Gives Versus Gets: How to Develop Your Value Proposition
The term value proposition is thrown around a lot in the business world. Customers, marketers, investors, business partners, and other stakeholders all want to know exactly what your brand brings to the table. How does your product or service provide value? How does it improve the lives of your customers or solve a problem they're experiencing? Most importantly, what makes your offering different from your competitors who sell similar or competing products?
Developing your brand's value proposition is the very first step in building a solid strategic messaging foundation. If prospective customers don't get a clear understanding of the benefits your business provides from their very first interaction with you, they'll have no reason or desire to hear the rest of your message.
But defining and presenting your value proposition isn't just about selling someone on those benefits. At its core, a value proposition is about both gives and gets. It's about explaining what someone has to do – and what they have to trade to get it – in order to acquire your product and get that promised value. A successful value proposition shows the customer that their "give" is worth the "get" from your business.
For a high-level overview of the seven elements of a strategic messaging foundation, you can read our blog post on the topic.
The perception of value
Human beings perceive value in terms of a potential reward weighed against the cost or risk to themselves. This is ingrained in us as an evolutionary mechanism: our instinct is to reduce external risks and protect ourselves so we can survive. However, humans will also take calculated risks on the promise that they'll receive a valuable payoff.
How does one make that judgment about whether a benefit is worth the effort required to obtain it? Much of it has to do with our rational – and not-so-rational – thought processes.
In his book, Thinking, Fast and Slow (Farrar, Straus and Giroux, 2013), Daniel Kahneman describes two "systems" of thought: System 1 (Thinking Fast) and System 2 (Thinking Slow). System 1 is quick; it's driven by instinct, intuition, and emotion – our automatic, gut reaction to a situation. System 2, on the other hand, is much slower and more deliberate. The impressions and intuitions generated by System 1 turn into beliefs and voluntary actions endorsed by System 2 without much effort, and will only question those impressions if we encounter the unexpected.
"When all goes smoothly, which is most of the time, System 2 adopts the suggestions of System 1 with little or no modification," writes Kahneman. "You generally believe your impressions and act on your desires."
Because human thought operates in System 1 nearly all of the time, the perception of value requires an immediate, intuitive positive reaction to a proposition, which then drives the person to act on their desire for the promised results. When you consider value proposition through this lens, it becomes clear that your job as a brand is to provide context and guidance for your customers to find the value in your business.
Balancing the value proposition scale
Think of your value proposition as a scale. On the left-hand side of your scale is all the benefits that your customer gets from engaging with your business. The right-hand side of the scale is the cost of engagement and product acquisition, monetary or otherwise. That scale needs to be in balance from your customer's perspective (or even slightly tipped in their favor) for them to begin their journey with you.
Drawing a customer in with your value proposition starts with answering one crucial question in their mind: Why you? Why should they choose your brand over any other on the market?
You can answer this question by telling them a clear and detailed story about your business that puts them and their needs at the center of it all. As you might imagine, this story must be tailored to the person you're trying to reach, because every customer context is different. Let's say, for example, you sell an accounting software for small to mid-sized companies. Crafting your business story is going to be a very different exercise for a 55-year-old female CFO who works 100 hours a week and has no young children, versus a 35-year-old male entrepreneur who went into business for himself so he could spend more time with his family. Both of these personas might represent a customer group you're trying to reach, but the way you present your story to each of them is going to be vastly different.
Developing your value proposition is all about creating and presenting details that will speak directly to those distinct customer contexts. It's about painting a picture that helps Jane the CFO or John the entrepreneur view the scale as balanced from their individual perspectives. Your story needs to show them that it makes sense to put in this effort with your business, because the reward to them is great enough to justify the risk.
Explain your benefits
When you're determining how to present the left-hand side of your value proposition scale, you should consider three things:
What is the promise?
How is it differentiated against the alternatives?
Why should the customer believe you?
PROMISE: Let's talk more about the promise you're making your customers. What benefits do they get from the product and from your company? There are a lot of different ways you can lay out these benefits, but an effective approach is looking at Context, Action, and Results – specifically, what are the challenges your customer faces (Context), what do they do about it (Action), and how can you help them solve the problem and/or improve their life (Results)? Taken together, these three pieces will frame your product or service as a solution to their needs.
