value prop best resonates is via running experiments where you can see from users’ activities what is most important to them (e.g., see if more people click the link on a button that emphasizes delivery speed vs. the price). (More information on experimentation to come in a future post.) Time required: varies, but should be a minimal addition to buyer/user engagements you already have underway.
- For companies with more than one product, review the value props of your different products as a group to see if there are any inconsistencies. It is fine for one company to have products at different points in the price-performance spectrum, but the organization will tend to treat all products as occupying a similar space on the price-performance curve. You will need to watch out for promotion and pricing strategies that don’t meet the needs of each specific product (e.g., while low prices may be appropriate for your undifferentiated commodity product, don’t let that influence you into a similarly low price for your premium product in a different space. Time required: typically less than 15 min.
- Once you have one or more value props defined that you feel reasonably confident in, communicate this information to your teams so that they can leverage this simple tool in formulating their plans and strategies. Time required: typically less than 15 min.
Hint, try and add the value prop communication to an already scheduled meeting — no one is going to be excited about a calendar invite that says “Review of Value Props”.
6. Keep an eye out for actions and plans that are not consistent with the value prop. When you see them, stop and change course. Companies and teams have inertia, and changing behavior can be difficult, but activities that are inconsistent with the value prop are at best a waste of time and at worst likely to reduce your chances of success.
Wrap Up
Getting clear on the value propositions for your product(s) is important for any business, but especially for a startup where resources are tight, timelines are short, and you are pursuing the product-market fit that will take your company to the next level. Add value props to your toolkit and increase your likelihood of success!
If you have related experiences or additional suggestions, I would love to hear about them below. And if you enjoyed the post, please share it with a friend!
The opinions expressed in this post are solely my own and do not express the views or opinions of my employer.
