Transcript: How to create a value proposition that’s actually valuable
This blog post is a transcription of our webinar "How to create a value proposition that's actually valuable"
So, before we dive in, let me just say that I’ve learned a ton, researching this topic and the article that I wrote that goes along with it on the C42D blog. One thing I learned is that this process can go really deep, right? There’s all kinds of approaches that I discovered. Everybody seems to have a different perspective. I will say I’ve borrowed heavily from the folks at Strategyzer and their model for value proposition creation and if this is a topic that interests you, then I recommend you purchase their book, Value Proposition Design. They got into a level of detail that I could never cover in a webinar and this is a must have, if you want to know more.
Our event today will be a high level overview of what a value proposition is, why you need them, and how to create one. And note that I’ll be covering this topic primarily through the lens of early stage companies, as opposed to established organizations. And primarily B2B service firms or product firms.
So, what is a value proposition? And why should you care? Michael Lanning, who’s the person who coined the term value proposition, describes it as, “about customers, but for your organization.” So, it’s about your customers but it’s actually a tool that your organization uses. And it’s not addressed to customers, but it must drive these communications. So, your value proposition is going to drive how you communicate with your customers. It articulates the essence of your business, defining exactly what the organization intends to make happen in the customer’s life.
So, here’s another way of putting it. It describes the benefits customers can expect from your products and services. It’s a clear and credible compelling expression of the experience that your customers will get, in the form of value, from your organization.
What is it not? So, a value proposition is not your mission statement. It’s not your tagline. It’s not a positioning statement. And it’s not an elevator pitch. I got this wrong myself. For years, you know, I thought, “Oh, the value proposition, that’s that little blurb that’s at the top of your webpage.” No, that’s actually your positioning statement and if you’re interested in positioning statements, we’ll be doing a webinar on that in a few months. But, the term value proposition does get used rather loosely and it means different things to different people.
Remember that value equals benefits minus costs. So, because benefits tend to be subjective, value’s always in the eye of the beholder. So, value propositions must be designed for a specific customers, market segments, and sales opportunities. There’s not a one size fits all approach to this. You have to think about every potential end user and create a value proposition for each one. So, let’s get into that a little bit.
The example I have here is a company called Oscar. If you’re not familiar with them, they’re a healthcare start-up, positioned as a simple, friendly alternative to the Aetnas and Cignas of the world, if you will. Some of the language here I’ve taken right off their website.
So, at the top, you have the organization and underneath, there are three different segments. And again, these are right off their website. One segment is for you and your family, so that would be the members, the people who are actually using their insurance product. The other one is for the business owners, so these are the people who are going to buy it, right? These are people who are shopping for a health plan for their company. The third segment is brokers. So, these are the people out there who are selling Oscar to the business owners. So, again, three different segments and three different value propositions.
So, for the end users, “Health insurance that works for you and your family.” So, that’s their positioning statement and their value proposition is based around a product that’s very simple and easy to use, which we all know healthcare can be kind of frustrating and not easy, right?
Business owners … so they’re going to push cost savings and a little bit of ego. “Be the boss who gives health insurance that doesn’t cost an arm and a leg.” So, be the hero. And that’s an emotional benefit, right? So, it’s making you feel good, ’cause you’re taking care of your people.
And then the brokers. High tech and less paperwork. So, it’s time for a choice. There’s so much same old in the market. We’re using technology to make it easy for you, benefit, and that’s like a functional benefit, to sell Oscar plans, meaning less time on paperwork and more time for everything else. So, we’re going to save you time and headaches as you sell our product.
Okay, so why do I need a value proposition? Great question. It creates alignment between the silos in your organization, so it gets everybody rowing in the same direction, in particular, marketing and sales, which is very important. It helps your team conserve resources by focusing on creating the right value for the right customer. So, tying in with that previous slide, making sure you’re sending the right messages to the right people.
