Creating real value to the customer for your products and services is possibly the biggest edge your company can have in a specific market.
So why then do less than a third of executives believe they have a unique value proposition?
Think of it this way – without an effective value proposition, when a customer asks you why they should buy your product and not your competitor’s, you won’t have a solid answer. It’s also difficult to move forward with developing a differentiated sales strategy if you can’t prove your value first.
Creating a value proposition is about understanding its components, as well as how your customers think.
A value proposition as an equation is:
Value = Quality / Price
Therefore, how much your customers will be willing to pay for your products is based on their perception of your product’s quality compared to the price tag. Understanding this formula can help you unlock unique ways to boost value and identify areas where you’re succeeding.
There are three main factors that influence how a customer will perceive the value of your offerings:
Functional Value: Whether you offer a product or a service, you will be measured and compared based on the functional and technical merits of what you do. Ease of use, product features, technical merits, team capabilities and overall design are examples of areas of where you may be judged. The question is where do you create unique and measurable differentiation that adds real value?
Economic Value: Aside from the selling price, clearly identifying how you can save customers money (or make them money) by buying your product can go a long way. This approach helps customers look at your offerings as more of an investment they’ll get a return from, rather than just another purchase. What are your clients business outcomes or priorities that are supported by buying from you?
Psychological Value: Research would suggest this is the most powerful value area of the three. It is harder to measure, more emotional for buyers and harder for competitors to copy. Psychological value is about the brand power, trust, relationships, service, risk and the overall experience of doing business with you.