Value proposition … a balance pole for technology, marketing, and business managers

An internal document, a concept’s compelling value proposition brings clarity, alignment, and intensity to the team crossing the product development tightrope. With this balance pole each member of team … like the athletes in the photo … move with swift strides along the tightrope and help shorten the time for a concept to deliver positive cash flow as a new product.

Creating compelling value propositions

A value proposition is a strategy document used inside the firm. It guides the technology-marketing-business team’s decisions through the firm’s product development process.

A template for building a compelling value proposition

1st Sentence … For those (target customers in the new product’s value chain) who are dissatisfied with (competitive products).

2nd Sentence … Our new product provides (a unique ability for solving customers’ key gain/pain problem).

3rd Sentence … Unlike (competitive products) our new product solves this problem with a gain/pain ratio  > 10.

(Gain … competitive advantage the new product delivers to customers)
(Pain … total cost for customers to adopt the new product)

Interviews with knowledgeable individuals in the new product’s value chain can identify target customers and their expressed and latent needs. Cursory and half-hearted interviews will not build a compelling value proposition. They detect obvious trends the firm and its competitors already know. Only in-depth interviews across the value chain will assemble the knowledge needed for the template.

A side benefit of gathering data along the value chain is that some individuals self-identify as early adopters and lead users. Such individuals, who will buy the new product as soon as it is launched, confirm the proposition’s promises of product/market fit leading to organic growth.

Building a compelling value proposition can also help discover latent business opportunities

Ten years ago Joan, a seasoned business manager in a specialty products company, was leading her firm’s third try to grow share in a market alongside their key market. She was frustrated … it had been three years and two abandoned prototypes since the firm tried to develop a longer lifetime product for the adjacent market. The prototypes did extend lifetime by a matter of months but potential customers balked at the price. For the third try Joan’s team intended to use a value-in-use simulation to justify a price increase.

The value chain from Joan’s firm to the adjacent market’s end user contains three complex links. Before setting up the third try she decided to employ a consultant to gather data on what knowledgeable individuals in each value chain link felt the product concept must deliver.

From elicitation interviews around the world, the provider found a consistent pattern. In links close to Joan’s firm, respondents said the keys for success of the concept were improved lifetime and low price. However, interviews in the top-most link, the ultimate end users, provided a surprise. End users didn’t care a whit about extended lifetime … they routinely applied a fresh dosage of the final product daily during their inspection of their machines for mechanical problems. What they did care about was how sloppy the dosage was … it dripped, stained clothes, and made the work area unsafe.

With knowledge of this latent opportunity, Joan’s team quickly put together a compelling value proposition for a new product concept. This concept incorporated the firm’s unique thickening agent that cut out sloppy dosages. Working as an aligned team with similar balance poles the cycle time from concept approval to positive cash flow was only fourteen months. Over the past ten years, Joan’s firm has exploited this new business opportunity to capture major share of an attractive worldwide market.

Lack of early adopters doomed Joan’s first two tries to have an impact on the adjacent market. In the third try early adopters were eager to identify gains and pains that, when built into value proposition, helped balance the team in its bold moves to market.

There are many ways to gather data to create a compelling value proposition. I prefer elicitation through phone interviews for its speed and global reach. I have used this skill and the detection of latent value issues since 1985 for B2B specialty products and private equity firms in North America and Europe.

Contact me at 203/323-4075 or George@georgecastellion.com. I’d like to explore with you how elicitation interviews might help build a compelling value proposition for your product concepts.

Endnotes

(2002) Castellion, George Telephoning Your Way to Compelling Value Propositions The PDMA Toolbook For New Product Development p63-86, John Wiley & Sons, NY, NY

http://en.wikipedia.org/wiki/Value_proposition/

http://mjskok.com/resource/building-compelling-value-proposition

http://steveblank.com/category/ardent/

Published by

George Castellion

Specializing in building unique market insights to cut in half the cumulative cost to develop a successful B2B product