Building a Value Proposition For Your Startup?

Individual buyers and organizational buyers both evaluate products and services to see if they provide desired benefits. For example, when you’re exploring your vacation options, you want to know the benefits of each destination and the value you will get by going to each place. Before you (or a firm) can develop a strategy or create a strategic plan, you first have to develop a value proposition.

A value proposition is a thirty-second “elevator speech” stating the specific benefits a product or service offering provides a buyer. It shows why the product or service is superior to competing offers. The value proposition answers the questions, “Why should I buy from you or why should I hire you?” As such, the value proposition becomes a critical component in shaping strategy.

The following is an example of a value proposition developed by a sales consulting firm: “Our clients grow their business, large or small, typically by a minimum of 30–50% over the previous year. They accomplish this without working 80 hour weeks and sacrificing their personal lives” (Lake, 2009).

Note that although a value proposition will hopefully lead to profits for a firm, when the firm presents its value proposition to its customers, it doesn’t mention its own profits. That’s because the goal is to focus on the external market or what customers want.

Firms typically segment markets and then identify different target markets, or groups of customers, they want to reach when they are developing their value propositions. For now, be aware that companies sometimes develop different value propositions for different target markets just as individuals may develop a different value proposition for different employers. The value proposition tells each group of customers (or potential employers) why they should buy a product or service, vacation to a particular destination, donate to an organization, hire you, and so forth.

Once the benefits of a product or service are clear, the firm must develop strategies that support the value proposition. The value proposition serves as a guide for this process. In the case of our sales consulting firm, the strategies it develops must help clients improve their sales by 30–50%. Likewise, if a company’s value proposition states that the firm is the largest retailer in the region with the most stores and best product selection, opening stores or increasing the firm’s inventory might be a key part of the company’s strategy. Looking at Amazon’s value proposition, “Low price, wide selection with added convenience anytime, anywhere,” one can easily see how Amazon has been so successful.

It is easy to recognize when a value proposition is bad:

  • If it is so general or universal that it doesn’t articulate unique value, then it likely isn’t very good. (For years Tony the Tiger promoted Kellogg’s frosted flakes saying, “They’re grrrrreat!” It’s a cute catch phrase for a tiger, but it’s not a value proposition.)

  • If a value proposition has so many words that you need to read it twice—or worse, you stop reading and move on—then it’s bad. As noted in the Quick Sprout infographic from the previous reading, it should take five seconds or less to read a value proposition.

  • If the value proposition does not provide clarity about the offering to the target market, then it isn’t providing value. The target customer should understand exactly what is promised.

  • If the value proposition for an offering mimics the value proposition of a competitive offering, it isn’t good. In the technology industry, many critics have poked fun at Microsoft for imitating Apple’s simple marketing language and presentation style. No matter how compelling the value proposition for an offering is, copying it for a competitive offering doesn’t make sense or work. An offering can’t be unique if it’s exactly like something else.

The value proposition explains why a consumer should buy a product or use a service and how the product or service will add more value, or better solve a problem, than other similar offerings. Once you get the value proposition right, you still have to actually deliver value to your target customer.

The value proposition is a simple, powerful statement of value, but it is only the tip of the iceberg. How do marketing professionals ensure that they are reaching and delivering value to the target customer?

Take yourself, as a “target customer.”  Think about your cell phone. What would make you want to buy a new one? How might the following issues affect your purchasing decision?

  • Features: A company has just released a new phone with amazing features that appeal to you.

  • Price: You’re concerned about the price—is this phone a good deal? Too expensive? So cheap that you suspect there’s a “catch”?

  • Information: How did you find out about this phone? Did you see an ad? Hear about it from a friend? See pictures and comments about it online?

  • Customer service: Is your cell service provider making it easier for you to buy this phone with a new plan or an upgrade?

  • Convenience: Could you easily buy it online in a moment of indulgence?

You can see there are multiple factors that might influence your thinking and decision about what to buy—a mix of factors. Taken together, these factors are all part of the “marketing mix.”

Organizations must find the right combination of factors that allow them to gain an advantage over their competitors. This combination—the marketing mix—is the combination of factors that a company controls to provide value to its target customers.

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