Value Propositions

Value propositions establish the value basis for a business relationship. They describe how the bidder’s solution will improve the customer’s business and how that improvement will be measured. A good value proposition helps clients grasp the value of what you are selling, compared to other options.

Introduction

A value proposition is a statement that specifically addresses how aspects of an offer positively affect a customer’s business. Value propositions should provide customer-specific statements that are quantifiable and describe tangible and intangible value. Tangible value is measured numerically, and intangible value is measured qualitatively.

In simple terms, a value proposition offers clients something they want, and it gives them a good reason to choose you over competitors. In the executive summary and in your full proposal, as well as in any other customer interactions, communicate a strong value proposition that matches your client’s needs and demonstrates your unique offer.

Best Practices

1. Sell the value based on client benefits.

Value propositions are opportunity- and customer-specific and should be developed collaboratively with the customer during the opportunity development phase. Value propositions go beyond traditional theme statements by incorporating as many of the following elements as possible:

  • Estimated returns to be gained from investing in your solution
  • Benefits your brand may bring to the solution or customer (recognizing that brand recognition may factor differently from one evaluator to another)
  • Specific timing of the benefits
  • Specific timing of the costs
  • Payback period
  • Methods for measuring and tracking results

Buyers within a customer organization may have different hot button issues and values, so you will want to prepare a different value proposition for each type of buyer. For each distinct opportunity, state the total added value of all value propositions in a single summary value proposition.

Salesman Elmer Wheeler famously said, “Don’t sell the steak; sell the sizzle.” That’s exactly what companies are trying to do when they explain value propositions to their customers. They are not selling features, but rather positive discriminators that deliver benefits that matter to the client.

A good value proposition takes the client’s needs into account and is also sensitive to the role of the evaluator. For example, a Financial Manager may be concerned about cutting costs, whereas a Marketing Manager may be concerned with growing market share.

As a Proposal Manager, you may need to overcome internal objections to creating a value proposition. Stakeholders may argue that it takes too long or that you don’t have enough information about the client or your competitors. They might also argue against being specific about the benefits you offer clients. In this case, it is a good idea to develop parametrics. These are statements about what another similar customer, seeking a similar solution, has achieved. Internally, providing some parametrics within a proposal tends to be more acceptable to all stakeholders as the “guarantee” of achieving benefits is removed. Of course, it relies on your organization having collected the data from previous projects.

According to proposal writing expert Tom Sant, the average proposal decision takes only 6 minutes. Selling on value helps to organize your proposal strategy. Value grabs your client’s attention and differentiates your proposal. A good value proposition demonstrates your understanding and frames your solution in a way that matters to the buyer. In short, creating a good value proposition helps you win.

2. Link the benefits to your unique selling points.

Making your value proposition the foundation of your executive summary gives evaluators a reason to select you, even before they read your proposal. Your value proposition should be unique for every sales opportunity and relate to your theme and strategy statements. Tell your customer a clear, concise, and compelling story in line with your strategy for the proposal. Introduce key win themes in a way that makes an impact on your client and demonstrates that you are the best choice.

Involve your customers in developing and testing your value proposition where possible during one-on-one meetings and other opportunities. A winning value proposition will focus on benefits that matter to the client. Explain what you do that no one else does, or what you do in a different way from anyone else (i.e., the advantages of your solution). Support your claims with facts and third-party evidence (i.e., proof points). Figure 1 illustrates how discriminators and proof combine to demonstrate value to a customer.

Figure 1. Building a Value Proposition.

Figure 1. Building a Value Proposition. Combine your unique claims with proof, and link these to client benefits to add real value.

3. Use effective price-to-win methods.

You don’t have to offer the lowest price to win a deal. Value is the way the customer perceives price, and the winning proposal offers a client more value than any alternative options. The role of the Bid or Proposal Manager is to maximize the difference between the value the client gets and the price paid for the work.

