Value Propositions – Revisited

Lack of clarity in business around what value they offer their clients or whats important to clients can be fatal. It has been so refreshing to recently read the 37Signals Rework book . Here is a company that has  been a raging success by focusing on keeping their applications simple – under doing their competitors on functionality.

To often we lose sight of our most important stakeholders our customers are we focusing on what is important to them.

Yes yet another post on value proposition from me – the last one was  No Value Proposition = No Business , this simple concept is still not understood.  I still come across too many business people who are confused between technology, features and Value Propositions (VP).

  •  Value: quantified worth or success factor, equivalent worth in money
  • Proposition:  the act of offering or suggesting something

Technologists in particular get fooled by their early adopters purchasing on technology and new. You need to remember this is a small group of people and will not make you rich. (Read Crossing the chasm – Geoffrey Moore)

The buying decision by your customer is complex – but there is always a mix of emotion and logic. In tough times clear value propositions dominate over emotion. My take is if you have a clear value proposition you business does not need to be sexy to win sales.

To illustrate the point here are the value propositions and thoughts I went through on some recent purchasing decisions for my business:

Product:  Learning Source Training Logistics -Booking System  VP:  $129 per month is cheaper than hiring support staff to manage venues, registrations and last-minute course communications.
The per registration fee is directly related to my success.

Product:  Xero Accounting:  $50 per month is cheaper than wasting my time with bank reconciliation and checking bank balances via my banks proprietary web site.  Automated processing is quicker than that on MYOB. Saving me 4 hours every month.

Note: the reason I shifted GMC from MYOB (which BTW I think is a better technical product) is because they wanted to charge me for a software upgrade for new GST rate (a feature I just expected to work).  The business values were miss aligned with mine.

 Interesting my guess is many business owners are still paying for bookkeeper’s that could easily be replaced with Xero plus business owner devoting 30 mins a day to staying in touch with their business finances.

Apple mac air:  value proposition : its starts instantly – but most importantly it’s sexy.

50 G Drop Box: $100 per year – fear of loss of data was the final VP that tipped me. My server lives my house – a break in forced me to consider what if I lost all my data. It was the only thing not replaceable in my house. $100 appeared as an insignificant cost. The convenance is great – but note it was  fear that closed the deal.

No Value Proposition – No Business.

Yet another “Me too” or “a solution looking for a problem” – Ideas that fly or not ?

What says your idea, product or business is going to fly or not? In the capital raising business we get plenty of chance to evaluate new business ideas and products. It is amazing how many mad inventors we come across in contrast to entrepreneurs or business people. So what’s the difference: inventors have ideas – entrepreneurs have validated value propositions and business models that work.

 Recently at MORGO Steve Bayliss tabled a great approach to marketing and new product definition. Here is Steve’s test that he applies to new product ideas:

  • ‘Genuine innovation solves a customer problem more delightfully and accessibly than existing alternatives. And as importantly, innovation isn’t a novelty, nor a response to a competitor move, nor a line extension the core brand has no right to make’.

The key point  here is the significant difference between current solution and yours. 

If you can not articulate a good value proposition,  then fix it or give up!

Fundamentally you do not have a business unless you can offer your customers something of value. I strongly advocate if you can not quantify the gain of your client, as a result of using your product or service, then sales will be hard work.

If you are not adding measurable value to your customers, you are going to become, at best, a discretionary spend for the few people who get it,  rather than being a must buy.
Fundamental to your pitch, is the succinct story that describes your value proposition in a palatable way.

If your sales have plateaued – more than likely you are selling technology or ideas, rather than business solutions – your pitch is wrong.  Spend time uncovering your true value proposition – change your pitch and your approach to business focusing on areas that customers will pay for as a top priority.  A starting point, go ask your existing or potential customers how their business will be different as a result of using your product or service.

It blows me away how many companies describe themselves by their craft  … “we’re a software company”  …well no CFO or CEO the ones with cheque books wakes up at 3am wanting to by software. I know software people wake up dreaming of new software platforms…but people don’t need software platforms they need “solutions to real business problems”.

In the business to business environment if you can not quantify commercial gain for your customers you do not have a sustainable business. 

As far as assessing whether your company will make it or not a value proposition that has been validated by the market is the first step – fail on this count and no savvy investor will touch you.