Johan H Vermeulen brings property professionals a two-part series on the importance of and how to create a value proposition as an estate agent.
“Business will never be the same.” It seems this is the new slogan for present and future CEOs. The question is, what can we expect to happen in the business environment?
In an attempt to answer the question, Nadler and Tushman (1999) identified the most important key characteristics of business success in pursuit of competitive advantage in an uncertain world. These key characteristics of the new business environment are:
• Global competition, industry deregulation and the abundance of capital
• The conducting of business unconstrained by the traditional limitations of time or space
• The movement from a manufacturing environment to an environment of service support and distribution
• A shift to knowledge workers, a new class of affluent, educated and mobile people who view themselves as free agents
• A demand for continuous innovation
• The fragmentation of markets
• The ability of technology to make everything faster, easier and cheaper.
The crucial questions are “Can I as a businessperson ensure profitability in these changing times?” and “What can I do to ensure sales through my value contribution?”
The Importance of Measurement in Business
To answer the question of profitability through your own value contribution, it is important to look at the broader picture of measurement in business and how it contributes to profitability.
For some time there has been considerable interest in performance measurement. Adages such as “What gets measured gets done” and “You get what you measure” suggest that implementing an appropriate performance measurement system will ensure that actions are aligned to the strategies and objectives of the organisation.
Typical performance measurement helps businesses in setting business goals and then providing feedback to managers on progress towards those goals.
The important concept here is “value”. The best way to distinguish your business from that of your competitors is to identify the major advantage that you have over them. The major advantage should be a statement describing what distinguishes you from your competitors, but it must be compelling enough to convert prospects not only into customers but repeat customers.
Robert Kaplan and David Norton coined the term ‘value propositions’ in their ground-breaking work, The Balanced Scorecard (1996). Value propositions form the central theme in the customer perspective of the balanced scorecard. The customer perspective enables companies to align their core customer outcome measures, namely satisfaction, loyalty, retention, acquisition and profitability, to targeted customers and market segments. The value propositions represent the drivers, the lead indicators, for the core customer outcome measures.
The value proposition statement summarises why a customer should buy a product or use a service. It should convince a potential customer that one particular product or service will add more value or better solve a problem than other similar offerings.
Companies use this statement to target customers who will benefit most from using the company’s products, and this helps maintain an economic advantage. The ideal value proposition is concise and appeals to the customer’s strongest decision-making drivers. Companies pay a high price when customers lose sight of the company’s value proposition.
Regardless of the size of your business or the type of industry you are in, your company as well as individuals should have a value proposition. According to Wendy Maynard (2010), a strong value proposition does the following:
• creates interest, so that your customers ask questions and want to learn more – your value proposition opens the door so that someone might be willing to meet with you instead of blowing you off when you call or mail them for the first time
• differentiates you from your competitors and creates a strong differential between you and your competitors
• increases the quantity and quality of your sales leads and makes conversion to a customer much easier
• wins your business greater market share in your targeted segments
• aligns your business operations more closely to customer needs
• focuses on your customers’ points of view
• include demonstrated results that will catch the attention of decision-makers – results such as increased revenues, decreased costs, improved operational efficiency and faster times.
Creating a Value Proposition
A value proposition is a short statement that clearly communicates the benefits that your potential client gets by using your product, service or idea. It “boils down” all the complexity of your sales pitch into something that your client can easily grasp and remember.
It needs to be very specific: simply describing the features or capabilities of your offer is not enough. Your value proposition must focus closely on what your customer really wants and values. Your customer wants to solve problems, to improve on existing solutions, to have a better life, to build a better business or do more, better, faster and so on.
Creating a value proposition is a useful marketing technique that has wider application than product marketing. Whatever you are “selling” and to whom, a value proposition is a useful if not essential tool. Whether your “customers” are external customers, employees, co-workers or even your family, the idea is to help them see the specific value your offer brings to them. By doing so, you will grab their attention in such a way that they know, “Yes, that’s right for me.”
According to the Mind Tools team in the United Kingdom, your value proposition can be created, step-by-step, by answering a series of questions. Once you answer these, you have the ingredients to create a value proposition.
1. Know your Buyer or Seller
Thinking from the perspective of your buyer/seller, ask the following:
• Who is he or she? What does the potential buyer/seller need?
• What problems does the buyer/seller need to solve?
• What does your buyer/seller value?
2. Know your own Product, Service or Skill Set
From the buyer’s or seller’s viewpoint:
• How does your product, service or idea solve the problem or offer improvement?
• What value and hard results does it offer the buyer/seller?
• What does your own skill set bring to the table?
3. Know your Competitors
Keep on thinking from the perspective of your buyer/seller, and ask:
• How does your product, service or idea create more value than competing ones?
• Can your own persona/character be the distinguishable factor between you and others?
4. Distil the Customer-Oriented Proposition
The final step is to pull it all together and answer, in two or three sentences, “Why should I buy this specific product or idea?” or “Why should I stay with this provider?”
Try writing from the customer’s viewpoint, by completing the following statements:
• “I want to buy this product or idea, or stay with this provider, because it will…”
• “The things I value most about the offer are…”
• “It is better than competing products or ideas because…”
• “I should stay with this provider because he/she differs from others because…”
5. Pull it all Together
Now, turn your “customer’s answer” from step 4 into a value proposition statement.
• Kaplan, RS & Norton, DP (1996). The Balanced Scorecard. Boston: Harvard Business School Press
• Maynard, Wendy (2010). How To Write a Value Proposition for your Company
• Nadler, DA & Tushman, ML (1999). Strategic Imperatives and Core Competencies for the 21st Century. Organizational Dynamics
• The Mind Tools Team: How to Create a Value Proposition. Mind Tools Ltd, 145–157 St John Street, London, EC1V 4PY. United Kingdom
Look out for the second instalment of this series in the May/June issue.