If you think a value proposition is just a catchy phrase or the elevator speech your salespeople can spout off to customers, consider what Michael Lanning, the creator of the term, has to say.
“It should drive what you communicate, but more. It should be the heart of your business strategy, and articulation of how customers will be better off if they do what your business proposes.”
Three decades ago, Michael invented the concept and coined the phrase while a consultant for McKinsey & Company. I recently had the privilege of speaking with him about how this term should be applied in the B2B context.
For an overview of what every value proposition should include, go to my MarketingExperiments blog: “Direct from the Source: What a value proposition is, what it isn’t, and the five questions it must answer.”
Here’s a summary of what Michael revealed:
A fundamental value proposition defines the purpose of your business model
A value proposition is more than a pitch. It is a strategic choice that defines why your business exists. A clear value proposition identifies:
- Your target customers
- The specific experiences they will have by choosing you
- How those experiences will improve their business more than any alternative
“Your business should then be completely integrated around delivering that value proposition. Every business function should agree on it, then be controlled and driven by it.”
But what typically happens in practice?
“People decide what product they want to make, how they want to make it, and where and how they want to sell it. Then they write a value proposition to dress it up. They should carefully choose a superior value proposition, then design and improve their products, services, and other functions to deliberately deliver and communicate that superior value proposition. Please don’t write a value proposition to help sell your product; create a product and communications to help deliver it.”
Insights into better value propositions come from studying your customer
To build a better value proposition, you have to start with how customers actually experience their world. Here are the key steps:
- Identify what is imperfect about their current experiences
- Think about how your products and services help or hinder those experiences
- Imagine the improved scenario your business could bring about
- Ask: “Will they see it as a superior solution compared to the alternatives?”
Lanning put it this way:
“Seriously, try to think like the customer. Get as close as you can to their current behavior and experiences. Understand what’s happening. Define how ‘better’ would look to them, better than their current experiences, better than they could get from competitors, and then analyze how close you can get to make that happen, profitably. This perspective is different from trying to sell the products you enjoy making or dutifully making what customers tell you to make. It’s about creatively discovering and then profitably bringing about the outcomes they would value most.”
A B2B value proposition isn’t a once-and-done deal. Consider the entire customer chain.
In B2B, your value proposition has to resonate with more than one person. Multiple stakeholders interact with your product at different stages, each with different priorities and agendas. The person who signs the contract is not always the person whose experience matters most.
“With B2B, you have to deliver value and influence behavior across that whole, long, complex chain.”
“Think about where in that chain it’s most crucial for a superior value proposition to be delivered. With a long B2B chain, the answer isn’t obvious. It often is not the one you deliver to immediate customers, even though they literally write the check. All value propositions you deliver across the chain must support and complement the most crucial one.”
A value proposition is not your whole strategy, just the driving vision for it
This is an important distinction. The value proposition is the compass. Strategy is everything you do to deliver on it. A complete strategy comprises:
- Provide and communicate the experiences that make up the value proposition
- Ensure everyone across the organization understands and aligns around it
The value proposition tells you what value you are committing to deliver and for whom. Product decisions, distribution, pricing, support, hiring … all of it follows.
But too many companies treat their value proposition as a communication tool. They write it, put it on a slide, and move on. A value proposition that is not operationalized across the business is just a promise nobody keeps.
Value propositions are not taglines, not mission statements, and not positioning slogans. They form the heart of your winning, profitable business strategy.
You might also like
- Direct from the Source: What a value proposition is, what it isn’t and the 5 questions it must answer [More from the blogs]
- Michael J. Lanning’s Academic Lecture Series [From MECLABS.com]
- Powerful Value Propositions [MarketingExperiments resource]
- Value Proposition: 4 questions every marketer should ask about value prop [More from the blogs]
No hype. No noise. Clarity your team can actually use.