Developing Effective Value Propositions

When Product or Brand Managers Miscalculate Customer Value

You’ve just taken a new job at a consumer products manufacturer, selling animal health products to the mass market. You’re an experienced seller in consumer-packaged goods and look forward to the challenge of learning a new product line and introducing yourself to the pet category buyers at the national chain retailers in your territory.

Your new company has historically sold only through the veterinary channel and has just recently begun manufacturing non-prescription products for the mass market. It is still hiring brand managers and marketing resources with mass-market experience.

After digesting product knowledge on the flagship flea and tick line, you’re nearly ready to head into the field to sell. Your first buyer meeting is in one week.

You ask the existing product team to describe the value proposition for the flea and tick products. “Our active ingredient kills 30% more fleas than the leading competitor,” is the only reply you receive.

Oh dear. That won’t do.

What Is a Value Proposition?

As it turns out, customer value propositions are extremely simple. You want a customer to buy your product, service, or solution. In B2B sales, it doesn’t matter whether you’re trying to sell grass seed to a big box retailer, engineering services to build a seaport, or enterprise-wide supply chain software. You must tell the buyer what’s in it for him. And you must explain why your product, service, or solution will help:

  1. Make more money,
  2. Save money, and/or
  3. Make the buyer a hero, or conversely, keep him from suffering organizational embarrassment.

You’ll also describe how your solution* will do these things better, faster and/or cheaper than your competitors. These items, and these alone, constitute value for a decision maker. The specific pains linked to these three items vary by industry, customer, and finally, by the individual decision maker himself, but the three main components of an effective value proposition never, ever change.

* We’ll use the term “solution” to mean product, service, or solution from now on.

Why Crafting a Good Value Proposition is Difficult

If there are only three components to any effective value proposition, why is it so hard to build a good one? The reasons boil down to these:

  • Training and coordination among sales, marketing, and product management
  • Willingness to spend the time
  • Availability of customer and competitor data

Training and Coordination

In most large organizations, sellers work with a variety of supporting resources to craft a value proposition. These might include marketing resources, product managers, or brand managers.

Often sellers expect the value proposition for the solution they’re selling to be packaged for them in advance in a “sales kit” or “play book.”

Sellers prefer to maximize their time in the field and minimize time spent in the office on this labor-intensive task, so their fervent hope is that someone else will be responsible for the value proposition.

Poorly crafted value propositions typically result because sellers, marketers, and product managers are untrained. The expertise of all three groups is required.

There are two problems with this:

First, marketing and product management resources sometimes do not understand how to craft an effective value proposition that focuses on the customer rather than on the solution attributes (that is, features and functions). And even if they do, the expert seller knows she must still spend time customizing the value proposition to resonate with a unique customer experiencing a unique set of pains.

Second, sales people are often themselves untrained in the art of value proposition development. In this case, there is the danger they’ll end up using marketing or product management as a crutch, taking whatever generic messaging is handed to them (appropriate or not) and using it indiscriminately with every customer.

What’s missing? An explicit link between the value proposition and the unique set of pains the customer is experiencing. The common denominator here is lack of training.

It takes the combined effort of seller, marketer, and/or product manager to craft an effective value proposition. Why? Because the proposition must address the customer, competitors, market conditions, and the solution itself, and it’s rare to find all of this knowledge in one person. Therefore, if any one of these parties doesn’t understand what a good value proposition looks like, the end result will be poor.

Willingness to Spend the Time

Time is the ardent enemy of the sales cycle. The more time a customer takes to make a buying decision, the higher the probability that something will go wrong:

  • A competitor will outsell you
  • The decision maker will be replaced mid-sales cycle, and you’ll have no relationship with the incoming executive
  • Customer priorities and budgets will change

In addition, time is money. Longer sales cycles are not only more expensive, but they also lengthen time-to-commission-check. Urgency, therefore, is the seller’s watchword. For these reasons, most sellers are usually in a hurry to get the deal done.

Exceptional salespeople, however, take the time to properly prepare for their sales cycle by doing the necessary research and strategy formulation required to win. But, as we’ve noted, they are exceptional. Average sellers prefer to be in the field interacting with customers which, to them, means the sale is moving forward (whether it actually is or not).

The more time a customer takes to make a buying decision, the higher the probability that something will go wrong. So, sellers skimp on spending time building an effective value proposition.

Conducting customer, competitor, and market research and using it to build a winning sales strategy is time-consuming and arduous. Most sellers loathe it. Yet, an effective value proposition absolutely cannot be developed unless this work is done, and done well.

Value propositions that win address all of these items:

  • Unique set of pains the customer is experiencing
  • Understanding of the customer DNA:
    • Business strategy (with their threats and opportunities)
    • Financial health
    • Organizational culture
    • Personalities of decision makers and influencers (and the manner in which they like to be sold)
    • Buyer’s compensation KPIs
    • Public and consumer perception
    • Risk tolerance, etc.
  • Insight into both the customer’s competitors and your competitors
  • Overall market conditions, as well as any unique industry conditions affecting the customer (such as pricing or availability of raw materials)
  • Government regulations, if any

Conducting enough research and discovery to become literate on these topics takes time, often a lot of time, regardless of how much assistance is available from marketing and product management resources.

