How to Create a Compelling Value Proposition

How well can you describe the value of your offering to different market segments?

Correctly communicating value at the segment level is critical to any successful business strategy. Unfortunately, many B2B sales and marketing professionals communicate value in broad, generic terms, or fail to customize their language to appeal to different market segments.

To make a successful impact and convey your value effectively, you must be able to articulate how your offering will affect that customer’s specific business challenges. I encourage you to start moving away from buzzwords like “state-of-the-art,” which is more about you rather than your customer, and generic words like “quality,” which mean different things to different people. Instead, start using highly specific words that directly reflect your customer’s wants and needs.
AirplaneHere’s an example. Let’s say your company makes jet engines. Enabled by some technological advancement, you are able to make the engine more fuel-efficient than anyone else’s. Now let’s say you have the following target customer groups (segments) 1) regional airlines, 2) companies with corporate jets, and 3) cargo/shipping carriers.

Traditionally, sellers and marketers would think about this new jet engine in terms of features and benefits. The feature is the new technology, and the benefit is fuel efficiency. But how would each of the three market segments realize value from that benefit? You could go to each of these segments and tout the fact that your engines are more fuel-efficient. But each would probably be left wondering, “I understand that there are fuel savings, but what does that mean to my business?”

Here’s a breakdown of how you could illustrate the value of your jet engine in terms that would address the specific needs of each of these segments.

 Regional Airlines

Regional carriers generally have a set number of routes and they would be interested in reducing their fuel cost on those routes. But there also may be some carriers that, by using a highly efficient engine, could fly an extra 100 miles and thus add more city-pairs. That represents a real revenue impact, because they can fly more routes and thus sell more seats.

 Value proposition: A fuel-efficient engine might open opportunities for you to fly to more cities, which would allow you to sell more seats. Value: increased revenue with more flights. 

 Companies with Corporate Jets

 Business executives fly on private jets because they want to minimize travel time. And they aren’t necessarily going to care about lower fuel costs; they’re already spending far more to fly privately than commercially. However, if you can offer business executives a product or solution that allows them to fly faster or farther without having to stop, you’ve suddenly got their attention. For example, a jet with a more fuel-efficient engine might save them a refueling stop in Anchorage on their way to Beijing. You’ve saved them time, and their time is worth a lot of money.

 Value proposition: A fuel-efficient engine will shorten your flight duration. Value:  decreased executive travel time.

 Cargo/Shipping Carriers

 Cargo airline carriers like FedEx or UPS want to maximize their revenue-per-mile flown. Their need is to fit as many tons of cargo as possible on each flight. A heavier plane has a more limited range and forces carriers to restrict the cargo load to reach all their destinations. Thus, greater fuel efficiency allows the cargo airlines to carry heavier payloads.

Value proposition: With a more fuel-efficient engine, you can carry more cargo on each plane. Value: increased revenue per flight.

 A segment is a group of customers who have a similar set of needs and thus will value your offering in a similar way. The groups of customers above will all value the benefit of fuel-efficient jet engines in a similar way, but they will all value that benefit differently than the other groups, thus they are market segments. Most traditional marketers would simply say, “Our jet engines are more fuel-efficient.” But when you stop and look at which factors influence the buying decision for each segment, you can start to see where you need to drill down into specifics in order to craft unique messages. As you can see, these are very different ways to talk about value to various market segments, even though all the conversations revolve around the single benefit of a more fuel-efficient engine.

Here are three questions you should consider when creating a value proposition:

  1. What are the unique benefits of our offering?
  2. Which groups of customers have similar sets of needs that you can address, and can, therefore, become our market segments?
  3. How will each segment receive value from our offering?

How do you define value for your market segments? What kinds of challenges do you have conveying that value in a way that resonates with prospects? Share your thoughts in the comments section.

→ Next week, we’ll discuss how you can craft different messages that appeal to different stakeholders within a company to advance to the next stage of the sales cycle. 

Where’s the “Business” in your “Value Proposition”

In today’s economy, having a compelling business value proposition and being able to deliver against that promise is not a ‘nice to have,’ it’s the price of admission. Companies today constantly vie for business decision makers’ attention and the opportunity to sell their product or solution. Unfortunately, once given the opportunity to present, many companies lose sales by failing to convey the business value of their offering their offering in way that convinces the business decision maker to act. While many sales and marketing staff tend to think of their value proposition in terms of discrete ‘features’, ‘functions’ and ‘benefits,’ business decision makers think about products and services in a completely different way. Thus to be effective, sales and marketing organizations need to build a “business” perspective into their “value proposition” to appeal to business decision makers and ultimately close more sales.

