Chapter 3.1 Value Proposition

The Value Proposition is the statement of the value that is received by the customer by using the product. The simplest statement is “better, faster, and cheaper”.

So if you look at the (new) product that you are being asked to sell you have to ask yourself what is the value to my customer?

With capital equipment or infrastructure selling it often relates to the process costs of the existing equipment. Computer’s today often have value propositions related to a reduction in energy usage, which saves money on electricity bills. So the Value Proposition for a new computer might be “With our new range of servers you will reduce your electricity bill by 40% over your current usage, saving $XYZ,000 per annum and paying for the upgrade in 4 years.” The structure here is important. There is a new product feature (uses less electricity), that can be developed into a generic value proposition (saving 40% of cost) that the sales guy makes concrete by applying customer data and deriving a specific value proposition (saving XYZ,000 per annum) and relating that to a decision criteria (capital costs need to pay back in under 5 years for example).

Better, faster, and cheaper is a little general, so a more specific list of areas to look for value would be:

Increase Revenue – How?

  • By selling more product to existing customers (or more product to new customers, or etc.)
  • By increasing deal size
  • By increasing market share
  • By improving the effectiveness of some step in the business development – sales process
  • By increasing customer loyalty

Reduce costs – How?

  • By eliminating manual intervention
  • Increasing cycle time
  • By reducing staff turnover
  • Etc.

I will develop this example in the sections Differentiation and Benefits later. Since there is no value unless there is a value recipient (customer) it will pay to re-read this chapter again after you read the The Customer – the Human Being.

 

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