It allows you to quickly prototype new ideas based on data, not opinions. And it will inform your positioning in marketing decisions. Again, if you’re interested in positioning, we’ll have some details for an upcoming webinar at the end.
So, what characteristics to great value propositions have in common? We have 10 of them. All great value propositions are embedded in a sound business model. So, it’s a component of a greater whole and they’re dependent on each other for success.
Great value propositions focus on the customer. So, it’s not on your services, it’s about the customer and that’s a point we’ll mention a few times in this webcast. You always want to think about them, and how you can help them.
It solves for specific customer pain points. So, in general, pain’s a great motivator, right? Loss aversion is more powerful than gains from benefits. And that’s something that’s been proven time and time again.
Your value proposition targets a few benefits, but it does so extremely well. So, the best value propositions don’t try to address every benefit, right? ‘Cause that wouldn’t really be possible. But the ones that it does address, it does so very well.
Great value propositions connect on an emotional level, so it’s our perspective here at C42D that reaching your customers’ hearts is crucial to success.
Great value propositions align with how your customers view success, so how customers equate success is going to align with your product or service.
And great value propositions focus on problems that most people have, or solutions that are extremely valuable. So, you’re either focusing on a common problem a lot of people have in your achieving scale, or you’re focused on more of a niche issue, that’s extremely valuable to a small number of people.
They clearly differentiate you from the competition. I’m not going to go deep into why this is important, but I think we all realize it’s clear that being undifferentiated is a poor strategy.
Great value propositions outperform the competition. So, connecting with number four, you want it to perform exceedingly well.
And number 10, great value propositions are hard to copy, right? So, ideally, you have some barrier to entry or a moat to keep your competition out.
Early stage firms have unique challenges and opportunities when developing their value propositions. Some of the challenges are, proving your idea can work on a limited budget, right? So that’s always an issue with start-ups, is how can we get this idea to market with the limited funds that we have, fending off your investors, so trying to not have too many cooks in the kitchen, and also running out of money, again back to the financial issue, before you find the right fit.
But, there’s also opportunities. Most early stage companies are very agile. They can make quick decisions, which larger, more established organizations, with layers of management don’t have this advantage. Typically, the owners are working on it and they’re much more motivated to make the process a success. And, again, unlike the established organizations, you don’t have any baggage from the past.
On one side, you have your products and services and these deliver benefits and relieve pains to attract customers. And on the other side, you have your customers, who seek to alleviate pain and gain benefits as they do their jobs. In the middle, you have the fit. So, at its core, a value proposition describes the fit between your products and services and your customers. It’s going to be how you deliver value to them and no, we’re not just talking about money, because value can take many forms. It could be increased status with your boss, it could be security, it could be peace of mind. There’s all kinds of forms value can assume, and we’re going to talk about some of them.
Quick overview on process, so for each major step, you and your team should be making lists of items. It could be customer pain points, or products or services. We found the best way to do this is to quickly create lists using sticky notes. Keep one idea per note. As you get these groups of items together, you want to rank them in the order of importance. Ultimately, you’re going to select the most relevant items. You’re going to get rid of the ones that don’t mean as much and use these as the raw material for prototyping.
Okay, great. Does that make sense? I hope it does, ’cause I can’t hear you if it doesn’t.
So, let’s take a look at your customers. The first step is to focus on your customer. All value propositions begin and end with the customer. They’re at the ultimate end of the value chain and you want to focus on their needs and also on what their pains are. You want to do research to fully understand what pain points they experience as they do their work, and you want to know their goals. So, what motivates them?
And keep in mind, benefits can come from products or services and in general, they can be grouped into three different categories. So, there’s functional benefits and these are around the actual work that gets done. So, that could be something like “We’re going to save you time. You’re gonna get your job done faster.” Social benefits relate to power, status, or how they are perceived by others. So, that’s a social benefit. And emotional, so here we’re tying into their emotion, and that could be security or peace of mind.
