Pain and Your Value Proposition

What is a “Value Proposition?”

The value proposition for your company or business is the statement of why your customers should give you money – what do they get in exchange for the money that they pay you?

How do You Write One?

One of the toughest yet most important tasks that any business has to undertake is to explain to its customers why they should pay for the company’s products and services. Why should they (your customers and customers) give you money? What is the “value proposition?”

We fly airplanes often as consultants. A question that is often asked of us by our fellow passengers is: “What services do you provide?” followed immediately by “That sounds interesting, who are your customers for that service and why do they need a consultant for that?” In other words, “What is your value proposition?”

Co-author Chris Stiehl’s friend Bradley Gale (author of Managing Customer Value and The P.I.M.S. Principle) often speaks of customers making decisions based upon the value of the deal, not the price. After all, if price was the major factor in decision-making wouldn’t we all be driving used Yugos? We aren’t. Why? Chris thinks we make such decisions based upon the utility of what we receive as compared to the price we pay; i.e., the value of the deal, where price has several attributes. The price attributes can range from initial cost to the hassle of dealing with you as a supplier to the long-term costs and many other cost-related factors.

Dr. Gale’s book addresses several issues: What is customer value and how is it managed? Who “owns” it? What are the specialized tools that are used to manage it? What data is needed? The market research elements that Dr. Gale discusses include the “Pain of the Customer,” customer satisfaction survey data and the “House of Quality.”

A value proposition captures the essence of these ideas: what is the utility you receive from our products and services versus what does it cost you? Of course, the better the utilities are described by the marketer or salesperson, the better is the perceived value by the customer. This is where the “Pain of the Customer” fits in. Marketing professionals have known for decades that customers respond best to ads that speak to their pain, both the fact that you understand it and the fact that you can solve it. Recent literature has shown that businesses behave the same way, especially with respect to “hi-tech” products and services. They want their risk of pain alleviated.

Thus, for your value proposition to work, the customer must perceive that his pain or risk of pain will be reduced, or there is an excitement about the positive attributes (features) of your product or service with minimal risk (pain avoidance).

Checklist of 5 Keys to a Great Value Proposition

1. Be able to express the value of your product or service in terms of how it solves or deals with the customer’s pain, or how the customer benefits with minimized risk of pain.
2. Make sure you understand how much that pain costs them in terms of dollars, staff, time, hassle and energy; i.e., the total cost.
3. Be sure to understand the costs of your product and service, both initially and long-term, including the hassles for the customer, if any.
4. Make sure you can articulate the value (the return) on the investment with your company in dollars and cents and when payback should be expected; this necessarily involves analysis of the dollar value of benefits that may not be easily quantified.
5. Be aware of their alternatives (competitors to you or the option of doing nothing) and what advantages you have over each alternative; proper value proposition analysis includes head-to-head comparisons with all of the customer’s choices.