In the past few days, I have been working on my unique value proposition for ContractExec. Every now and then it is good to revisit what you do and have on offer, and why customers would buy from you. In the end, they decide whether or not you have a unique value proposition. They will show that by buying from you.
A unique value proposition is a concise and compelling statement of who your target customer is, what is unique about your offering, why it’s better than the competition and provides evidence that you’ll deliver to promise. But we’ll come to the definition later.
So here we go. I will use this opportunity to also set up a guide on how you can create or improve your own unique value proposition, especially if you not already have one.
If you want to skip the theory and immediately want to go creating your won unique value proposition: please visit my unique value proposition generator and checklist.
Why is Having a Value Proposition Important?
So why do you need a value proposition for your company, products and services and why do I need it for ContractExec?
Well, to keep it simple, value propositions help companies increase sales. More importantly, and in line with other posts I wrote on contract value, your value proposition is one of the most important elements in setting the target of what in the end will be the margin earned over the lifetime of the contract.
But that’s not all.
With a strong value proposition, you can :
- Use it in customer requests for quotes / proposals
- Use it in business, sales, account, product/service or operation plans to help your organization internally
- Share it with partners and vendors so they understand what ContractExec needs
- Focus communications and marketing
So what can happen if you don’t have a value proposition or have one that is weak. It can cause confusion resulting in a lack of confidence in your business, products or services. If it is unremarkable it will not connect with customers and prospects.
Your customers – as our mine- are looking for solutions that will increase their competitive advantage.
The customers want to hear specifically how your products or services will contribute to their success and why you uniquely will deliver that value to promise.
Your value proposition defines what makes you different from alternative solutions. Value propositions can increase conversions and therefore your revenue. Therefore, the value proposition should be developed early in business planning.
What is ‘Value’?
Value is how much a customer gets back from paying for something. And, how important or useful it is.
Perceived value is composed of:
- Monetary worth
Together they determine value perceived benefits compared to perceived costs. If the perceived benefits outweigh perceived costs there is positive value.
Benefits can be functional, emotional, financial and there are also other quantifiable benefits.
Functional benefits means that whatever you are buying whether it’s product or service, “it” does the job you “hired” it to do.
Emotional benefit is that the purchaser feels satisfied.
Financial benefits like increasing the revenue or margin or saving money.
Other Quantifiable Benefits include decreasing downtime for yourself or your employees. Or, decreasing the time to respond to customers. They are alwyas related to financial benefits. For example, increasing customer satisfaction can lead to customers coming back to you which then can lead to higher sales revenue and profits.
The obvious first one is how much the product or service costs. This is not only the initial price paid but in the case of goods also ongoing operational (‘lifecycle’) costs.
There are also emotional costs. For example, the fear of making a wrong decision.
Total perceived value
When we take the perceived customer benefits and subtract the total customer costs, we have the total perceived value.
Your customers decide what ‘value’ is, not you or your marketing department.
Definition of Unique Value Proposition
A value proposition is a concise and clear summary of the clearly demonstrated value your service or product will deliver to customers and the benefits you offer, the problems you solve, and the things that distinguish you from your competitors/alternative offerings.
A unique value proposition:
- Is an offer that promises to solve a specific problem or accomplish a specific goal
- Clearly describes how prospective buyers benefit from using your solution
- Distinguishes your solution from alternatives and competitive offerings
- Ideally identifies quantifiable outcomes buyers can expect as a result of buying/implementing your solution
- Demonstrates you clearly know who your target prospects are, what they’re trying to accomplish and where alternatives fall short
- Enables you to offer must-have solutions and create compelling marketing messages
Your value propositions mus be:
- Unique, and distinguish the value you offer vs. the value your customer can obtain elsewhere
- Measurable, and deliver quantifiable outcomes and benefits
- Defendable, so provide evidence to support your claims and reduce the buyer’s risk (emotional costs)
- Sustainable and stand the test of time since they can be delivered consistently.
When Your Value Proposition Isn’t Working
Ah, you already have a value proposition but it doesn’t seem to be working? So what is wrong?
- The value proposition is developed as though it’s a strapline for advertising only?
- The target customer is not identified correctly?
- Do you have ten priority one goals or are you focused?
- The customer pain or urgency is missing?
- The competition has been under-estimated?
- Your people and other key stakeholders don’t believe in the value proposition or cannot convincingly describe it?
- And, most important of all – your customers don’t perceive unique value in your proposed offering?
Do you really know your customers? The best businesses really do all to deeply understand and know their customers . They know what their needs are and their business.