Okay, so let’s take a look at some pain points. As I mentioned, pain is a great motivator, especially as you try to avoid it. To understand pain points, you want to do a little bit of research. So, think about what annoys your customer as they try to get their jobs done. What obstacles do they face? What’s getting in their way? What’s making it harder to accomplish their goals? What do they fear? What’s keeping them up at night? So, if you can tap into that, you’re well on your way to creating a great value proposition. What risks do they want to avoid?
As you’re thinking about all these, you want to be specific, so you’d want to say something like, “Our enterprise customers should not wait for more than 10 minutes, for a response from their support ticket.” As opposed to something more generic like, “They should have a rapid response to support tickets.” So, always try to be specific.
As I mentioned, you want to do research to try and find these benefits. There’s a lot of forms this research can take. You don’t want to be guessing, you want hard data. As I mentioned at the beginning, if you want to drill down deeper into this research, you can check out the Strategyzer book or any number of books out there on customer research and we’ll list a couple resources at the end.
So, let’s take a minute to look at benefits. Benefits are the outcomes your customers seek and not the services you provide. Bear with me. Avoid identifying baseline benefits, so these are those that are expected from your service or product. Baseline benefits are something that is just, should always be there. So, if you’re in an industry where prompt customer service is the price of entry, then focusing on that benefit is going to be meaningless, because everybody does that. So, instead, you want to focus on the benefits that go beyond what is expected. How can you really delight your customers? And like the pain points, you want to be as specific as you can.
Okay, so let’s explore your products and services and how they provide these benefits. So, what products or services do you offer? You want to start making a list of all these and in this step, you want to list the products and services you offer to the specific customer segment that you are focused on. Think about what products or services alleviate pain points. And what products or services provide benefits, either functional, social, or emotional.
Remember, your products and services alone do not create value, only when satisfying a specific need, or a specific customer. And again, the functional benefits are things like saving time. Social could be getting recognition, a positive performance review from your boss. Emotional is security and peace of mind, things like that. So, “Sleep well, your data is secure with us,” as a database gets hacked.
How does your product or service solve for the pain points? Here’s a few thought starter. If you want to think about how your product or service can save time or money for the customer, so again, those functional benefits, how can it remove their frustrations? How can you simplify or make things easier for them? And how can you help them avoid a negative status, like a poor performance review? And again, focus on the most important pain points and solve them well. And don’t try to solve for every pain point your customer faces. Just really look at like really, what’s the most important ones?
Okay, so, how does your product or service deliver these customer benefits? Let’s think about how it does this. And again, there is a lot more questions that you can ask besides these. These are just a few examples. You want to drill down and think about how your products or services can make their work lives easier, how you can exceed their expectations, how you can increase their status among peers or superiors, or fulfill an emotional need. Focus on the benefits that produce the greatest returns. Just like focusing on the most important pain points.
Okay, so now you’ve got all these lists of everything together. You’ve thought about your customers. You’ve thought about your products and services and what are the most important items from all of those lists. Now you want to get into prototyping. So, let’s talk about prototyping your value proposition.
You always want to achieve a fit, right? It’s all about the fit. It’s your ultimate goal and it’s achieved when your product and services solve for the customer pain points and create value for them. Don’t underestimate this. It’s kind of difficult to find and once you find it, you have to keep re-evaluating because things change, right? Business models evolve. Marketplaces change. Customer preferences change and this an ongoing process that you’re always going to have to be taking a look at. Again, focus on the important ones to create the most effective value proposition.
There’s two types of fit. There’s a problem/solution fit, so that might be more service oriented. And there’s a product/market fit, if yours is a product company.
Prototyping can take a lot of different forms. You can use templates. You can create rough sketches. You can create mock-ups. You can build a minimum viable product. For simplicity, I’m only going to discuss one of these potential ways to prototype today, and that’s using a template. And again, there’s a lot of resources out there on different ways you can prototype.