Use price-to-win methods to arrive at a winning price. Historical databases, teaming partner knowledge, and Price-to-Win Consultants can help you do this.

4. Quantify the payback.

A good way to demonstrate the value of your solution is by quantifying the return the client will get by investing in your solution. The return on investment (ROI) may include one of the following typical measures:

  • Time. This is sometimes called the “breakeven period.” For example, “Our software solution will pay for itself within 6 months, assuming 10 users save 20 percent of the time they currently spend doing the same task manually.”
  • Rate. This is usually a percentage and is sometimes called the internal rate of return (IRR). For example, “If I spend $100 and expect a 30-percent return, then I expect $130 back.”
  • Value. This is usually measured as an amount of money. It is sometimes called net present value (NPV) or economic value added (EVA). For example, “Compared to your current costs, our solution will save you $100,000 in the first year and $200,000 per year thereafter. Over 3 years, you will save $500,000.”

By focusing on the benefit that your client wants to gain, and by making some simple assumptions about your solution, you can usually quantify the payback in a simple way. Use proof points to further convince the customer. This is far more persuasive than making vague claims about the value clients will gain.

5. Make it visual.

Using pictures to explain your value proposition helps clients understand your value faster and remember it longer. It also adds emotion to persuade them. Refer to the guidelines about graphics and action captions for more information.

For example, if your solution has a 5-year payback and results in substantial energy savings over 30 years, you might include a bar chart showing the initial expense, when it pays for itself, and the savings each year with the total savings and your key assumptions. Figure 2 illustrates this scenario.

Figure 2. Showing Benefits with Visuals.

Figure 2. Showing Benefits with Visuals. Illustrate the value you offer using graphics whereever possible.

6. Structure your value proposition in a logical, orderly way.

You can structure value propositions in many ways. Here are some templates and examples that are based on best practices that you may find useful in your proposals.

Follow the SMART approach:

Make your value proposition SMART: Specific, Measurable, Achievable, Relevant (or results based), and Time sensitive.

At APMP’s 2008 International Conference, Tony Birch proposed that one way to phrase the value proposition in a proposal could be:

[Client name] can improve [what] [by how much/in what way] as a result of [doing what differently], over [what timescale] for an investment of [how much].

For example:

Acme can improve customer satisfaction by 20 percent as a result of automating service desk functions over 6 months for an investment of $2 million.

In the Shipley Proposal Guide, Larry Newman offered this syntax and example of a value proposition:

[Prospect] will realize [quantified business improvement] by purchasing [our solution] for [total investment cost].

Beginning [implementation date], the improvement in [specific business process or function] will achieve an economic payback in [timeframe].

We have agreed to document the delivered value by [results measurement and tracking approach].

For example:

BigCo will realize a 5-percent productivity improvement by purchasing our consulting solution for $5 million.

Beginning June 1, 2014, the improvement in factory output will achieve an economic payback in 6 months.

We have agreed to document the delivered value by comparing the current baseline to increased output on a monthly basis.

According to Sant, a value proposition can be presented in three parts:

  • State the value the customer will get
  • Identify the differentiator that will deliver that value
  • Provide proof that the claim is credible

For example:

  • One important benefit of accepting this proposal is that NewCo will see a decrease in energy consumption of 15 percent to 18 percent.
  • That decrease in energy consumption will come as a direct result of implementing our energy optimization software, which will automatically manage your energy costs to ensure that you pay the lowest possible price 24 hours a day. The only system of its kind, the software has been proven in controlled studies to reduce energy bills.
  • When Gee Smelting implemented our software, it saw an immediate reduction in energy costs of more than 20 percent. Similarly, Mercy Hospital reduced energy costs by 17 percent during the first year of using our software.

You can also use the elevator pitch (from Crossing the Chasm by Geoffrey A. Moore):

For [target customers] who are dissatisfied with [the current market alternative], our [product name] is a [new product category] that provides [key problem-solving capability]. Unlike [the product alternative], our product provides [unique product features].

