Value Propositions - Helping your customers understand the value of your offerings (2024)

Being able to show the value of your product to your proponent or customer, even in the very early stages of development, is essential. Whether breakthroughor incremental, building a strong story of value helps ensure that the allocation of financial resources, whether this is a customer purchase, an internal development budget or external funding, includes your product.

A “value proposition” can be classified into three types: All Benefits, Favorable Points of Difference, and Resonating Focus.

All Benefits

When asked to construct a customer value proposition, most engineers and designers simply list all the benefits that they believe their product might offer to their end customers - the more benefits they can think of, the better. This approach requires the least knowledge about the end customer and is therefore easiest to do.

The main drawback of the All Benefits value propositionis something called “benefit assertion”. Here, the product creators claim advantages for features of their product that actually provide no benefit to the targeted end users. A further drawback is that many, or even most of the benefits put forth may also exist in the next best alternative (i.e. they are points of parity). This dilutes the effect of the few genuine differences. If you are trying to gain traction with a customer and convince them that they should switch to your offering over the solution that they are currently using, listing ten benefits of your product which also exist incommercially available alternatives will not be a persuasive argument for the customer taking the risk of trying something new and unproven.

Favorable Points of Difference

The second type of value proposition explicitly recognizes that the customer has alternatives. The Favorable Points of Difference approach asks the question, “Why should the customer use my product instead of someone else’s?” Developing an answer focuses developers on differentiating their innovationfrom the next best alternative. This process requires detailed knowledge of what the alternative actually is, which may be a competitor’s product, or it may involve solving the problem in a different way.

There is a catch: simply knowing that a feature of your product is a point of difference relative to the next best alternative does not convey the value of this difference. Without a detailed understanding of the end user's requirements and preferences, and how important to them it is that each of these requirements be met, designers may stress points of difference that actually deliver very little value. This is called “value presumption”, which is assuming that favorable points of difference must be valuable to the customer.

Resonating Focus

Although the Favorable Points of Difference approach is beneficial compared to the All Benefits approach, the Resonating Focus proposition is what we all must strive for. This approach acknowledges that the people who make purchase or investment decisions are often pressed for time. They want to work with peoplewho fully grasp critical issues in their lives, and they will quickly dismiss those who can’t show that they do. Your value proposition can be made on the few elements that matter most to your target customers, and this can be communicated in a way that conveys a sophisticated understanding of their needs, risks, and priorities.

The big difference here is that more is not better. There may be several Favorable Points of Difference, but the Resonating Focus proposition concentrates on only the one or two points of difference that will deliver the greatest value to the targeted end user. Points of parity with competing solutions may matter, and may be pointed out if they are required for the customer even to consider the presented alternative. In fact, stressing a point of parity (“yes, we do that just as well as NextCompany’s solution…”) can help prevent your customers from mistakenly presuming that factor to be a point of difference favoring your competitor’s offering, and this can be a very important part in building an effective value proposition.

A final point is that your value proposition needs to be measurable (based on tangible points of difference that can be quantified in monetary terms) and sustainable (the customer must be able to benefit from this value proposition for a significant period of time).

The bottom line: Do your research not just on your product, but also on your customers. Understand their pain points, what costs them money and time, and where their risks are. Understand the basis on which they are likely to choose a solution. Communicate in a way that shows that you are solving their actual problems, not what you think their problems are. And make it clear that you understand that money matters.

Value Propositions - Helping your customers understand the value of your offerings (1)

References:

  1. Anderson, James C., Narus, James A., Rossum, Wouter, “Customer Value Propositions in Business Markets,” – Harvard Business Review, March 2006.
Value Propositions - Helping your customers understand the value of your offerings (2024)
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