So, this is the template that the great people at Strategyzer put together. I’m just going to read it. Our product or service helps “customer segment,” who wants to achieve a goal by “something” around a pain point and by providing a benefit. So, let’s look at an actual example of that. This would be a company that offers analytics tools, so “Our analytics tools help hedge funds managers, who want to deliver profits to their investors, by reducing risk, and creating returns of 15%.” So, we’ve got a nice specific benefit there. We’re alleviating a pain point. And we’ve got a specific goal in there. This is a nice, succinct example of a value proposition. Again, this would be the thing that informs your marketing communications and drives other decisions that your company makes. So, this wouldn’t be the exact language you would put on your website because it might be kind of boring, although, maybe you would want to.
Just a couple other examples of companies you’re familiar with. These are ones that I just built using the template on the previous page. Looking at Airbnbs, under the segment of travelers. “Our global platform helps travelers, who want to connect with property owners, by avoiding scams and enabling safe, secure transactions.”
For WeWork, targeted at business owners, a nice run-on sentence. “Our flexible office solutions helps small to mid-size business owners and entrepreneurs, in major cities worldwide, who want to lease office space, by providing quality inventory, with no long term commitment, and including valuable amenities for free.” And I can testify this one works, because that’s where we are.
Getting back to our earlier example under Oscar, for the brokers that are selling Oscar. “Our technology platform helps insurance brokers, who want to sell corporate health plans, by reducing paperwork and enabling a seamless, faster, on-boarding process.” Just some nice benefits aimed directly at the brokers to make their lives easier.
Okay, real quick, we’ll go through some best practices for prototyping. First off, keep it real. Focus on something that can actually be delivered to customers. So, tangible ideas that can be discussed and approved upon. Don’t veer too far off into fantasy land. Have a beginners’ point of view.
Explore your ideas with a fresh mindset. Try to be a clean slate. Don’t think about what can’t be done, get imaginative, get creative. Explore lots of options. Don’t stop with your first idea. This is like a brainstorming session. You want lots of rapid ideas that you can then evaluate later.
Keep it rough in the beginning. Don’t get too high res. I think you’re going to lose focus of the big idea. You want big Sharpie markers on napkins, as opposed to a fine ballpoint pen.
Don’t get caught in a bubble. Get feedback from your peers, investors, and especially customers. So, as much as you can run your idea by people who might actually relate to it, that feedback’s going to be very critical.
Don’t avoid failure. So, the old start-up cliché of fail fast, fail early, fail often, you want to make this about learning, iterating, and repeating until you get to something that works.
Seek to explore new ground. Do what’s not being done in your industry. Think back to the earlier slide with Airbnb. They created … what did they do in hospitality? They created an entirely new platform that nobody else had ever thought about and now, they’re a unicorn.
Okay, so now you’ve prototyped it. You want to refine, iterate, and get into implementation and see if you can find one that works. Refining is all about testing to see if your proposition has market validation. There’s a lot you can do on this and this process could literally take months. We’re going to walk through a couple basic ways you can do it. So, you can’t test internally, you want to test with customers. One great method, especially if you’re early stage, is to make an AdWords campaign on Facebook, LinkedIn, or Google, whatever’s appropriate to your specific market. You can run some ads and do some keyword research. There’s a lot of tools out there for that, that will click through to a coming soon landing page, or maybe it’s a really basic website that you build with Wix or Squarespace. And then, measure the results. See how many people actually seem interested in this value proposition.
Like I said, there’s lots of testing methods out there. You can do more in depth research and analysis, perhaps even with focus groups, if you have the budget. That’s definitely something you can do, but if now, the AdWords/landing page idea is a nice cheap way to test it out.