Remember, "benefits" are not the same as "features." Listing all the bells, whistles, and cool things your product can do isn't going to get someone to buy it. You need to speak to your customer, human to human, and tell them why using this product will make their life easier or better in some way.
DIFFERENTIATION: Once you've presented your value proposition's core promise, you need to show your customers the alternatives to your offering and what makes yours different, i.e. better. The alternatives could be literal competitors, or the act of simply doing nothing at all to solve the problem your customer is facing.
Successfully differentiating yourself from your competition involves spelling out exactly where your value lies and how that value delivered. In a Forbes article, Rebecca O. Bagley of NorTech writes that businesses deliver value in one or more of three categories of differentiation: cost, technology, and service.
"Identifying which of these categories your product benefits fall into allows you to effectively differentiate yourself from your competition," says Bagley. "You can then identify where your strengths are. Your product, for example, might deliver superior performance and have a long shelf life, which means cost and technology are its major advantages."
When thinking about competition, don't limit your thoughts to companies and products that offer something very similar to what you offer. You should also consider what other things your customer could do instead of engaging with your business. Sometimes the status quo is the biggest competition that somebody faces when it comes to the decision of whether or not to choose to spend their hard earned cash with you. Or, it could be a choice of purchasing goods or services at a category level rather than at a product level. A simple example here would be buying cloud services from an independent private cloud hosting company as opposed to buying from a big-name service provider such as Microsoft or AWS.
SUPPORT: Finally, your customer needs a reason (or, ideally, a multitude of reasons) to believe the claims you're making. Here's where you can tie in any statistics and anecdotes that support your first two points. Is there any data that proves numerically or quantitatively the benefits of your product. How about case studies? The idea is to provide evidence and proof points that show somebody why their life and/or business will be better if they choose to go with you.
Ask for the effort
Returning to our value proposition scale, the right-hand side of the equation explores the "gives." What must your customer part with to get your product and start enjoying its promised benefits? This can also be broken into three elements:
What is the total cost to your customer?
What effort is required?
What are the risks involved?
COST: First, consider the total cost from cradle-to-grave that your customer may have. For example, when purchasing a new manufacturing control system, the "total cost" includes the cost of software, plus potential hardware components, installation, and configuration services. In short, make sure your considering all of the potential costs that your customer may face, both in terms of time and treasure.
EFFORT: Next, you have to address the required effort from your customer. What does a customer need to do to acquire, get ready to use, and benefit from your product? Will the team require training? Will changes need to be made to the existing environment that the product is being placed into? If the total monetary cost is low but the effort or time-spend is high, a customer likely won't see your product as being valuable.
RISK: Last but not least, think about the potential risk to your customer, from their perspective. What could go wrong with the purchase, installation, configuration, and use of your product in the customer's environment? Pay attention to your customer service queries for help here: The complaints and troubleshooting issues existing customers have had can inform the risks a potential customer may perceive when considering your value proposition.
Pay attention to both sides of the equation
A word of warning: It's easy to spend your time on the left-hand side of the equation, promoting the wins your product will bring the customer. You might even hope that doing so will create an "ooh, shiny" moment for your potential customer and make them momentarily forget that they will, in fact, have to give up something in order to reap the benefits of your product.
But nobody wants to be sold to; you want to build trust with a realistic picture of what happens when someone works with or purchases from your company. You want your customer to weigh the costs and benefits, and draw their own conclusion that, yes, this is the right decision for them they are willing and able to pay the price.
That's why you must also pay heed to the right-hand side of the value proposition scale. Not only will this help you deeply understand your customer and their needs (which will help you craft the remaining elements of your strategic marketing foundation) – it will also serve as an opportunity to inform future changes to your product or service that take into account the challenges and costs that your customer faces every day.
In terms of customer context, make sure that you're considering with a reasonable amount of specificity what customers and scenario that your offering is best designed for. This will help you answer all of the questions on both sides of the equation and it will also gear you up for the next step of your strategic messaging: your positioning framework.
Stuck on developing the value proposition for your strategic messaging foundation? Let's chat.
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