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What is a Value Proposition?

Written by: John Brennan

Article Overview: Your value proposition is the value your company focuses on delivering to the market. It should be based on your company’s goals and objectives as well as the value provided by your competitors. Value propositions establish the value basis for the business relationship. They describe how your solution will improve your prospect’s business and how that improvement will be measured.

What is a Value Proposition?

Value proposition is not the same as a solution. A fully defined value proposition incorporates five specific elements:
1. Quantifies the anticipated business improvement
2. Specifies the timing of the benefits
3. Specifies the timing of the costs
4. States the payback period
5. Specifies how the results will be measured and tracked

Value propositions are opportunity and prospect specific and are best developed collaboratively with your prospect over the course of the sale. If you have limited contact with your prospect before offering a solution, you cannot develop a value proposition. You will just be presenting your solution
The objective of collaborating with your prospect to develop a value proposition is to convince them to award the contract without competitive proposals. Your prospect must be convinced that the opportunity cost of delaying exceeds the potential savings from competing the contract.

Collaboration between you and your prospect offers these benefits:
• You gain a clearer understanding of your prospect’s objectives and potential benefits.
• You and your prospect better understand the actions required of each party, which reduces risk.
• Your prospect becomes your advocate in the prospect’s organization.

There are three basic kinds of value propositions:
1. Operational excellence/cost leadership
 You can deliver your product at a lower cost than your competitors thanks to better manufacturing processes, better economies, or other advantages
 Your product is typical for the category – not the best and not the worst
 In mature industries, most companies are competing on operational excellence (costs); those companies that cannot produce at a lower price will lose in the market

2. Product innovation/ leadership
 Your focus is innovation: new technologies, better products
 Because your products are new, different and unique, your prices are likely higher than your competition, but you are delivering a superior product

3. Customer intimacy/solutions
 Your goal is to solve your customers’ problems with a broad portfolio of products and services
 You are selling a relationship that is superior to that offered by your competitors

It’s important to understand your customer needs, industry trends, and your ultimate vision before you create a brand strategy. The questions below will help you identify the qualities/aspects of your offerings that should be emphasized in your brand position.

• Industry trends: What has been happening in your industry over the last few years? What changes do you anticipate in the next few years?

• Customer needs: How well (or poorly) has the industry been meeting customer needs? Have these needs changed over the last few years? Do you expect them to change in the next few years?

• What’s your ultimate vision -- what do you ultimately want to deliver, to be?

• What do you need to do to capitalize on these trends and visions?

All companies have a primary value proposition that should drive everything they do. A company can also have a secondary value proposition, but it is almost impossible to effectively deliver on all three kinds of value propositions. Your branding and messaging should support your primary value proposition and, to a lesser extent, your secondary value proposition.

Related Articles
  Developing a Value Proposition
  Sales Coaching – How to Find Clients
  How To Do Effective Local Marketing & Advertising
  Market Focus – the Proposition
  Discipline, Opportunity Management & Value Propositions

Article Tags: business relationship, goals and objectives, prospects, value basis, what is a value proposition



Related Forum Posts
Re: This is Marketing Warfare! - Hey GT, I guess this was from a while back, and it'll test your memory a bit but could you possibly elaborate on Unique Selling Proposition? Can you give us some examples of good USPs?


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