To further explain what we mean by a business value proposition, we provide the “Evolution of a Business Value Proposition Framework” below. After working with numerous organizations challenged with communicating and delivering a business value proposition, we identified 5 levels of evolution.

The first level is Do Nothing, where many companies are today. The second level is Provide Framework, where companies are able to describe the potential business impact of their product or solution within a customer environment. An easy way to think about this is, “What are the direct revenue enhancing, cost reducing, and strategic business benefits associated with your offering?” Providing your customers with a business value framework is an excellent way to capture business decision makers’ attention and interest in moving to the third level, Predict Value. At this level, your sales organization works with the customer to model the potential business impact and return on investment associated with your offering. This step adds a powerful step to the selling process, vastly reducing decision making time and ability to generate budget. Just ask yourself, “With a compelling ROI, how can a competent business decision maker not purchase from you knowing they are leaving money on the table?” The next level in the evolution is Deliver Value. It’s at this level where your company and your customer measure the business impact previously forecasted, identify where value isn’t being captured and take corrective action. What an incredible way to build customer loyalty and drive associated services and follow-on sales opportunities! The final level is Share Value, where you enter into shared risk, reward and gain sharing arrangements. Most companies ultimately want to do business at this level when they are confident of the value being delivered to their customers, and want to maximize the amount of money earned from any client. However, you can think of these levels as “stairs”. You need to take one step at a time when evolving your business value proposition, not jumping ahead until you have mastered the previous levels.

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Business Value Proposition Evolution

In today’s economy, having a compelling business value proposition and being able to deliver against that promise is not a ‘nice to have,’ it’s the price of admission. Where is your company in its business value proposition evolution? Where would you like your company to be? Are your sales being hindered through lack of a compelling business proposition? If so, evolve your value proposition to be more compelling.

For more information on how to build a quantifiable business case with value calculators and ROI tools and to see examples of value calculators, visit www.stratavant.com.

Three Fundamental Drivers of Marketing Excellence Innovation, Focus and Leverage

Fundamentals, in most competitive endeavors, are what we must first learn and master in order to perform well. They provide us confidence in setting basic direction and a stable foundation when the going gets rough. In marketing, sound fundamentals help set strategic direction, guide tactical plans and provide benchmarks for determining execution performance. This article reviews three fundamentals to drive marketing excellence that span the gamut from strategy through execution: Innovation, Focus and Leverage. When set as a foundation for your marketing efforts, they enable you to establish and fine-tune your marketing activities to drive superior results.

Three Drivers of Marketing Excellence

Innovation… that Leads to Unique Customer Value

Although innovation has been recognized for years as being fundamental to achieving competitive advantage, it has become a very hot topic recently.  Fueled by globalization and rapidly evolving technology, competition is increasing in intensity at an alarming pace. Competitors are moving faster than ever before and you need to move fast also, but it is more than getting your solution to market quickly and efficiently. While speed is important, speed alone will merely enable parity, to be in the game, to maintain. Offering “me-too” solutions that are not much different from the competition will only result in a bitter battle for market share and rapidly shrinking margins. To maximize your potential requires true market innovation – to be able to profitably deliver unique customer value.

True market innovation is only derived from a deep understanding of your customer’s ever-evolving needs. This understanding provides insight into what is of value, to who and why. Armed with this customer and market insight you can create and hone a robust market-driven business plan. This insight also enables you to develop compelling, differentiated offerings to meet the needs of a clearly defined market.Differentiated offerings deliver greater value to customers, provide higher competitive barriers and ultimately fuel profitable growth. They take you beyond parity.

Focus… for Market Impact and Lower Go-To-Market Risk

Armed with differentiated offerings and clearly-defined markets, it is now time to refine and focus your efforts on specific target segments. Companies interact with the market in two ways, reactively and proactively. Reactively, you decide if you will respond to any particular opportunity, only expending the opportunity cost of the moment. Being proactive is another matter, it requires investment — and the greater the focus of that investment, the greater the potential return. Too often, a vague, high level, “one size fits all” value proposition is created in a rush to get to market quickly. It is then either broadly applied across all segments or given a quick face lift and repurposed towards individual segments. To maximize impact, go-to-market plans and their associated campaigns need to maintain a laser focus on a well-defined target segment and deliver a consistent, clear and compelling message.

