Stage 2 companies must already have a clear and compelling value proposition if they’re successful enough to have grown out of start-up, right?
Well, yes and no. They do have enough traction in the marketplace to show that they have a value proposition that works. But it’s actually unlikely that the company has a systematic way to communicate the value proposition. And if that is the case, it will find that revenue growth is harder and harder to achieve – and in a competitive market, the company may start to lose ground to other companies who are communicating their message better.
What should a value proposition look like? When I started out in marketing, I worked with an excellent marketing agency, who explained that the “brand positioning statement” should follow a classic formula of, “For [market segment], Our Brand is the [product category] that [customer benefits] by [points of differentiation].”
So, for a clear and compelling value proposition, you need:
– A clearly defined target market segment or customer profile – is it marketing directors who work with global brands, or owners small businesses in cities, or…
– A definition of the product category – the marketing agency I worked with explained that orange juice could be defined as a breakfast drink or as a health drink, so picking the product category has a big impact on how the product itself is perceived
– A description of the customer benefits – what are the pains you alleviate (lost revenue, production downtime, etc.) and gains you enable (new revenue sources, talent retention, etc.)
– The points of differentiation – choosing from all the ways that your product works or the ways you deliver your service, what are the ways that set it apart from the competition?
Once you have your value proposition, make sure you reinforce it with everyone in your company, and you use it to focus your marketing and sales messages.
Many of my clients are proud of the “family feel” of their companies. They care about their people, see the whole person, and create a bond of trust that moves them well beyond an “employer-employee” relationship.
The last few years have been hard for the leaders of these companies, because they haven’t been able to protect their employees from the tumultuous market environment that their companies are operating in. Bonuses have been cancelled, raises postponed, training missed, and some of the “family” have even been let go.
In a discussion this week with a leadership team that was debating how to balance the benefits of a family feel with the realities of operating a company within the rules of business, I pointed out that it is profitability that provides the flexibility to treat employees well.
Look at a company that treats its employees well, and you’ll also be looking at a company that has a profitable business model.
At a Board meeting with one of my family business clients a few weeks ago – a company that has been passed down through several generations – they said it another way: “Always protect the money tree first.”
After yesterday’s meeting, I thought, “If profitability is the foundation of an empathetic company, what is the foundation of profitability?”
The answer has many parts, of course – strategy, productivity, discipline, teamwork, culture, accountability, etc. But I’d say the thing that comes first, before making the profitability happen, is…empathy. The ability to empathize with your customers, so that you understand what they need and how to make their lives better, in a way that they value.
If you want to empathize with your employees – if you want to create that great family feel – empathize with your customers.
There are many values that a company can live by. If you haven’t considered having Empathy as one of your company’s core values, it’s worth a look. And if you haven’t defined any of your core values…we should talk.
Confused by all the marketing options? Here’s a quick way to cut through the clutter…
Your marketing and sales occur in a funnel, with lots of unqualified suspects at the
top, fewer qualified prospects in the middle, and even fewer scoped proposals
to potential customers at the bottom.
Most of the “chatter” about marketing is focused on the Top of the Funnel (TOF). The
problem with TOF marketing, though, is that it’s a 2% game. Super Bowl ads,
Facebook ads, click-through rates – they’ll all have about a 2% response rate.
That’s why most people say, “Marketing doesn’t work.” They’re right – but they
really mean TOF marketing.
Middle of the Funnel (MOF) marketing is much more powerful – response rates of people
who know you and are interested in what you do are usually around 15-20% –
about 10 times the rate of the top of the funnel. That’s where most people
should focus their marketing – getting more out of the relationships you have.
How? Email, webinars, speeches and workshops – things like that.
Is 20% not good enough for you? Then focus on the Bottom of the Funnel (BOF). It’s
not marketing down there, it’s sales. And most companies have hit rates of
40-80% on the proposals they write – two to four times MOF rates, and 20 to 40
times TOF rates. What kinds of things should you invest in to improve sales?
Account plans, sales training, sales process improvement – things like that.
Where to Begin?
So, here’s the simple lesson in looking at the response rates at various points
in the funnel – start at the bottom of the funnel when you are starting to
upgrade your marketing and sales, and work your way up. BOF upgrades will get
you the most bang for your buck. Once you’ve optimized your sales, then move up
the funnel and upgrade your MOF marketing to people who already know you. Only
after you’ve got a good MOF system should you then wade up into the 2% world of
TOF marketing to make more people aware of what you do.
“Value proposition” is one of those phrases, like “paradigm shift” and “synergy”, that started out as a good idea…but was then so overused that a lot of people don’t understand the importance of the original thought.
But a clear value proposition is as important as ever, especially for growing and Stage 2 companies that are past start-up.
What is a value proposition? It’s a statement that describes who your customer is and how you make them better – the value that you create for them.
To get a better idea of what a value proposition should be, let’s look at the good, the bad, and the ugly of what it can be.
In my work as a marketing strategy consultant, I get to see all kinds of value propositions. Usually, they are OK, and have some redeeming qualities. But there are some that are simply awful.
The worst has to be a statement like, “We offer our value proposition to our customers.” In other words, the value proposition is… “our value proposition.” You can see why that would be a problem – it doesn’t describe who the customer is or how they improve. Often, if asked to tell more about the value proposition, these people will say, “We offer good service at a low cost.” That makes me cringe, too, but that’s a subject for another column…
Another ugly value proposition is doing everything for everybody. I recently asked the CEO of a marketing firm who his target market was, and was shocked when he shrugged his shoulders and said, “We work with pretty much anybody.” (Note: if your marketing firm does not have a clear value proposition itself, they can still help, but don’t ask them to develop yours.)
Look at this video – the value proposition seems to be…”we’re the most popular.” I’m sure there was more thinking behind it, but compare this one to the one I show farther below, and you’ll see that it doesn’t say much.
Which brings us to bad value propositions. With these, the company has usually successfully described the customer and the value – but what they describe…is a problem. Here are some examples of value propositions that are a strategic problem for a growing company:
– Basing the value on something only the owner can provide
– Basing the value on being good and cheap (note: please pick one if you haven’t already!)
– Basing the value on flexibility and quality
All of these value propositions work when a company is small and in start-up mode, but they are unsustainable in the long run. It’s almost impossible to grow a company when it is:
– Reliant on the owner to deliver the value (Steve Jobs being the exception that proves the rule)
– Dependent on finding labor that is good and cheap (there is not a lot of good, cheap labor available, folks!)
– Expected to provide high quality AND offer a lot of flexibility
So, what does a good value proposition look like? One of my favorite examples is demonstrated in an ad campaign that came out in 2010.
Listen to what they say they can do for their customers. And look at how they portray their customers – despite their broad appeal, it’s clear they are selling to people who are active. I think this is a great example of an ad being so “on strategy” that the value proposition is perfectly clear.
Here’s what I think a good value proposition looks like:
– It is focused on a specific market that is the appropriate size for the company’s resources
– It is focused on quality, cost, or speed – or if it’s a niche offering, then 2 of those 3
– It clarifies what the company doesn’t do
– It’s been developed by the team, so that everyone understands it and is committed to it
A good value proposition is just one of the pieces of a marketing strategy. If you’d like to learn about the other pieces, feel free to register for our upcoming teleseminar on marketing, at stage2secrets.com.
I was working out at the gym in Ann Arbor last week and heard the song According to You from Orianthi, the lead guitarist for the Michael-Jackson-tour-that-wasn’t. It reminded me of one of the key concepts that I work on for clients when we are doing marketing strategy – who is your target market?