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. 

4 thoughts on “How to Create a Compelling Value Proposition

  1. Pingback: Why Branding Doesn’t Work on B2B Customers | B2B Strategy and Value-Based Sales and Marketing

  2. This is a fantastic explanation of the importance of the contextual (customer) aspect of value drivers. Don’t forget that value drivers are also relative and dynamic. Relative to the competition: how much more fuel efficient are you compared to alternative jet engine manufacturer A, B, C, etc.? Dynamic: how much does the value (of the increased revenue, decreased executive travel time, etc.) change when fuel prices rise next month, next quarter, next year?

  3. Pingback: Why Branding Doesn’t Work on B2B Customers | Stratavant Blog

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