The start of every year brings renewed enthusiasm. For many professional services firms it is the start of the new financial year, but even where it isn’t, there is something about the new calendar year that offers a reset. A strategic time-out.
When we work with firms on strategy, we often explore value propositions. Given the importance we place on value propositions, we thought it would be useful to set out why we think they are so helpful. We also provide some ideas of how to go about creating one and – crucially – we set out what to do when you have one.
What is a value proposition?
A value proposition is a statement that sets out the value that a firm/company will deliver to its clients. Value proposition statements have been described as:
“a clear, simple statement of the benefits, both tangible and intangible, that the company will provide”.
The same authors went on to explain that:
“All of the company’s customers should see significantly more benefit from the transaction than they are being asked to pay.”
These statements give some insight into why value propositions are so useful.
Why are value propositions so powerful?
1. They get you to think about your firm from the customer/client perspective FIRST.
There are so many examples of firms who, when asked to think about positioning and differentiation, start with the competition. Analysis of what others are doing can be useful, but it should never be the starting point. Positioning is about where you sit in the mind of your client. It goes without saying therefore, that your client should be the starting point.
2. They get you to define who your client is.
This sounds obvious. But…how often do you think about who your client is? How often do you analyse who your most profitable client is? How about who your most enjoyable client is? What do you do if they aren’t one and the same?
There has been a movement towards increased segmentation in professional services firms. Defining who the client is has become increasingly sophisticated and granular. With digital marketing increasing in importance, there has also been a new focus on customer journeys. However, digital marketing sits underneath a broader marketing strategy and even beyond that, everyone in a professional services firm should understand who their target market is. Both at a broad and a granular level. Working on value proposition statements really helps you to flush out whether you do have a true sense of who your client is.
3. They get you to understand the difference between features and benefits.
Benefits sell, yet so many firms market the features of what they do and find it hard to articulate the benefit, or even understand the difference between the two. Features describe what the service or product is, for example, drafting bespoke terms and conditions is a feature. Benefits are what the service offers of value to the client. Helping a client to conclude a sale faster is a benefit of a well-drafted set of terms and conditions. Value propositions focus on benefits and getting firms to understand these can be enlightening.
4. They enable firms to price value.
How many professional services firms start with value when they think about pricing? Not many! Most start with “how long will delivering this service take?”. Some might do this and then use a cost-plus pricing approach. However, rarely do firms think about how much value a client is deriving and work back from there. Not many ask the question that we started this blog with: “how much benefit will the client see from the service that we are providing?”.
5. They encourage us to listen.
McKinsey suggest that in devising a value proposition statement we should be “systematically listening to customers and distributors about customer preferences.” Lots of firms listen. Some listen in order to shape their service offering, but more often than not, firms follow the older style model of “build it, sell it” rather than “understand value, provide value, communicate value”. Value propositions can be created on the basis of assumptions of what clients want. However, the best value propositions are created on the basis of what clients articulate.
How to devise a value proposition statement
There are many different ways of devising value proposition statements. An increasingly popular way has been to use a value proposition canvas, examples of which are readily available on the internet. The canvas is a visual tool which helps firms to think about the client’s profile on one side: drawing out what the client has to do, what the client wants to achieve and what their pain points are. On the other side it gets firms to think about their value: what products and services they have and how these provide value to their clients, either by removing pain points or through creating gains.
As with everything, clarity on who the client is and going and asking the client are both key ingredients in elevating this from an academic exercise to a strategic tool.
Fundamentally, whether you use the canvas, or another means of breaking down your proposition, the end result should be clarity around what problem you are solving or the need that you are fulfilling. You should be clear on how your service fulfills that and you should also be left with a sense of why or how you are specially placed to provide this.
What to do with a value proposition when you have one
One of the reasons why we spend time working on value propositions is because it helps firms to understand what makes them special. It helps firms to understand what makes them valuable to clients.
Yes, value proposition statements can be used to provide a killer message in marketing literature and on a website, but more than that, the work done in a value proposition exercise can help focus a firm on what its key messaging should be, it helps a firm to define its pricing, it can also help a firm to identify a pipeline and to help communicate with that pipeline.