What's your differential advantage?
Updated: May 1, 2020
We've long known that differential advantage is the product of insight, innovation and execution capability focused on economic and emotional benefit for customers. What's less clear are the ways to systematically build and industrialise those sources of differential advantage that help you consistently 'win in market'. Specifically, what's the discipline that quantifies and communicates differential advantage, that ultimately drives revenue, margin, cash flow and improves intangible asset and intellectual capital value?
Many customer experience implementations, brand building efforts, sales and marketing executions are sub-optimal because leaders can't attach value to them. Also, they can't quantify the value they are trying to deliver to the business or to the customer. Quantifying differential advantage, commercial benefits and customer economic and emotional value is what great value propositions are all about. Unfortunately, too many businesses don't invest in the quantification of value and miss-out on potentially significant opportunities to impact customers and commercial outcomes.
6 Guidelines for quantifying value propositions
1. Future customer obsession
It may sound obvious but a healthy obsession about market opportunities and customer behaviours is a good thing. And, it's absolutely necessary if you want to develop great value propositions. It's like method acting, you have to live the part, you have to be in the mind and environment of the customer to really understand what they think is valuable.
Current customers are important, but 'future customers' are more important. Why? Because, future customers are what your current customers will become, they are the new customer you will acquire. Potentially they have different needs and expectations than you current customers, they behave differently and have different perspectives on value. For these reasons they are an indicator of where the business has to go and the value it has to provide to stay in business. It's a way of thinking to uncover new opportunities. What makes you different and valuable to customers now, is not necessarily what makes you different and valuable to customers in the future.
2. Relentless focus on opportunity
A starting point for a quantified value proposition is a quantified and qualified market opportunity. Simply put, from a business perspective there has to be a 'pot of money' to chase, that's at least in prospect could have reasonable returns. From another, customer perspective, there must be unmet needs or opportunity to add value over and above what customers already have. At adaptomy we bring all of this together as a Market Opportunity Statement, a detailed document explaining market dynamics, potential prospects, competitor profiles, influencers, key segments and eco-systems and a range of metrics, measures and analyitics that quantify the market opportunity.
For a selection of key prospects in any given segment adaptomy goes further to understand their strategies and objectives, key needs, decision making behaviours and buy factors, key personnel, development initiatives, products and services. We do this to understand 'what makes them tick', find similarities and prioritise specific needs and goals and begin the process of quantifying customer value and commercial opportunity.
Would you like to know more about how to transform insight into market opportunity?
3. Clear strategic alignment
All value propositions need to be aligned to business, marketing and customer strategies. These strategies prioritise market opportunity and determine which value propositions are more or less attractive. To do this effectively, they must be quantified.
Strategists need to understand the contribution any value proposition is expected to make, and consider the business impact, commercial and customer outcomes in terms of potential revenue, cash flow and economic value. Marketing leaders need to know what the economic and emotional benefits are for customers and sales teams need to know what this means in terms of opportunity planning and account management. Well quantified and clearly communicated value propositions are effectively mini-strategies in themselves and can be instrumental in aligning broader strategies and tactics throughout the business.
4. Sources of value
Businesses have many sources of value, often more than they realise. The trick is to prioritise these sources of value or 'value assets' with respect to specific market opportunities and their importance to specific customers. It's where customer needs analysis meets business capability, competency and capacity.
Products and services are valuable assets, but there is often a misguided temptation for businesses to describe value in terms of product and service functions and features. Functions and features may be important to some customers, for example those keen to learn about the latest mobile phone, but what customers are actually interested in are the economic and emotional benefits and outcomes they can expect. These benefits and outcomes are framed by a range of specific 'value assets' that provide customers with value, such as: utility versus luxury brand positioning, specific cost reduction or margin gain, reputational risk protection, sales velocity gains in specific markets, friction free customer experience or innovation that offers competitive edge.
5. Understanding customer relationships
While positioning is strictly speaking a different discipline, value propositions cannot be completed without considering current and future customer relationships. Exactly what will a value proposition do to change the nature customer relationships? Will it help open new opportunities, create more customer intimacy or develop commercial partnership? A simple way to visualise this dynamic is to use a Relationship Matrix that plots proposition attractiveness against business relationship value, a way to understand what it takes to navigate from tough price negotiation to 'selling to value'.
6. Integration with customer experiences
Value propositions need to 'talk to' customer experiences, they need to have relevance at specific touch-points and grasp 'mind-share' in decision makers at specific times. This means targeted communication of specific aspects of the proposition, modularising propositions and their communication to particular audiences.
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