Do you talk about your products or features (internally focused) or do you talk about the problems and pains you are solving for your customers (externally focused)?
Mistake #1: Internal focus
The first mistake is that you may be too internally (sales) focused. If the conversations in your company focus only on how much money you need to make, the great products you have , or smart marketing slogans you created, the alarm bells should start ringing.
Of course, as may be clear bu now, you should focus on why potential customers should buy something from you.
Mistake #2: Being too generic
If customers can’t read in your value proposition that you truly understand the customer’s needs and company. If you are too generic and cannot demonstrate that you can deliver to promise , you will certainly lose the customer’s attention.
Mistake #3: Being too generic
The third mistake is that the value proposition is too broad or trying to cover too much. Even if all the features are good to have, you need to limit the proposition to the one most unique and important to the customer.
You need to be focused to be successful.
The Difference Between a Unique Value Proposition and Unique Selling Proposition/Point.
A value proposition is often confused with a ‘unique selling proposition’. Their purpose is different although they’re intimately related. In fact, when you want to provide value to your customers (as described in the value proposition), you need to have a unique selling point to sell to the customers. This then is the main point on which your value is based.
Unique Selling Proposition
The unique selling proposition (USP) locates a business in relation to its competitors and is a statement about what the one point is that makes you and your company different from other alternatives. It describes how you deliver the value you have promised in your value proposition.
It should answer the question what the ultimate point of differentiation is between you and your competitors and alternatives so that it makes your company the one worth doing business with.
Its primary value is to create competitive differentiation based on one and only one distinguishing characteristic and is much more effective in B2C compared to B2B).
So in your product or service strategy, you should really pay a lot of attention to creating differentiation that is a) hard to copy and b) addresses a significant problem.
The USP doesn’t have to focus on a product or service detail (such as quality, features, or price). It can also be service, speed, convenience, availability, guarantees, customization, and so on.
A USP can come back in the value proposition (see below steps 4., 5. and 6.).
Our USP is what you find on the Home page in the header: We Maximize High-Tech Contract Value. But once in a while I revisit this to see whether it still works and improve the message.
A USP is also different from an ‘elevator pitch’. This is a short, 1-2 sentence statement of about 10 seconds long that defines who you work with (target market) and the general area in which you help them.
My elevator pitch would be: I help B2B high-tech businesses with improving their commercial contract management capabilities – people, processes, tools – to improve their profit margins.
Unique Value Proposition
A value proposition is a clear statement of the tangible results a customer gets from using your products or services. This is the explanation for your prospect why they should consider buying your product. It addresses what’s ‘broken’ in the market (your why), what problems/challenges this results in, how you uniquely take this problem away to deliver significant value, and what’s the means by which it is delivered (your what i.e. the product or service (category).
The value proposition focuses more on how the customer will benefit by working with you. while a USP describes for your target market how you’re different, a value proposition answers the question: Why should they care about that difference?
Your value proposition, therefore, incorporates your unique selling points. The strength of your unique selling point determines the strength of your value proposition.
From there it’s all about assessing what unique value you can unlock by applying your unique selling point to a customers’ problem – You use it to create the strongest value proposition – even one that makes your competitors irrelevant.
Also you can have more than one value proposition depending on for example market segments, geographical areas, industries served.
Our value proposition is today:
“ContractExec helps B2B high-tech manufacturers and suppliers of complex products and services that have weak or no commercial proposal writing, contract drafting, negotiation, and contract management capabilities, to succeed in improving profit margins by reducing their sales and proposal cycles and transaction costs, and preventing contact value leakage in the total contract lifecycle.
Unlike companies and consultants that only offer tools and services related to (legal) risk prevention or technology, we use our Contract Value Lifecycle Managementsm methodology to focus on lifetime contract value and make sure your top line and profit margins improve, as evidenced by the projects we successfully performed in aerospace, maritime, high-tech, IT, enterprise software, and other industries”
The Value Proposition Model
So you should support your customers. Help them deliver effectively and efficiently or improve their competitive advantage.
You have to create and give your customers real meaningful value. With one goal, that your customers turn down your competition.
Your potential customers must understand your value proposition and why they should buy from you. It expresses how you will help them achieve their goals, and solve their problems, how your solution will give them an experience which they will not get from other companies of doing it themselves.
To achieve all of the above you can use the following value proposition formula which in the next paragraphs I will explain step-by-step.
(You can also first create your own unique value proposition and directly get our feedback on by clicking on the button to the right.)