To begin, you need to first understand how customer needs vary within and across different groups. You can then perform market segmentation in a way that allows you to identify your highest-value market segments. By focusing your resources on the highest-value segments you will maximize impact and limit go-to-market risk. You are able to hone very specific value propositions and compelling market messaging when you have chosen a small number of high-value market segments. Based on your target segments you can then determine your best route to market. Knowing who you have selling to which customers enables you to equip your sales and channel partners with appropriate sales and marketing tools to accelerate sales growth. Bringing this information together in a focused, well-documented go-to-market plan will enable you to align your sales, marketing and delivery resources to increase your speed and efficiency in execution.

Leverage… to Accelerate Growth and Boost Returns on Market Investments

You now have a differentiated product, focused message and compelling value proposition for your target segment, it is time to accelerate market penetration and maximize impact. Too often companies reach this point with a superior offering and value proposition but underperform because they are either too slow, too inefficient, or don’t follow through with high quality sales and marketing campaigns and supporting deliverables. Leveraging the right resources, at the right time and at the right cost is crucial for executing your go-to-market plan quickly, effectively and in a cost effective manner.

You need to get your message out. Your sales and channel partners require sales support tools and training to be able to articulate your message and value proposition.You must be able to leverage and manage a significant number of diverse resources to get the job done. If you do not have internal staff experienced in either coordinating marketing efforts or designing, producing and delivering targeted messaging then you should consider looking outside your organization. An experienced partner can make a significant difference in accelerating your time to market with effective messaging and quality marketing and sales deliverables – leading to increased revenues and lower overall costs.

Conclusion

Innovation, Focus and Leverage. These three fundamental drivers of marketing excellence should be embedded into your methods and approach for setting strategy, planning and executing your marketing initiatives. Together they can significantly increase the return on your market investments.

Does your company truly understand your customer’s business and their underlying needs? Do you feel you have the market insight required to develop innovative offerings? Can you translate your market insight into specific, differentiated offerings and executable market plans? Can you clearly and consistently communicate a compelling value proposition to your target segments? Can you execute your go-to-market plans and targeted campaigns quickly, effectively and efficiently? If not, it is time to revisit the fundamentals that drive market excellence: Innovation, Focus and Leverage.

Value Calculators are not all Created Equal

Value calculators can be a very important part of a sales and marketing program.  They can help to generate more leads, move prospects through the sales pipeline, and close deals.  If you have a complex solution with a high average selling price, a value calculator or ROI tool could be crucial to your sales process.  There are a few different types of tools, and each of them has a different purpose and intent.

In general, these tools differ on two different dimensions, which then dictate how they work and are used: 1) Purpose of the tool and 2) Intended user of the tool.  There are three primary purposes of a value calculator:  Lead generation, Building a simple business case, or Building a detailed business case.  There are four primary intended users of a value calculator:  Prospects, Sales Team, Solution Consultants, or Internal Economic Evaluation Team.

Calc table

The type of tool that is needed is derived by mapping the purpose of the tool against the intended user of the tool.  There are three general classes of value calculators:  Value Calculators, Simple ROI Tools, and Comprehensive ROI Tools.

Value Calculators

A standard value calculator is typically a web-based self-service tool.  It can be used by a prospect, a sales rep, or an internal solution consultant.  It is intended to be a simple and quick analysis of the value that a specific solution offering can provide.  The intent is that the user should be able to get a high-level answer in a couple of minutes and that a full analysis should take no longer than 10-15 minutes.  Often these tools will not estimate the investment required and thus will not calculate all of the key financial metrics, but instead provide an estimate of the economic impact of solving the problem.

There are several attributes of a self-service value calculator that enable them to be simple.  First, the user interface needs to be very intuitive and simple.  Second, the number of questions that the user is asked before getting into the analysis needs to be kept to a minimum (typically less than 5).  These questions (e.g., number of employees, industry, or revenue) are often used to ask for high-level information, which the tool uses in conjunction with benchmark data to estimate additional values required for the analysis.  All of these pre-populated or benchmark values need to be visible and modifiable by the user or the tool will lose credibility and believability with the user.  The tool needs to show the user how each of the benefit values are calculated and allow them to see and typically modify any benefit claim assumptions.

Value CalculatorThe main purpose of this type of tools is lead generation and qualification of leads.  The calculations are typically too high of a level to provide the level of detail that is needed in a later stage business case development.  The primary goal is to end up with a qualified lead.  A secondary goal is for a user to generate a Business Value report and forward it to others within their organization or even other potential prospects.

