December 17, 2014

Why Powerful Value Propositions Are Always be Written Down

Vistage Blog interviews Roger Martin-Fagg. A renowned Vistage Speaker, Roger has been helping companies of all sizes get their value proposition right for 30 years.

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How businesses start and where it often goes wrong

New start-up businesses are usually the ideas of one, two or three founders who hold the passion and delivery of the company’s value.

They know the Value Proposition and they live it – every day.

Quite often they don’t write it down because they have a relationship to the value proposition. As the business grows the founders interview new people and share the vision and the passion with new employees. When the company starts to get to about 25 employees, the founders are less likely to be interviewing. Their colleagues know the value proposition but it starts to get watered down and interpreted.

When you get to 65+ people it’s still not written down and while the founders still know the Value Proposition, things can be seen to start to go wrong. This can manifest itself in a number of ways.

Sometimes it’s a drop in sales and sometimes it’s a rise in customer complaints.

As results start to take a wrong turn, companies that are lacking an explicit and clear value proposition can find it hard to get out of this chasm.

But the result can be two-fold. The founders sell and don’t realise the price they thought they’d get or the company retreats back to a safer place – a back to basics culture kicks in.

Misinterpreting the Value Proposition inhibits growth

Once you hit that point that not every member of staff is exposed to the company’s Value Proposition you start ending up with customer facing employees answering 'what’s your value proposition' with words like quality and experience. They make a break between the true value offering and they slip into making it up with what Roger Martin-Fagg calls weasle words – that mean very little and certainly don’t differentiate.

How to stop messing up your Value Proposition

Be careful not to go too broad. If your Value Proposition is not succinct, look at whether you have these issues in your VP:

  1. You are still too broad and have not honed your real compelling difference
  2. Write about what is distinctive about you. Name one or two stand out things, these are often behaviours
  3. You need to be clearer on language – take out all the weasle words like quality service, customer first – it means nothing to you or your customer
  4. Be clear on what you mean
  5. Use simple language
  6. Describe the actions you need to consistently take

A lot of the truth has gone out of the English language. You mock it when you see it so why do you do it to your own staff and customers?

It’s like the old adage about not having time to write a short letter. Invest the time and you’ll reap the benefits. It can take up to and over 2 days for the board to truly define the value and come up with a value proposition.

Are value propositions and positioning statements the same thing?

A positioning statement is ‘What business we are really in and why you are in that business?’ – so yes they are the same thing.

Value Proposition and pricing

The Value Proposition says why you have a premium price, but wouldn’t normally state pricing implications. The point of the Value Proposition is to state clearly the markets we serve and why they like it.

Many small businesses actually start by charging a premium to do something better for their customers who are seeking a new level of value. They are clear on the Value Proposition and the premium is defined in the compelling, superior and distinctive nature of the offering.

Think about how you would score your own company using the following equation:

Value For Money = Satisfaction – Price

The Value Proposition is unlikely to come from a mission statement

According to Roger Martin-Fagg: “The vast majority of mission statements are anodyne, weasly and serve no value to the company. The difference is that a Value Proposition is an achievable mission statement.”

Sometimes you might want to include a time schedule if it has a particular market value or strategic importance, but on the whole time is not a dimension that needs to be included.

Does the business model equal the value proposition?

The business model and the value proposition are not the same thing. The business model is how you do business and the value proposition is why you do business.

When starting a business from scratch the company tends to have a single product targeted at a small group of niche buyers or customers – which ties to a clearly defined Value Proposition.

As the company grows and starts to get to 40, 60 or 100 people, then they start the process of diversifying products and markets. This is where things tend to go wrong; when Value Propositions are blurred in how they connect with the single product and single market.

It’s likely that the original business model and the new business model do not match the new Value Propositions and the original culture and working practices are changing.

Do you have a written down Value Proposition? Are you experiencing any of the issues discussed here?

To find out more about how your value proposition plays a key part in business growth download our latest guide 'Going for Growth'.

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