The Value Proposition Model
We help [1. identify your ideal prospects] that [2. need help with the pressing problem you address] succeed by [3. outcomes/results you deliver]. Unlike [4. alternatives], [5. your solution] [6. describe main benefit/why your solution is best choice] as demonstrated by [7. evidence you’ll deliver on promise].
1. Identify your ideal prospects
You need to develop a complete view of your target customer(s) based on all the information you can get. You then need to turn this into a concise and informative description.
Information about your customer
Try first to get as much as possible information about your customer(s):
- Business type, location, annual revenue
- Industry type, is it growing or consolidating, is it profitable, environmental, legal, economy, technology trends
- Customer, technology lifecycle stage, is the product or service new to the market or customer, does the market or customer need to learn something new
- Market sizing and share, how big is the market
- Budget cycles / seasonal buying habits – is there a budget that expires in December?
- Social media, what conversations can you find on LinkedIn, YouTube, Facebook, Instagram, Twitter and all the other sociale media channels?
This category of information isn’t generally a competitive advantage since your competition can also easily obtain this Information. However, you would be surprised how many companies there (often technology or engineering-driven) are out there that don’t even bother to obtain or regularly refresh such data! In that case, you already are one step ahead!
Expert information about your customer
Ask your own ‘experts’ working with your customers:
- your sales representatives, what do they know about your customers’ problems and solutions, why some customers don’t want your product?
- your customer support, what are the typical questions the customers ask, are they happy with their experience with your company and support; are there uncovered needs?
- your suppliers and vendors, what do they know about the markt, your customers
- experts you meet at tradeshows or industry analysts.
Customer titles and roles
Who in the organisations of your customers makes the purchase decisions, is it a committee or just one person. Who are the technical, economic, and other influencers? In industries selling more complex products and services there may be many influencers – inside and outside the customer’s organisation even – in the purchase decision.
It is important to understand who influences and what their power is.
Information from your customers themselves
The best information you can obtain is that coming directly from your (potential) customers themselves:
- Visit the customers and talk to them about their problems and needs.
- Find out what the daily issues and friction points are and ask how you can help
- Learn how your customers make their priorities (needs versus wants). What drives them: costs, innovation, market share, reputation?
- Understand the customers’ purchase journey – from pre – purchase to post – purchase. what are the actual steps a customer takes?
- Are they ‘early adopters’ who opt into an early market product and are willing to take bit of a risk or more ‘mainstream’ followers and want others to take the risk first before they buy in?
Going back to my own value proposition, I identified my prospects as being “B2B businesses working in high-tech, capital good manufacturing (aerospace & defense, maritime), IT and enterprise software industries where sales cycles are long, proposal and contracts are complex and negotiation skills are very important”.
I have struggled to find a shorter and more to-the-point description, so feel free to leave suggestions in the comment box below.
2. Identify the customer’s pressing pain or problem you address
An important but difficult step in creating a value proposition is identifying the key customer pain point, unmet need or other motivation.
Answer the following questions:
- Can you formulate ‘what’s broken’ in the world of your customer?
- Can you explain why it’s key to resolve this once and forever and as soon as possible (creating a sense of urgency),
- Can you describe what the ideal world would look like if it was resolved?
This is where the real value is for the customer and therefore where you can earn real money.
In step 1 you focuswed on the “who”. Step 2 looks at the “ why ” and focuses on understanding of why customers think and behave the way they do. What their needs and motivations are.
The bes advice I can give you is to test the above first with your front-line sales representatives and customer support people and then with target customers themselves.
I identified as pain points for my targe market the fact that my prospects, high-tech and complex products/service providers, often are very much technology- or engineering-driven, and (that) have weak – or outsource to expensive lawyers – commercial proposal writing, contract drafting, negotiation, and contract management capabilities . The famous, stereotypical image of the techies and nerds who are customer-agnostic and averse to everything marketing and sales whereas they know they absolutely need to bring out proposal and draft contracts as part of their operation. And the pain point that they don’t have the skills themselves or have to pay outside lawyers huge amounts of money to review, edit or draft proposal and contracts.
Again I would like to make this shorter; I could have ‘limited it to ‘(that) have no or weak commercial and contract management’ but the terms are not self-explanatory, whereas many companies immediately recognize the need for proposal writing, contract drafting/management and having strong negotiation skills and the issue that outside lawyers are so expensive. Again feel free to leave your comments!
3. Identify how the customers will succeed with outcomes/results you deliver
Features and benefits
In next step you first need to have a clear picture of the features and functional and emotional benefits of your solutions, products and services. You will need them for this ans the next two steps.
