The Three Ingredients of a Value Proposition

Value Proposition = Benefits - Cost

Frequently in marketing, I hear a product or service’s ”value proposition” confused with a product description or list of benefits… “Saves time and money,” “Do more with less,” “2x faster” are actually not value propositions.   

A value proposition needs to have three key elements in order to be a true value proposition:   

  1. Quantified Value

    I’m sure you’ve heard those packaged goods ads that claim “4 out of 5 dentists recommend Colgate” or “Twice the cleaning power of the leading brand (asterisk).” The most important ingredient of a value proposition is the quantified value of your claim compared with some other quantity. The power of the value you are claiming depends on:

    1) How relevant the metric is to your audience
    2) What you are comparing against

    For example, if you are claiming your product runs “twice as fast.” A relatively weak comparison - yet, frequently used – would be against your previous model. The strongest comparison would be against an appropriate competitor’s performance or the industry benchmark. Of course, the metric has to be relevant. If you’re talking to a CEO, s/he may care less about how fast your product goes. Instead, the CEO might be more interested in how it helps his/her company reduce operational cost, or improve return on assets.

  2. Relevance

    A value proposition is only as valuable as it is relevant to the audience you are targeting. If you have decided that your primary product or service benefit is that it lowers the cost of operation, that may be music to the ears of a airline CEO concerned with razor thin margins, but the CEO of a Telco may be more interested in deploying new mobile services to increase revenue per subscriber. Therefore, your lower cost pitch may not be as relevant or valuable to a Telco customer. Your value proposition needs to be tuned appropriately for each marketing segment.

  3. Unique Differentiation

    The final ingredient is whether your competitors can make the same claim as you. If you claim your product can reduce their operating costs by 40%, and your competitor can claim 50%, you have a weak value proposition. This is why claiming a lower price is often a weak quantified value – your competitor can easily match your price, then you’re sunk.

 

If you’ve got all three of these key ingredients, and each is strong, you’ve got yourself a solid value prop. Of course, what makes a value prop even stronger is to weave it into a customer story or elevator pitch with real live examples. 

In the next post, I’ll provide some examples of good value props and a template to help you make sure you’ve capture the key ingredients…

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