So, if your proposition fails, if nobody clicks on your ads, don’t despair. Just return to the drawing board and think, is there another customer segment that might be a better fit for your value proposition? Maybe you’re focused on the wrong market or delivering the wrong services. Would switching up your language resonate better? So, maybe some A/B testing around language might help. Ultimately, you want to keep designing, measuring, and iterating until you have something that feels right to your team and has that market validation. And again, there’s a lot more to iteration and I would refer you to some of the books out there, if that helps.
Okay, so now, you’ve got your value proposition. You want to implement it. So, implementation is all about communication. Have a communications plan for your employees. Make sure they know where you stand and how they can look at difference, in particular, sales, and how they’re going to sell to these segments. Set your priorities and initiatives through the value lens. So, here’s where it’s informing some of your business decisions and what you’re going to do now, in the next quarter, or over the next year to deliver. And maybe you want to set some milestones around that. Internally, you want to have some key evangelists to promote and deliver on your new value proposition and maybe that’s just you. Maybe that’s somebody on your senior team and you want to be talking about it often and repeating it until the message sinks in.
So, value propositions, you know, they aren’t set in stone. This is something that’s always going to be evolving and I would say think of the digital music industry and what happened to the recording industry’s value proposition around the time that the iPod came out and then later on, music streaming. Value propositions do become obsolete and you want to constantly reinvent your value proposition and also your business model. You want to remain relevant and as new opportunities emerge, re-examine where you are and see what you can leverage around what’s changing. So, what’s changing in your environment? What’s impacting your value proposition? Always be on the lookout for those threats.
Maybe there’s regulations or competitive changes in your industry that’s going to rearrange the playing field. So, you know, this is a big one. Now, if you do digital marketing, or marketing automation, the new regulations around GDPR and data privacy are really shaking up the way that we do email marketing. You know, there’s significant penalties out there. There’s a ton of news on that now. So, things are always going to be changing and that’s why you always have to keep on top of regulations, competitive changes and things like that. You know, with changes comes new opportunities. Change isn’t necessarily always bad. I think there’s a lot that you can do when a new opportunity pops up, like maybe it’s augmented reality, which was kind of in its embryonic phase a few years ago, but where is that going to be in five years, right? And again, getting back to my point earlier, how could a change in technology render your value proposition obsolete?
So, who’s going to Tower Records anymore? Exactly. So, your customers’ needs are always evolving. There’s always new segments that come with these other marketplace changes. Don’t wait for a crisis to hit. Reinvent while you’re still enjoying success. Like Seinfeld, you want to change while you’re still at the top, right?
All right. So, let’s sum up. Looks like I’m doing good on time. We’re right at about the 30 minute mark. So, let’s summarize and then I’ll get to your questions.
A value proposition describes the benefits customers can expect from your products or services. It’s not a tagline or a mission statement. Different customers require different value propositions. Seek to find a fit between your customers and your product or services. Find out what your customers want through observation, hypothesis, and research. Seek to find their goals, pain points they avoid, and benefits that they seek. List and prioritize the most important on sticky notes. Do formal research, if you have the budget. Analyze the products and services that you offer. Look for how they benefit your customers or solve the pain points. And don’t forget about those emotional needs, ’cause they matter too. They’re very important. Prototype your ideas. There’s many ways. Chose one. Seek to find the fit. Try using a template. Keep your ideas rough and don’t fear failure.
The best value propositions solve for only a few points and they do it very well for specific people as opposed to doing everything for everyone. Once you’ve got your prototype, refine and iterate. Test to see if your proposition has market validation. AdWords is a great and cheap way to validate. If your proposition fails, don’t despair, return to the drawing board. Once you have it together, implement it and keep evolving. Have a communications plan for rolling it out. Assign key evangelists to promote and deliver on your new proposition. And reinvent your value proposition to remain relevant.
So, that’s the summary. I mentioned we’d have a few resources, so again, the one that heavily influenced my structure for this webinar was Value Proposition Design by Strategyzer. You can check them out at strategyzer.com. They’ve more or less written the book on this and it’s a great, very visual, easy to use book and I highly recommend it.
