Why do we Need a Value Proposition? (Part III)

Please read Part I and Part II for background information before reading Part III.

VP for Service Businesses

A service is the action of doing something for someone, or an entity. It is largely intangible (i.e. not material). A product is tangible (i.e. material) since you can touch it and own it. A service tends to be an experience that is consumed at the point where it is purchased, and cannot be owned since it quickly perishes.The marketing mix for a service based business is an extension of the 4-Ps framework where ”Product” is interchanged with “services provided”. The essential elements of product, promotion, price and place(channels) remain but three additional variables – people, physical evidence and process – are included to make a 7–Ps mix.

People – an essential ingredient for any service provider is the use of staff (people). Recruiting the right staff, trained appropriately to deliver a service is essential if the organization desires a competitive advantage. Consumers make judgments and create perceptions of the service based on the employees with whom they interact.

Process – refers to the systems used to assist the organization in delivering the service.

Physical Evidence – is the material part of a service. Strictly speaking there are no physical attributes to a service, so a consumer tends to rely on material cues. There are many examples of physical evidence, including some of the following: logos, business attire, business cards, web site, collateral, etc.

The quantified advantages for a service business can be developed using techniques similar to these displayed in Table 2: so conducting this example in terms of StrategicVision’s services:

Table 3 Differential Value Factors for Services

Mix Factors	Importance	Performance	Competitor	Advantage
Cost: –
Project Cost	11	9	6	33
Retention Fees	8	7	4	24
Product: –
Specific Service	13	8	8	0
Measurable Attributes	10	8	8	0
Qualitative Attributes	7	7	8	0
Promotions: –
Resources	7	6	8	0
Breadth	4	4	6	0
People: –
Experience	6	9	7	12
Knowledge base	6	8	7	6
Range and Number	2	3	6	0
Processes: –
Leadership	3	8	7	3
Mentoring	3	8	6	6
Reporting	5	8	8	0
Physical Evidence: –
Web Site	6	7	8	0
Position Papers	5	8	7	5
Collateral	4	8	8	0
Total	100

From this example it is clearly seen that StrategicVisions should be highlighting Price (cost) and Experience as its differential advantages. Its differential weaknesses are in its Promotional capabilities and in the number of people and range of their skills (StrategicVisions is an individual consulting firm).

Synthesizing the VP

Let’s continue using StrategicVisions as our example; and let’s look at what we have already developed for them:

StrategicVisions target market: –

StrategicVisions is in the business of providing Business Development consulting services to growth oriented companies.

Companies that will use these services will generally be growth oriented and will be technology driven, seeking growth through product extensions, market development, new products, new markets and strategic alliances; they will have resources available to support their growth efforts.

And the economic benefit they provide: –

Our clients (large or small) typically grow their annual revenues by at least 20-30%

And their differential value factors (we determined above) are: –

• Pricing & Fees
• Experience

StrategicVisions is a Business Development consulting firm with more than 25 years experience; it cost effectively helps growth oriented  technology companies grow their annual revenues by at least 20 – 30% by extending their business base with new products, new markets and strategic alliances.

OK! What we have done here is to weave together the statements about who StrategicVisions is, who their customers are, the values StrategicVisions transfers to them via its services and the realizable benefits a customer experiences as a result of the values transferred. And at the same time StartegicVision’s differential advantages (low cost and experience) have been included as part of the word weaving process.

If you want to use this as part of your sales pitch it can be re-phrased as:

We are a Business Development consulting firm with more than 25 years experience; we can cost effectively help you  grow your  revenues by at least (20 – 30%) we’ll extend your business base with new products, new markets and develop strategic alliances for you.

The Value Proposition statements developed (as above) should be revisited over and over again until they are fine tuned to clearly represent your company, what it does and the values it delivers to its customers. Remember your VP should be:

1. A clear and succinct statement (e.g., 2-3 sentences) that outlines to potential clients and stakeholders a company’s unique value-creating abilities.
2. A clear statement of the tangible benefits a customer gets from using your products or services.
3. An offer to some company in which they get more than they give up (probably $), as perceived by them, in terms that they understand.
4. A value proposition is the basic reasoning for companies to consider your product or services.
5. What you do in terms of tangible business results. It should draw interest and share a success story with a few words.

Copyright 2008 – 2010 Henry Gregor, StrategicVisions. All Rights Reserved Worldwide.