Why do people buy your product? It should be obvious, right? If you sell groceries, people buy them because they’re planning their next meals. If you sell books, people buy them because they want something to read. If you sell B2B software, customers buy to improve their business processes.
In reality, it’s not that simple. People who are hungry could go to the grocery store, or they could order take-out. People looking for a new book could go to your bookstore, or they could go to a library. Companies looking to improve processes could buy software, or hire a specialist.
Your company, product, customer, and price point all contribute to your value proposition. Your value prop details the exact usefulness that your product provides. It is also your differentiator.
Value proposition definition
Value proposition is a promise of value stated by a company that summarizes how the benefit of the company’s product or service will be delivered, experienced, and acquired. (Corporate Finance Institute)
A value proposition is what you do, and how you do it.
Why is a value proposition important?
A value proposition is crucial for your company’s success. Here’s why.
A value proposition centers your company
Value propositions define exactly what your company should be doing. Oftentimes growing companies can be tempted to pivot or adjust their vision. A value proposition serves as an investment to keep the company focused on the task at hand.
A value proposition explains your company to your customers
At the end of the day, a customer doesn’t care about your marketing spend. They don’t care about how many social media posts you publish, or how many blog posts are on your site. They care about what your product does, and if it serves their needs and meets their expectations. The value proposition is the bridge to your customer having brand awareness.
A unique value proposition sets you apart from your competitors
Your product, value and price point are different from those of your competition. But does your audience know that? Your value proposition allows you to outline what makes your offering unique, and how it disrupts the market.
How to create a value proposition statement
Value proposition statements are best done when developing your business plan. Yet, many CMOs may want to go through value proposition exercises later on, as they refine and improve marketing programs. You can adjust your value prop as your company grows and changes. Use these steps for new and revised value proposition statements.
Identify the features of your product
Start simple: list the products that you offer and their useful features. If you are a software as a service (SaaS) company you may have many features that allow users to do many different tasks. If you are a restaurant, your products may offer breakfast, lunch and dinner. You can include outstanding customer service or special events as your offerings.
Features can be large or small, many or few, original or unoriginal. By listing each feature, you get an idea of exactly what you are offering to your customers.
Identify the benefit of each feature
Features and benefits are often lumped together, but they are distinct. Each feature should provide a benefit. For example, Uber’s app for requesting a carshare is a feature. The driver picking you up and taking you where you need to go is a benefit.
Map each of your features to their customer benefit. By doing this exercise, you’ll start to see which features provide the biggest benefits.
Define your target customer
You’ve likely completed many exercises aimed at understanding your target customers. By clarifying their identity, you’ll better understand their journey to your product.
Dive deep into your customers wants & needs
Sure, your customer might want to buy a new software solution because they need a new software solution. But—what do they really need? Say, you sell financial management software. If your target customer is a finance manager, they might need your solution. Yet, what they really need is to free up some time during their end-of-month close. This will give them the time they need to still have 1-on-1s with team members. They might be searching for a financial solution, but what they are really looking for is time.
Clarify your price point
It takes time and research, but you must understand if your product has a price below, at, or above market rate. This allows you to understand if your product is a value product, a typical product, or a premium product. Your unique value proposition allows customers to understand if they are getting their money’s worth.
Put it all together
Steve Blank (Lean Startup) suggests the following simple phrasing for your value proposition. “We help X do Y by doing Z.”
Mapped to the above framework, this may look more like:
“We help our [TARGET CUSTOMERS] do [CUSTOMER NEEDS] by doing [OUR FEATURES AND BENEFITS].”
If you offer a low-cost or premium product, include your pricing in your value proposition statement well.
Examples of effective value propositions
These seven digital technology companies each offer a unique product, but also face stiff competition. Each of these value props outlines their target customer, their needs, and how they meet them—setting them apart from their competitors.
Calm
Calm is a mobile app based in San Francisco.
Value proposition example
Calm helps people who have trouble relaxing sleep, rest, and meditate by providing an app that offers these experiences.
Curology
Curology is a custom skin care solution based in San Francisco.
Value proposition example
Curology helps people in need of skin care by providing custom skin care products. They also include their competitive pricing and delivery mechanism.
Duolingo
Duolingo is a language-learning app based in Pittsburg.
Value proposition example
Duolingo teaches second-language enthusiasts how to speak a new language by providing an app that gamifies language education.
Impossible Foods
Impossible is a meat-alternative company based in Redwood City, CA.
Value proposition example
Impossible Foods provides an option for health-and-environmentally-conscious consumers to eat sustainably, by offering a meat product alternative.
Slack
Slack is collaboration software based in San Francisco.
Value proposition example
Slack provides busy professionals a way to avoid using email, by offering a more comprehensive and easy-to-use collaboration and communication tool.
Zendesk
Zendesk is a customer support SaaS based in San Francisco.
Value proposition example
Zendesk provides customer service professionals a way to manage their operations with a comprehensive software solution.
Conclusion
Setting your value proposition is an exercise that helps everyone. It aligns your internal focuses and it better communicates your company to customers.