Simple ROI Tools

Simple ROI tools are used by sales teams (including partners) and solution consultants to develop a simple business case for a specific solution area.  The key phrase is “for a specific solution area” because the scope of the solution needs to be well enough defined to be able to develop a list of no more than 10 or 12 benefit areas.  The goal of these types of tools is to build a business case based on a short interview process (typically no longer than 30-60 minutes) with one or more people within a prospect organization.

Similar to a standard value calculator, a Simple ROI Tool design should try to minimize the number of questions asked and use benchmarks to estimate many of the values.  This is to simplify the data gathering process and estimate the benefits and costs within the right range, which is often good enough for this level of analysis.  The tool should allow the user to update any of the inputs and assumptions and see all of the calculations to understand how the numbers were derived. Usually with Simple ROI Tools, the estimated total investment required by the customer over the length of the analysis period is included. This provides a much clearer cost/benefit picture to the prospective customer.

Quick calc

The main purpose of this type of tools is to build a simple business case for a defined solution.  The calculations should be detailed enough to provide all of the key financial metrics for the solution in question.  The primary goal is to help the prospect navigate their internal buying process by providing the financial justification.  The upside of this type of tool is that it is still relatively easy to use and doesn’t require detailed knowledge on the development of a financial analysis.  The downside is that it needs to be developed for a specific solution and therefore often lacks the flexibility needed for the development of more complex business cases found in areas such as enterprise applications and services.

Comprehensive ROI Tools

Comprehensive ROI tools are used by sales teams (including partners), solution consultants, and/or internal economic evaluation teams to develop or evaluate a business case for a proposed investment.  These tools are configured to be extremely flexible in the analysis with a library of benefit calculations that can be selected for a given business case.  The goal of these types of tools is to build a business case based an extensive interview process with one or more people within a prospect organization.

Roi tool

The main purpose of this type of tools is to build a detailed business case for any solution.  The calculations should be detailed enough to provide all of the key financial metrics for the solution in question.  The primary goal is to help the prospect navigate their internal buying process by providing the financial justification.  The upside of this type of tool is that it is very flexible in the depth and breadth of the analysis and can be used for most complex solutions.  The downside is that it needs the user to have a basic level of understanding in financial analysis in order to build an accurate business case.

Summary

Although value calculators can be a very important part of a sales and marketing program, you need to understand the type of value calculator that best fits your needs.  Be sure to utilize the right type of value calculator based on both the needs of your users as well as your purpose for the tool.

For more information on how to build a quantifiable business case with value calculators and ROI tools and to see examples of value calculators, visit www.stratavant.com.

How to Speak the Language of B2B

Have you ever been in a meeting where someone is presenting (hopefully not you) to an executive level audience, and it is obvious within a few minutes that the senior executives have “checked out” of the meeting, or worse yet left or cut the meeting short?  Why would that happen?  One of the primary reasons for this reaction is that the presenter isn’t speaking their language.  And, when I say language I don’t mean English or German, or Mandarin, I mean the language of business in their industry.

This phenomenon isn’t limited to presentations either.  All too often, marketing and sales communicate in language of features, functions, and specifications.  This is appropriate when connecting with someone that speaks that language as well, but not when communicating to executives.  When you are selling your solution to a prospective customer, it’s imperative that you know your audience and speak in their language.

Business leaders typically fall into one of three strata when it comes to communications:

  1. Functional or First Line Management
  2. Business Management
  3. Executive Management

Functional or First Line Management

Functional leaders or first line managers typically communicate in a more technical manner.  They are looking at how a solution can meet their specification including what features and functions it delivers.  They have a job to do and a specific set of objectives to meet, and they want to know how your solution will help them to do that.  This is the level where most sales and marketing collateral is targeted.  This level cannot be ignored, but it is not sufficient in most circumstances to close the deal.

Business Management

Business management is where financial responsibility for an area of business is held.  This can range from being responsible for the P&L for a line of business or geography to financial accountability for sales or marketing.  In a smaller company this may reside solely in the President, but in larger companies these are typically the Vice Presidents or General Managers.

Because they have financial responsibility for the success of the business, they think and communicate in financial terms.  They want to know about revenue impact, reduced cost, time to benefit, business risk, and bottom line how your solution will impact the financials of their business.  They typically aren’t interested in the features of your product and they rarely will be interested in a demo.  They want the business case in financial terms.  They want to know how much you can improve their business and how you can prove it to them.  Proving it doesn’t mean showing them how the product works, it means showing them how their business will operate differently and providing evidence and proof.  That evidence and proof can come in the form of benchmark data and studies, but ideally it comes in the form of references and case studies from other similar customers.