You need this to develop a concise statement or prioritized set of statements that motivates customer preferences and purchase triggers.
In the statements include the feature and its benefits – functional and emotional .
A feature is a distinctive attribute or aspect of a product or service . It often is more tangible and factual . A benefit is the advantage a feature has for the customer .
Whatever your business , product or service, you should have a clear view of its features / benefits and their relative competitive strengths .
Remember that benefits can be functional or emotional. The best value propositions lean into emotions and intangibles and not just features and tangible benefits. A positive emotional connection with your customer is really important.
Start a list of these strengths or key features . See if you can get to at least 10 – including the feature and the benefit .
|Not different from competition||Different from competition|
|Necessary feature||Necessary feature, but not different from competition||The feature is both different from the competition and highly customer relevant|
|Non-relevant feature||The feature is neither relevant nor distinctive||The feature is different from the competition but it’s not very relevant to the customer|
Pay special attention to the lower right quadrant if your business, product or service is early in the market and it still needs explanation. The customer may not realize it is relevant for ts business. Or, it may be that it will never be relevant to the customer
Most B2B buyers focus on a business value when making purchases: the product saves time , money , and gets the results.
Only a very small group of B2B buyers actually perceive a real difference in B2B supplier offerings . This means that well over the majority of B2B customers think the offerings are all about the same .
A majority of buyers will pay more for a product or service when they see personal value, that is how they personally benefit from the purchase (liking feeling helpful or innovative or supporting society) . In business , buyers want to feel smart or helpful .
The personal value or emotional connection to your customer is more sustainable than only a functional benefit connection .
And here again how I used the two-by-two above to plot the features and benefits ContractExec’s value proposition.
Firstly, here below a first attempt of randomly listing the top ten of features and benefits of ContractExec can offer:
- Deep expert knowledge of commercial and contract executives in the target market of suppliers offering complex high-tech products and services, long sales- and contract cycles not widely accessible or procurable (so rare resource not readily available in-house or elsewhere)
- ContractExec’s proprietary output-driven Contract Value Lifecycle Management℠ methodology covering the complete contract lifecycle from pre-proposal up to and including close-out and integrating people, processes, tools, and partners to increase value for our customers (unlike partial solution only focusing on specific phases – a proposal, or contract drafting, or negotiation, or contract management, not ‘and-and’)
- Holistic focus on people, processes, and tools to improve contract value, profit margin maximization (and not only legal risk, compliance offered by lawyers, or single processes by consultants, or CLM/legal tech tools by IT suppliers.)
- A large international network of commercial and contract specialists in relevant industries (not only focus on one country, US, or region like EU, but global reach)
- Fast turn-around times and staffed to cope with urgencies (compared with customer’s own staff or lawyers and consultants which are not always readily available)
- Independent advice and objective recommendations (compared with full-time staff since we don’t have a vested interest in the outcome)
- The catalyst for and supporting transformational change – from internal technology to external customer focus (unlike own staff that may not have the skills, time, or possibility to freely involve employees in the same company
- Cost-effectiveness – not having to employ full-time staff in an area that isn’t to the customer’s core resources, offerings, and capabilities (technology), who need to continuously be trained and who cannot be dispensed with easily, and who work less efficiently, effectively or quickly than us, which could give you a competitive advantage.
- Availability for short projects or longer engagements – interim work (unlike competitors who can only offer either/or solutions)
- We can work remotely, and can join you on location (unlike competitors only offering remote capabilities or working locally).
|Not different from competition||Different from competition|
|Necessary feature||Necessary feature, but not different: 1., 5., 7., 8., 9.||Feature is different and highly customer relevant: 2.,3.,|
|Non-relevant feature||Feature is neither relevant nor distinctive: 4.||Feature is different but not very customer relevant: 6., 10.|
In the end, I selected the two in the top right quadrant: “to succeed in improving profit margins by reducing their sales and proposal cycles and transaction costs and preventing contact value leakage in the total contract lifecycle“
4. Unlike the alternatives/competition
Customers have more choices than we consider. You can think of competition in three categories: direct, indirect, and replacement. We will be looking at direct competition mostly. However, don’t forget one of the biggest competitors could be your customer itself ‘doing-it-themselves’.
You need to capture key information about your competitors, including important details about the company, its strengths, and weaknesses, products and services, features, and benefits offered.
Based on the above, compare the competitors to where your company fits in the overall market landscape.
You should already know your unique and best, and poor capabilities, so now compare them against your competitors from the viewpoint of their importance to your customers and see where you score higher, lower, or equal.
