Posted By Tench Forbes
June 23, 2014
Abstract: This post contains Q&A with Neil Baron, managing director of Baron Strategic Partners, which summarizes the discussions during his workshop on creating compelling value propositions conducted on June 13, 2014.There are several video links showing the workshop, and some of the concepts discussed.
Category: Planning, Analysis & Strategy
As part of our Practitioners Workshop Series, Neil Baron, managing director of Baron Strategic Partners, a consulting firm focused on helping organizations remove roadblocks to revenue growth presented how to make effective value propositions that can transform an organization, as well as increase the odds of its success. This was a "hands-on” working session that not only demonstrated a new way to deliver value to your customers, but also showed how to apply a proven process to define a product's value proposition.
A video overview of the Workshop can be found here:
Below, we review some of the questions that came from the audience and others about this topic:
1.What is one of the secrets to creating a value proposition that resonates with customers?
One of the keys to creating a value proposition that resonates is truly understanding the customer. This enables you to understand how your product or service changes the life of your customer. If your offering does not impact their life in a tangible manner, they will not buy it.
One of the techniques we introduce in the workshop is called the Benefit Experience analysis. This exercise helps companies understand the impact of a product or service.
2. Why is it so difficult to create a value proposition that resonates with customers?
A big challenge is that we assume that our customers know as much as we do about the product. Our own knowledge gets in the way. Companies have an advanced understanding of the technology because they live with it every day. Customers (even those with PhDs) are not at the same level of expertise. This makes it hard for vendors to relate to their customers. It is nobody's fault. It is just how our brains are wired.
We refer to this problem as the curse of too much knowledge.
Often the problem of too much knowledge can best be addressed by bringing in an someone who does not have the same level of knowledge as your team. They can come from either from another part of your organization or be a true outsider. The key is that they have the ability to question your assumptions about your product and your customer.
In the workshop, we introduce tools and techniques to address this challenge that leverage the latest research from MIT in brain science.
3. You mention that the term "Value Proposition” is misused and misunderstood. What are some of the key mistakes that companies make when trying to determine their value proposition?
There are a number of mistakes that companies make when developing or refining their value proposition. Here is a sampling:
● Viewing the value proposition as just a tag line and not the foundation for your product's success
● Assuming that Marcom or your agency should own the value proposition
● Making assumptions about the customer which are not supported by data
● ·Not involving an outsider (from the company, your division or your functional area) to challenge your assumptions
● Not involving representatives from various functions in the creation of the value proposition
● Assuming that it is just about price
● Assuming that the value proposition is "obvious” and that "everyone” (both internally and externally) will get it
● Not training the sales people on how to sell value
4. How does the process of determining target customers for value proposition differ from that of market segmentation? How are they similar?
There are many ways to segment a market. Tom Bonoma and Ben Shapiro of the Harvard Business School outlined 17 methods in some of their groundbreaking research. Your value proposition work should support your segmentation efforts and vice versa.
A highly effective way to segment a market is to group customers by the overall value they receive from your product or service. The higher the value received, the more likely they are to buy. When this is mapped against the cost to serve, you can identify your target customers.
Identification of segments of customers that are most likely to buy (and also will be profitable for your business) is vital information to provide to your sales teams.
5.During the workshop, you describe the value equation (Value = benefit - cost). What are the implications of the value equation?
A key to identifying the key obstacles to selling your product or service is to document the total costs that customers incur when they use their product. These costs include much more than the price. Examples of these costs are:
● Personnel training
● Process changes
● Psychological pain of change
If these costs are greater than the benefits customers receive from your offering, then customers will not buy.
6.Can you provide an example of a successful company that aligns it organization around its value propositions?
Aligning an entire organization around a value proposition can have a powerful impact on profits. Southwest Airlines is a great example of a company that does this extremely well. Every functional group within Southwest understands its role in delivering the value proposition. It is no coincidence that Southwest is the only US airline to be profitable each year for the past 40 years. For more on Southwest, please check out one of my recent FastCompany articles here.
7. Are traditional market research techniques such as surveys and focus groups a good way to understand a product or company's value proposition?
In the workshop we discuss and review various techniques to learn about customers. Surveys and focus groups can have their place in a market research program. However, it is tough to capture customers' emotional reaction in a survey. And I have noticed that in focused groups customers may not be 100% willing to elaborate on their needs and concerns in a group setting.
Two powerful ways of learning about customers are:
● Observational analysis- actually spend time watching what happens at a customer
● In depth interviews- conducting detailed conversations with customers about their needs and challenges
While these techniques can be highly effective, they require a high level of expertise and experience on the part of the person leading this effort. If you aren't careful, they can backfire.
In summary, the Workshop provided actionable advice with real world examples from Neil's extensive client base for understanding value proposition. The lively question and answer sessions illustrate the attendees' interest. The BPMA very much appreciates Neil's contribution, and thanks all the attendees for their active participation.
For more information on the Value Proposition Workshop, please contact Neil at firstname.lastname@example.org or 617-365-3411.