Often these people are referred to as the financial buyer or the sponsor.  Whatever you call them, they need to see a professional and practical economic business case with proof.  Investing in your solution can impact not only their success or failure as a business leader but their bonus.

One would think that once you have the business leader bought into your business case, that the deal is yours, right?  Not always.  In larger enterprises, and especially publicly traded companies, there is another level, the executive management team.

Executive Management

Not all business cases need executive management approval, but when they do it is crucial that they convey a very solid financial justification.  This is often the domain of the CFO.  As the stewards of the money, it is their job to make sure that the company is making the best investments for the stockholders.  Thus they will be comparing various initiatives and investments and assessing for each the overall impact on the company.  They will be considering things like the expected impact on stock price, market share, EPS (earnings per share), and other wall-street metrics.

Since the job of the CFO is to invest in the best initiatives across the company, they will often reject what seems like a solid business case in favor of other initiatives that have a stronger impact on the company’s overall financial metrics.  Just because your business case met the minimum hurdle rate, had an acceptable ROI, and a short enough payback period doesn’t mean that it will be approved.

However, you can all but be guaranteed that not having a quantified business case will doom your proposal.

Often you won’t have the opportunity to communicate with this level, especially if your

Summary

Bottom line is you need to understand the various audiences that will be consuming your value proposition and be sure to craft your message appropriate to each of the audiences.  The technical message is suitable for some, but certainly not all of the people that you will need to communicate with.  The higher up you go within an organization, the more likely they are to communicate in business terms and that includes building a quantifiable business case including financial metrics for success.

For more information on how to build a quantifiable business case with value calculators and ROI tools and to see examples of value calculators, visit www.stratavant.com.

Why spreadsheets often fall short as ROI tools

Prospective buyers often ask vendors to provide them with a business case during the selling cycle. In response, sales and/or marketing teams often create a spreadsheet to show the financial justification of their solution. However, this approach has many pitfalls and often leads to deals just fading away… the dreaded “no decision.”

Consider the following:

1)      Prospective buyers question the credibility of spreadsheets created by vendors. In contrast, ROI calculators created by third parties are viewed as trustworthy.

2)      It is difficult to create compelling summary reports within spreadsheets. Prospects prefer PDF reports that not only look professional but are easy to share with colleagues.

3)      Spreadsheets suffer from low adoption rates by salespeople due to their inherent complexity. Today’s new ROI tools provide a simple, attractive user interface.

4)      Spreadsheets are notoriously difficult to maintain for a host of reasons. The current ROI platforms are centrally managed and maintained, and thereby eliminate version control issues, outdated data, field modifications and unauthorized usage.

5)      It is problematic to provide online access to spreadsheets. Web-based value-calculators can be integrated into a web site and act as an effective lead capture mechanism.

For more information on how to build a quantifiable business case with value calculators and ROI tools and to see examples of value calculators, visit www.stratavant.com.

How do you handle indirect benefits in a business case?

Many times an offering may have what a prospect might consider to be indirect benefits. These are benefits that, although real, are harder to directly link to the offering and/or are harder to actually capture. A couple of categories of benefits that often fall into this indirect bucket are labor savings (e.g. productivity gains) or revenue enhancements (e.g. sales growth). If your prospect struggles with the direct linkage of these benefits from your offering, how can you use them in your business case?

What we have found to be effective in those cases is to group all of the benefits into one of three buckets: direct, indirect, and strategic.  Strategic benefits (e.g. increased employee satisfaction) are sometimes referred to as intangible benefits. These cannot be easily quantified in financial terms, but are often an important part of the benefit delivered by the solution. These should be called out in the business case, but not included in the financial justification.

Direct benefits are easy. Those are the benefits that the prospect will easily believe and will want to include in the cost justification. The difficult category is indirect benefits. An easy way to deal with indirect benefits is to first build the economic justification based on the direct benefits (using financial metrics such as ROI, IRR, payback period, and NPV). Then show the indirect benefits as pure upside to the business case. Typically those would be listed as the additional financial impact from each of the benefit areas, and then a recalculation of the NPV with the indirect (or upside) benefits.

Stratavant ROI tools and value calculators have a feature that allows the separation of direct and indirect benefits when building the business case report.

For more information on how to build a quantifiable business case with value calculators and ROI tools and to see examples of value calculators, visit www.stratavant.com.