Most sellers lack the patience to do a thorough job, so they take shortcuts or omit some areas, telling themselves that since they already know the answer to these questions, there’s no need to dig. (And occasionally they get lucky.)

Exceptional sellers know, however, that this extensive effort substantially increases win probability (one notable reason why is because the competitive seller isn’t likely to be this diligent), and in the long run, may even shorten the sales cycle.

Availability of Customer and Competitor Data

Sometimes sellers have trouble building value propositions, not because they lack training or are unwilling to put in the time on research, but because their research doesn’t unearth enough valuable data to build one.

Sometimes research doesn’t unearth enough valuable data to build an effective value proposition.

To illustrate, let’s look at the consumer packaged goods industry.

The value proposition that persuades a retail buyer to take a competitive product off the shelf, incur the switching costs, and replace it with your product might include this kind of data:

  • Unit cost to retailer
  • Price point
  • Margin
  • Trends in consumer buying preference within the product category
  • Size of the market and whether it’s growing
  • Market share of the proposed brand vs. competitors
  • Revenue lift from advertising
  • Brand awareness measured via consumer attitude and usage study
  • Retail financial performance of the proposed brand by channel, geography, consumer demographic, seasonality, etc.
  • Freight charges
  • Shopper behavior/consumer preference
  • Promotional spending
  • Exclusivity
  • Innovative product features
  • Shelf or aisle placement
  • Optimal assortment mix for profitability
  • Average ring for a basket containing your brand
  • Product quality
  • Social media awareness
  • Fill rate reliability
  • Inventory management assistance
  • In-store education and support
  • Buy-back policy
  • Payment terms

It’s quite a list. (Note that to make it into the value proposition, each data point must contribute to helping the buyer make more money, save money, appear to be an organizational hero, or avert political embarrassment.)

Sometimes you can get this data, sometimes you can’t. It’s always going to be difficult to estimate a competitor’s sell-in cost and proposed margin to the retailer, for example.

And even when data is available, especially for items your own company controls (you’ll always know your sell-in cost, freight charges, promotion budget, etc.), you still can’t always know whether the value you’re offering is better than your competitor’s – and that’s what matters.

When good data is available, you still can’t always know whether the value you’re offering the customer is better than your competitor’s – and that’s what matters.

In instances where accurate data is scarce, particularly competitive data, value proposition know-how and adequate time spent on research and discovery become even more important. The seller must build a winning value proposition with the ingredients she’s got, not the ingredients she wishes she had, which takes art and nuance and negotiation and, silly as it might seem, force of personality.

All in all, she’d rather be working with a lower sell-in cost to the retailer.

The Most Common Mistake

The most common mistake that sellers, marketers, and product managers make, of course, is in believing that a good value proposition consists solely of solution features and functions.

The feature/function mistake shape-shifts among industries, but it’s always recognizable. It is the common cold of the sales world, highly prevalent with a variety of symptoms (though fortunately, in this case, it’s treatable).

Different Industries, Same Mistake

In the consumer packaged goods industry, brand managers and marketers working with sales fall into the trap of detailing the value proposition to the consumer. But CPG sellers don’t sell to consumers, they sell to corporate retail buyers whose pains are vastly, vastly different from those of the consumer.

This is a classic case of the seller walking into an orange grower’s office with a pocketful of apple seeds. One can hardly persuade a retail buyer under severe pressure to increase category margins and lower inventory held, by offering a tutorial on the flea lifecycle

Is the flea lifecycle important in helping the buyer judge the quality and efficacy of the product? Of course, but it’s rarely the first or only item on the decision criteria list. In fact, depending on the buyer, it might be the last (hard as it is for marketers to hear this).

Detailing product features that are a priority to the consumer, but not to the buyer, is a classic case of the seller walking into an orange grower’s office with a pocketful of apple seeds.

In enterprise technology sales, product managers working with sellers fall into the trap of being consumed by the merits of system functionality, rather than the strategic business goals that the technology will enable. It is the product manager, after all, who runs the team that builds the solution, making her a proud parent. The temptation for her to focus on solution features is, in fact, overwhelming.

Is invoice-matching a key piece of the value proposition for an ERP procurement module?

To the super user, yes, it’s enormously important. And certainly, the super user is going to be an influencer in the buying decision, focusing on operational pains (solved by product functionality).

But the Chief Procurement Officer, who is actually going to make the buying decision, doesn’t care about invoice matching – other than to ensure he isn’t buying a solution that his end users will refuse to adopt.

What he cares about is eradicating inefficiency in the company’s procurement process so that the true cost of buying a box of pencils doesn’t end up exceeding the price of a ticket to Madison Square Garden to see the Knicks play.

His mission is to save money; indeed he’s compensated on it. He’s going to choose the procurement solution that does that best.

