Day 1 Morning - Value Proposition David Hudson

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Customer & Partner Value Propositions

July 28, 2009

Tony Bailetti, David Hudson, Steven Muegge

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Define compelling value propositions for customers and partners

• Upon completion you will know about:– Compelling customer value propositions

– Ways to define customer value propositions

– Value word equations

• And you will be able to:– Use customer value propositions to communicate an offer’s superior

value and deliver superior business performance

– Use value word equations to make value propositions persuasive

Slide 2 July 28, 2009

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What a value proposition is NOT

• All of the following are useful but are not a value proposition in themselves– Product/Technology/Service

– Brand

– Slogan

– Ad/collateral

– IPR

– Secret sauce

• A value proposition need not be static– May evolve as your market, customers, competitors evolve

– Likely to retain core elements


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Market offers

• A market offer (offer) defines: – What is purchased

– Rights over what is purchased

– How it is purchased

• Offers:– Get jobs done for customers

– Solve problems

– Satisfy needs that customers have

– Reduce cost or drive revenue for your customer


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Customer value

• Value a company delivers to its customers is referred to as customer value and can be assessed as:

Customer value = Benefits from what is purchased + Benefits from how it is purchased + Emotional benefits – (Financial + Non-financial burdens)

• This is about why a customer purchases instead of what a customer purchases and fundamentally overcomes three issues– Customer does nothing

– Customer does what the competition says

– Customer does what you say, but not at your price


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Partners as force multipliers

• Your other stakeholders may include channels, suppliers, complementors, customers’ customers, ecosystem, etc.

• Value propositions for key stakeholders need to be as compelling as customer value propositions– E.g., a company that has a channel partner as part of its go to

market strategy will need to deliver both compelling customer value and compelling channel partner value

• Partners, suppliers, ecosystem all make choices too!– Likely competing for attention, position, priority, mindshare

• Partner relationship may not be financial, so equation may deal primarily with emotional benefits


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Partner value

• Partner value = Net financial + emotional benefit – Non-financial burdens

+ Collaboration benefit – Collaboration burden

• Ecosystem collaboration benefits:– Market entry barrier reduction

– Access to customers

– Operations cost reduction

– Elimination of regional limitations

– Makes niche markets viable

– Leverages international disparities

– Makes scarce skills abundant

– Community/asset reuse


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Challenges

• Term “customer value proposition” is used widely, but no agreement as to what it is

• Unsure as to what makes one compelling

• Loose talk, not backed up by evidence

• Value that is intuitive but not quantified or not uniquely owned

• We often talk more than we listen

• We often try to put too many points on the table

• Customers do not believe suppliers’ assertions


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Strategy – deliberate, not accidental

• Deliver superior value relative to competitors which is measurable and sustainable

• Make all-in company responsible for defining compelling customer value propositions

• Define customer value propositions of “resonating focus” type

• Use customer value propositions to:– Communicate your offer’s superior value

– Deliver superior business performance

• Use value word equations to make customer value propositions persuasive

• Use process and tools to demonstrate value


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All benefits

All Benefits Favorable Points of Difference

Resonating Focus

Consists of: All benefits customers receive from an offer

All favorable points of difference a market offer has relative to next best alternative

Few points of difference whose improvement will deliver the greatest value to customer

Answers customer question:

Why should our firm buy your offer?

Why should our firm buy your offer instead of your competitor’s?

What is most worthwhile for our firm to keep in mind about your offer?

Requires: Knowledge of our own market offer

Knowledge of our own market offer and next best alternative

Knowledge of how our own market offer delivers superior value to customers compared with next best alternative


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Favorable points of difference


Resonating Focus












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Resonating focus


Resonating Focus












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Resonating focus

• Also meaning, concise and to the point

• At most two or three key points– Like a good essay, a good argument

• There are likely many benefits to your product or service but you must establish which are critical to the purchase decision

• Concentrate on those points


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Most of us

• Need to discover these with our customers and partners– But we don’t always listen because we’re busy talking!

• Every pitch is a learning experience

• If you have the benefit, ensure one person from your team is actively listening– Asking questions

– Probing for why

– Restating and getting confirmation

• Resist the temptation: “They didn’t get it”


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Value elements

Point of difference

Element that makes supplier’s offer either superior or inferior to next best alternative

Point to distance yourself from all other offers

Point of parity

Element with essentially same performance or functionality as those of next best alternative

Point to take off the table

Point of contention

Element about which the supplier and its customers disagree regarding how its functionality or performance compares with those of next best alternative

Point to counter (often these are the competitor’s points of difference)

Find significant – order of magnitude – points of difference for which customers are willing to pay


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Make value propositions compelling

Fits: Fits with customers’ and channel partners’ needs to grow and/or make pain go away

Value for all roles:

Satisfies requirements and power relationships of who really buys: (i) economic buyer; (ii) user; (iii) gatekeeper; and (iv) advocate

Superior: Better than those of competition (order of magnitude)

Demonstrable: Based on tangible points of difference that can be quantified in monetary terms

Substantiated: Claims supported by evidence collected with customers and channel partners

Sustainable: Sustainable for a long time


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Use value word equations to bring sharp focus on value

• Focus on points of difference

• Equation that concretely demonstrates customer value proposition using words with which customers are familiar

• Power reduction cost savings = [kW spent x number of operating hours per year x $ per kW hour x number of years system solution in operation] Competitor

- [kW spent x number of operating hours per year x $ per kW hour x number of years system solution in operation] My Business Unit


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Demonstrate value

Pre-sale talk• Promoters’ endorsements

• Published comparisons and rankings

• Case histories

• Value calculators

• Data collected in customers’ premises

• Benefit guarantees

Post sale evidence• With customer define what will

be tracked, track, and document results

• Evidence of post sale impact is highly valuable intellectual property

• Collect data from customer sites and develop relationships while doing so

• Reference accounts and data for quantified points of difference


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Moment of truth

• Define the compelling value proposition for your business– Identify your (a) Customer and (b) Partner Value Props

• Write them down

• Be brutal: at most 2-3 points each

– Present your value prop back to the group here. • 5 minutes MAX


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References

• Anderson, J.C., Narus, J.A. & Van Rossum, W. (2006) Customer value propositions in business markets. Harvard Business Review.

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Day 1 Morning - Value Proposition David Hudson

Education

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