For example:

For mobile businesspeople who are dissatisfied with heavy laptops with a limited battery life, our MobiJob is a solar tablet that provides 24 hours of battery life after only 1 hour of ambient light. Unlike regular tablet devices, our product weighs no more than a novel, requires no accessories, fits in your briefcase, and has more processing power than the average laptop.

7. Focus on the right kind of impact.

When you are looking for client benefits for your value proposition, remember that the return your client wants might not only be financial. According to Sant, clients may seek the following kinds of impact, as shown in Figure 3:

  • Strategic/financial
  • Tactical/technical (operational)
  • Political/social

Look for impact that is measurable, linked to your products or services, and proportional to the fees you will charge. For example:

  • Strategic. Improve working capital by 30 percent with no increase in revenue
  • Tactical. Automate a manually intensive aspect of the mission so that it requires 10 fewer steps to complete, thereby reducing errors and saving hours of effort
  • Political. Improve morale by combining long-distance telephony and network offerings, thereby increasing retention by five full-time equivalent positions per year

Figure 3. Three Kinds of Impact.

Figure 3. Three Kinds of Impact. Determine the type of impact that matters most to your customer, and then emphasize that impact.

8. Address common obstacles to using value propositions.

Most organizations have difficulty with value propositions. Figure 4 lists some of the common problems and offers potential solutions.

REASON VALUE PROPOSITION DEVELOPMENT CAN BE CHALLENGING POTENTIAL SOLUTION
Legal or contracts people refuse to allow any specific statements to limit potential liability. Develop parametric value propositions–what another similar customer has achieved by deploying the same solution.

Carefully state all assumptions and conditions.

Few people understand the difference between selling on value rather than price.

Value proposition development is not a disciplined concept.

Train all participants in the concept of value, rather than just price, and the development process.

Provide templates to kick-start value proposition development.

A short sales cycle limits customer-bidder collaboration. Develop reusable generic value propositions that can be tailored whenever possible rather than developed as new.
Excessive targeting of multiple opportunities limits customer-bidder collaboration. Improve opportunity assessment and bid/no-bid milestone discipline.
Bidder-developed value propositions are not accepted by the customer. Find a friendly collaborator. Sell on a basis other than best value or no-bid.
Customer distrusts the bidder, or purchasing restrictions limit or bar collaboration with bidders. Encourage Sales and Opportunity/Capture Managers to sell on a basis other than best value.

Figure 4. Overcoming the challenges of developing value propositions. Common obstacles to effective development and use of value propositions can be overcome by considering the larger business or organizational perspective.

Individuals working in regulated government markets, where contact between the customer and bidder is limited or prohibited, can still benefit from developing value propositions. A quantified value proposition based on reasonable assumptions will be more persuasive than a vague, qualitative claim to offer best value.

Demonstrating an understanding of the customer’s business can favorably discriminate your organization. With many government purchasers adopting commercial buying practices, value propositions might give you an edge.

Common Pitfalls and Misconceptions

Reluctance to include a value proposition

Common obstacles to using value propositions include a lack of awareness, poor information about clients or competitors, and a fear of mentioning specific results. It’s important to overcome these obstacles and to include a value proposition when you bid. If you don’t state your value, you limit your chances of winning.

Summary

  • Failure to sell on value will result in the client choosing on price or doing nothing
  • Overcome obstacles to using the value proposition to increase your chances of winning
  • A value proposition offers clients something they want and gives them a good reason to choose your organization rather than your competitors
  • The value proposition forms the foundation of the executive summary
  • You don’t have to offer the lowest price to win a deal, but you must show more value than your peers
  • Quantify the payback using a measure of time, rate, or value
  • Make the payback visual and add emotion by including a graphic, even when the value is intangible
  • You can structure a value proposition in many ways. Choose the method that works for your organization and the bid or proposal you are working on.
  • Focus on the right kind of impact, which may not necessarily be financial

Terms to Know

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