On the other hand, his co-decision maker, the CIO, will have these concerns (or pains):

  • Cost to implement the solution
  • Whether he has the expertise in-house to maintain it
  • Whether it fits his best-of-breed IT strategy and governance policies, or
  • Whether it will be cheaper to outsource the whole thing to someone else

Neither will give invoice matching more than a passing thought, if that. Again, functionality seems to fall to the bottom of the decision criteria list.

Are we suggesting that solution features and functions are utterly unimportant to the sales cycle? Of course not. Fail in your ability to thoroughly articulate how your solution works and risk looking foolish in front of your customer. A deal killer if ever there was one.

No, we’re suggesting instead that sellers and their compatriots quite often fail to link the value of their solution to the very specific business pains troubling their customers, choosing instead to focus on features and functions that are important to an end-user or consumer.

Why? Because it’s easier to list what a solution does rather than figure out how it will improve your customer’s business by making them more money, saving money, or making the decision maker look like a hero (or conversely, saving him from political embarrassment). The former doesn’t require you to know what makes your customer and competitor tick. The latter does.

Making this link is what wins deals, and linking value to customer pain successfully requires training, a willingness to invest time in research and discovery, and the availability of quality data and insights.

Linking value to customer pain successfully requires training, a willingness to invest time in research and discovery, and the availability of quality data and insights.

Kicking The Feature/Function Habit

How do you cure someone of the habit of building value propositions solely out of solution features and functions?

A great way to do this is by continually asking the question, “Which Means?” until you arrive at the value statement that addresses one of our three fundamental components: “Which means the decision maker will a) make more money, b) save money, c) look like a hero or avert political embarrassment.”

Let’s take an example:

Statement 1:
Fully automated, three-way invoice matching flags discrepancies for immediate action, while enabling more effective and timely approval workflow.

Which means…

Statement 2:
Less manual input and less time spent chasing down errors
by the accounts payable clerk handling the invoice.

Which means…

Statement 3:
They can process more invoices in a shorter period of time
and get them approved much, much faster.

Which means…

Statement 4:
The cost of processing an invoice drops dramatically.

Which means…

Statement 5:
The company-wide cost of the procurement function decreases.

Which means….

Statement 6:
Funding is freed-up for more strategic initiatives, like
product innovation.

Who wouldn’t look like a hero if he could free-up funding
for strategic initiatives in product innovation, particularly
if he’s the Chief Procurement Officer?

Who wouldn’t look like a hero if he could free-up funding for strategic initiatives in product innovation, particularly if he’s the Chief Procurement Officer?

Step-by-Step Value Proposition Construction

Rather than resorting to the duct tape method, we prefer using the Discovery to Create Value Worksheet to help sellers do with their customers just as the name suggests – discover how to create value and then mold the findings into a proper value proposition:

Discovery

This specific example was used with a hospitality client to help their sales force better understand and cater to the needs of their corporate customers.

A somewhat fuller version gives direction and tools for conducting customer and competitive research, but the point we want to illustrate here is the flow of discovery and analysis used to design a value proposition.

Assuming we’ve done thorough customer research (or formal account planning, which we discuss often in other literature), we work our way from left to right through the worksheet to capture our discoveries and then analyze them in order to design a benefits statement that is part of a total value proposition.

Discover…

Analyze…

Customer’s specific issues, needs, pain points** And then… Your solution to determine whether it fills a need or eases pain for the customer.

** This may be strategic initiatives, directives from a superior, behaviors a buyer is compensated for performing, decision-making criteria in order of importance, etc.

Conduct as much discovery and analysis as required for your selling situation. (In other words, add as many rows as you need to do a thorough job.) Add rows to conduct discovery about competitors (yours and your customers). If you are selling to a buying committee, add rows that address the pains of each member (the financial pains that concern a CFO decision maker vs. the operational pains of an end-user influencer). Then, turn your analysis into benefit statements that, when pulled together, constitute a holistic value proposition.

Conclusion

We have all heard the cliché “features tell, benefits sell.” It is a truism that sellers still willingly ignore, because it’s simpler and more expedient to describe what a solution does rather than delve deeply into a buyer’s organizational and occasionally, personal pains (as from a superior) to determine, in detail, how their solution could ease this pain better than a competitor’s.

To win consistently, there is no shortcut. Exceptional sellers are always willing to put in the time and effort to understand the business of their customers well enough to demonstrate why their solution is best.

Download This Point of View Whitepaper in PDF Form: Developing Effective Value Propositions

Consultative Selling, Value-Added Selling, Solution Selling. The Methods Have Been Around A Very Long Time, But We Still, All Too Frequently, See Sellers Explaining The Value Of Their Solution To The Customer In Terms Of Product Features And Functions. Winning Consistently Means Understanding Your Customer’s Pain And Then Linking The Value Of Your Solution To That Pain. This Requires Training, A Willingness To Invest Time In Customer Research And Discovery, And The Availability Of Quality Data And Insights.

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