One book on research is a book called Just Enough Research by Erika Hall. It’s published by A Book Apart and it’s a nice, quick little read on how you can jump in and do some customer research.
Another book on value proposition design and they propose a completely different method, but I still found this book to be really valuable. It’s called Creating and Delivering on your Value Proposition by Cindy Barnes, Helen Blake, and David Pinder.
So, that’s it for resources.
Okay, so, what’s coming up next from C42D land? You didn’t think we’d stop with just one webinar did you? Of course not. It’s our goal at C42D to deliver these once per quarter and next quarter we’re going to be examining one of my favorite conversations to have with a client, positioning. So, learn more about how to position your early stage company for success. Stand out from your competition and crush them, all before lunch. How could you ask for more than that? This must see webinar will take place on September 18th, at 11:00 AM. To register, you can visit C42D.com/blog and look for the sign-up link, which will be up by the end of the week.
Note that in case you missed anything, we’ll have a copy of this webinar, along with the transcript, up on C42D.com by next Monday. There’s also lots of great content around there, so check out our blog for more thought leadership. I’d also like to thank Blair Enns at Win Without Pitching for encouraging us to create this webinar and for the opening statement that I more or less, took word for word from his webinars. So, thanks Blair. I made a bet of myself and I’m glad I did it.
So, I’m going to jump into questions and answers. If you have any, you can type it into the Q & A box right now. And we’ll just wait and see if there are any. Okay, let’s see, bear with me here.
Okay, so Elizabeth has a question. “Can you describe the difference between functional, social, emotional benefits one more time?” Sure.
So, functional is the actual work that gets done. So, that’s a benefit that might save you time or money. What’s the other? Social. So social benefits are around power or status. So, what can affect somebody on how they’re perceived by others? So, maybe that’s a favorable review or avoiding an unfavorable review. So, how can your service or product provide something that will not get the person fired, right? Emotional benefits are around security, peace of mind, et cetera, so, keeping your data safe.
Let’s see, we have another one. Mark said, “You said what a value proposition is not, so where do we use this value proposition?” Great, yeah, that’s great. So, like I said, you wouldn’t exactly take this language and put it right on your website, but what it is, is it’s a tool that’s going to … you’re going to use this as a roadmap to inform your communications to employees, to inform what your sales team is doing, and to inform how your business model works. So, you wouldn’t literally take this language and drop it into communications. What you would do is you would use that as a basis to maybe give to your copywriter, or to facilitate a discussion with your sales team about what they should be doing to deliver value to the customer. And I hope I answered your question on that.
Let’s see, Matt has a question. “How would the landing page AdWord thing work again?” Okay, yeah. Thanks, sorry, I think I went pretty quickly through that. So, thanks for asking. The AdWords campaign, you would want to use that to validate your value proposition, so you could pick a channel that works for you. Maybe it’s LinkedIn, maybe it’s Facebook or Google. There’s lots of tools out there to pick targeted keywords and you’d build a campaign. One great thing is, I know this from experience, that Google will actually help you build a great AdWords campaign. If you just jump in and start spending money on your platform, you’ll get a nice friendly email from a Google advisor and let me tell you. Let them build the campaign because they can do it way better than you can and they’ll do it for free and they’ll do it in a couple days.
Once you get that up, it can click through to a landing page, or maybe it’s just a very basic site that talks about … sort of like a fake thing, right? It’s like, “Here’s our product or service. Click here if you want more information about it. Coming soon.” And just see … you can see what the click throughs are on your ads and you can see if people take call to action on your website and maybe submit an email address to get more information. With that, you can measure results and see what happens.
So, great, if you have any more questions, you can always email me at [email protected]. So, any other questions? I think that’s it. Great, well, thanks to all of you for participating in our first ever webinar at C42D and I look forward to seeing you guys again on another one. Thanks. Have a great day.
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