You should focus on understanding the marketing strategies your competitors use to target customers — such as social media , keyword targeting (SEO, SEA), conten , events , and more.
Look at their key messages and how they communicate the benefits of their product in their USPs and value propositions. You can use a SWOT analysis for this.
Look at the competitors from the viewpoint of the target customer and understand customer perceptions.
Also, investigate whether you can partner with your competition.
Back to ContractExec’s value proposition. So who are the competitors and where did I find them? One of the biggest competitors is the potential customers ‘doing-it-themselves’. Of course, in nearly all companies there always is somebody doing sales, and here is nearly always is an in-house lawyer. Sometimes, for more complicated proposals and contract work, companies will outsource work. In US there is still the belief that only lawyers can do contracts and terms and conditions for proposals. An idea that in many industries all over the world and in other regions has been abandoned. So lawyer offices may be direct competitors. As are consultancies specializing in certain stages of the contract lifecycle, like proposal writing or contract drafting (see Fiverr or Upwork!). Often the executives and salespeople think they can do negotiations themselves without realizing they’re leaving millions on the table by doing so. Finally, there are more and more legal tech and CLM providers selling contract lifecycle management tools that also offer – in addition to automation- some form of process consultancy. These could be partners instead of competitors since ContractExec’s offering is quite complementary. So here we go for the value proposition statement we add: “Unlike companies and consultants that only offer services related to (legal) risk prevention or technology, ContractExec offers….“
5. Your Unique Offer
The question in the next step is whether you are going to lead with a killer feature/benefit or with a big idea?
A killer feature is located in the top quadrant you created above and is new and exciting, unique, credible, and of high value to the customer. You must communicate the feature with credibility and proof to alleviate the doubts and doubters.
The big idea can have real transformation power. But it can be expensive and takes to for market to understand or attract attention. Also, it often can be easily copied by competitors.
So, at this stage of ContractExec’s existence our unique offer consists of applying our proprietary and output-driven ‘Contract Value Lifecycle Management sm‘ methodology in everything we do and offer. It helps create value for the customer at the four levels of the People, Process, Technology, Partner model. At this stage this approach is unique and not many companies will be able to copy it right away. It also ties in splendidly with existing offers of contract management tool suppliers who can partner with ContractExec for us to take care of the people and process side. So here we go: “we use our Contract Value Lifecycle Managementsm methodology to focus on lifetime contract value”.
6. Key selling points: benefits/ why your solution is best choice
What are your Key Selling Points?
In this one but last final step of the value proposition, you want to give proof or reasons to believe your big idea or your killer feature/benefit are really different or better than the alternatives.
The reasons to believe must lead to that one key and unique benefit, that differentiates strongly from the competition.
Watch out for what you claim. Of course, ideally, it stands out, but it must remain credible. You will need to be able in the final step to deliver evidence you can live up to the claim. Not only today but over time. And also when the competition improves.
It can take significant time and financial investment to substantiate claims .
Are you claiming that your customer will save up to 10% of costs and in your contract, you add a lengthy disclaimer legal statement?
My claim is that with our Contract Value Lifecycle Managementsm methodology we focus on lifetime contract value “and help you to improve your top line and profit margins improve“. Now at this stage, we don’t and cannot state that we can guarantee this and maybe we never completely will be able (or allowed by the customer!) to do that (like lawyers and consultants we are not different as far as this feature is concerned). But the proof in the pudding will come in the last sentence which should contain proof that our approach actually already worked.
7. The evidence
One of the common mistakes that can get in the way of creating a good value proposition is not having proof of what you claim.
Here testimonials from customers really help. Or when you just started you can refer to projects you worked on.
In our case it is a little but different. Since we work in high-tech environments like aerospace and defense and related IT and enterprise software projects, we are often under NDAs or defense-related non-disclosure protocols. In that case, the only thing you can do is describe your projects without giving away your customer’s name. We solved it like this for now: “as evidenced by the projects we successfully performed in aerospace, maritime, high-tech, IT, enterprise software, and other industries”. If the customer still finds this risky, we can also offer to first work with us in a pilot project with a money-back guarantee.
Review Value Proposition
Creating a value proposition is not a once-and-never-again kind of exercise. You need to write value propositions for different products and services. You need once in a while to revisit them, refine them. More and more sculpt the proposition to something your customers immediately recognize, understand, and believe.
While writing this post I (again) changed the wording of my own value proposition for ContractExec and I am sure – since I think it still needs rework – in a few weeks I will again have adapted the statement. Especially if you here below leave your comments I will take over any good suggestions and reply! I thank you in advance!