Every business pundit has said at one time or another, “There’s no more misunderstood, argued about topic in business than <insert topic here>, but it’s really not that complicated. Here’s the secret to understanding it.” The concept of value proposition falls into this same category.

On the one hand, it’s a pretty simple concept to grasp. But like all simple, important concepts, it takes some thinking to understand it deeply and use it to your advantage. Let’s first look at a definition of a value proposition, then we’ll look at the three major components that comprise it so you can put it to work for you.

A value proposition is the collection of reasons why a person or company benefits from buying something.

This, at least, is our definition, and we put it in Professional Services Marketing (Wiley, 2009). Not everyone agrees.

From Investopedia:

What Does Value Proposition Mean?

A business or marketing statement that summarizes why a consumer should buy a product or use a service. This statement should convince a potential consumer that one particular product or service will add more value or better solve a problem than other similar offerings.

Investopedia explains Value Proposition

Companies use this statement to target customers who will benefit most from using the company’s products, and this helps maintain an economic moat. The ideal value proposition is concise and appeals to the customer’s strongest decision-making drivers. Companies pay a high price when customers lose sight of the company’s value proposition.

You’ll note that the Investopedia definition and explanation reference a value proposition as a statement. Thinking of a value proposition as a statement does more harm than good for consulting firms. With these definitions in mind, firms head down marketing messaging and communication paths that just aren’t helpful, leading to Quixotic and circuitous journeys by marketing and firm leaders to find a sentence or two that encapsulates value of the firm while at the same time is different from all competitors. They invariably end up with some pap about how they’re an experienced, client-focused, results-focused, trusted partner, yadda yadda yadda (example – nickelharpa).

If you think of a value proposition not as a statement, but as a concept about why people buy something, then you’ve got a lot more to work with. It’s from that concept—the collection of reasons why people would want to buy from you—that you can put your marketing and sales to work much more effectively than if you try to boil it down so far that there’s little substance left.

The reasons why people buy typically fall into three major buckets that, in sum, form the three rules of winning value propositions:

1.    Potential buyers have to need what you’re buying. It has to resonate with them.

2.    Potential buyers have to see why you stand out from the other available options. You have to differentiate.

3.    Potential buyers have to believe that you can deliver on your promises. You have to substantiate.

The 3 Legs of the Value Proposition Stool

What happens if you don’t follow all three of the value proposition rules?

As you can see from the graphic above, take any of the rules away and it makes it much more difficult to sell.

•    Remove resonance, and people just won’t buy what you’re selling.

•    Remove differentiation, and they’ll pressure your price or attempt to get your service someplace else.

•    Remove your ability to substantiate your claims, and while clients may want what you sell (you resonate), and may perceive you to be the only people on the planet that do what you do (you differentiate), they don’t believe you and won’t risk working with you.

Now, don’t get me wrong, I’m not against statements that encapsulate the mission and value of a firm. “We at RAIN Group help companies that sell complex products and services to improve their sales performance. If you want your professionals, business developers, and sales people to sell more, we can help.” This is the umbrella under which we operate. The purpose is to help our clients and the market wrap their heads around the general area where we help, and to know when they might want to work with us.

Ultimately, this is why our clients buy from us; because we’ll help them increase sales success. But there is always a set of underlying factors that swayed them to choose us versus a) doing something themselves, b) choosing someone else to help them, and c) choosing to do nothing at all.

Too many firms don’t investigate the various underlying components of why clients buy from them. They stop at “we’re trusted partners” or “we help you reduce your overhead costs” and it doesn’t serve them well.

If you want to resonate, differentiate, and substantiate, you need to do much more than write a short sentence…or a long sentence, or a paragraph, or a page. While you can sum it up, the summary itself doesn’t carry much weight. It just stands to do a little positioning for you. Your actual value proposition—the collection of reasons people buy from you—is woven into the fabric of the firm and your relationships with clients. Then it’s communicated through the collection of messages you bring to the market.

Instead of trying to come up with a brilliant, simplified value proposition statement, focus on understanding all of the components that make up the three legs of your value proposition stool. Then you can really get your value across in your sales conversations. You can sum it all up in a short statement, too, but you’ll be way ahead of your competitors that stop there and think they’re done.

Comments (1)

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Excellent Read
written by Clint MacPhail, January 22, 2011

I’ve shared this particular article with several people – who I happen to be coaching. Excellent read, and perfect to help people understand the critical nature of establishing this ‘first’, before running off to sell, sell, sell!

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