Tips For Tuning Up Your Value Proposition

We are a consumer driven economy. You know what that means? It means that in contrast to the past when it was a virtue to save - a penny saved is a penny earned - a couple of decades ago economic growth began to depend on the consumer spending more and more. At first it was based upon spending more and more OF their income until savings rates dropped to zero. And then it progressed to spending more THAN their income to drive the economy at the cost of a negative savings rate, i.e. consumer debt. If you've got it spend it. If you don't - borrow it and spend it. Ultimately, bad lending practices devised to get more people to take on more debt led to the house of cards crashing down. So, what does our government do to fix this problem of consumers spending more than they earn? They borrow money to put into the hands of consumer and tell them to spend it to "stimulate the economy". What is wrong with this picture? Does this drive anybody else out there as nuts as it does me?

• Has your offering changed? - There are companies that continuously improve their product, services, or tools which increase the value they provide to their customers but fail to change their value proposition and/or pricing. The cost of continuous improvements won't be recovered unless the incremental value is accounted for in your value proposition. Even if market conditions do not allow a price increase, if customers do not percieve the ever increasing value you are providing them you may lose them as a customer. For example, we have seen this happen all too often with software customers who resent paying software license maintenance fees and don't realize the value they are receiving in continuous improvements with each incremental release. The value proposition needs to reflect how each software release further improves their business processes and thereby makes them more efficient and competitive.
• Examine economic trends - With the trend of higher energy prices effecting the costs of all kinds of goods and services it is time to take a another look at your solution to see if your value proposition is strengthened by this trend. If your solution reduces transportation costs, directly reduces the consumption of energy, the use of paper or any other energy intensive material, the value generated by your solution has increased. Whenever there is an increasing cost trend favorably impacted by your solution, there are cost avoidance benefits that need to be added to your value proposition. If the economic trends have reduced the value of your offering an updated value proposiiton can help you quantify the impact. A value proposition model will permit you to run "what-if" scenarios on scope changes to your offering. In any case, an accurate up-to-date value proposition is essential to a value pricing practice whether the value of your offering is increasing or decreasing.
• How has the market changed? - For decades in process automation business for flat sheet processes such as paper manufacturing, reduced process variability was the key benefit leading to raw material savings and faster converting operations. I remember sitting with a customer one day explaining how our new generation of product would reduce their variability by another 50%. The customer looked at me and said "I don't care. You guys have gotten the variablity down so low now we can barely measure it. It doesn't matter". If our value proposition continued to hail further variability reductions it would fall on deaf ears. We needed to talk about other ways that our offering could improve thier business. If your value proposition hasn't changed in a while, you better get out there in the market and make sure it is still valid.
• How has your competition changed? - I like to say that a competitive advantage is like a satelite launched high into orbit. For a while it flies high but competitive gravity tugs away at it on a daily basis until it eventually burns up in the atmosphere or crashes to earth. To stay competitive you have to either get the shuttle to periodically nudge your satelite into a higher order orbit, or launch a new satelite to take its place. If you are using the same value proposition you were two years ago chances are some of the competitive advantages have come crashing down since then. We have seen companies spend a lot on collateral material or worse yet waste facetime with customers talking about features that have long since been comoditized by the competition. An up-to-date value proposition will put you in a position to stop talking about what everybody can do and start talking about what only your company can do.

Everyday your company spends money to have salespeople discuss your offering with prospects, print and distribute collateral materials, pay for advertising and so on. Tuning up your value proposition is a simple and cost effective way to make sure your marketing and sales efforts are as effective as they can be.

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