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Cathedral Career Training

Associate Track 2

Topics of the Month

Marketing: Lecture 2 Value Proposition

Lectures to be covered in this Course:

1. What is the overview of marketing?

2. What is your value proposition?

3. Who is your customer?

4. How do you implement a marketing program?

5. How to get revenue?

6. When do you update your marketing plan?

Topics to be covered in this lecture:

1. What is the overview of this lecture?

2. How is value proposition Road Mapped?

3. What is a company’s value proposition?

4. When developing your value proposition what questions should you ask?

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5. What steps are involved in evaluating your products and services for the value

proposition?

6. What makes a value proposition particularly powerful?

7. What are value proposition examples?

8. How does the value proposition affect pricing?

9. How does branding fit in the marketing plan?

Preparation requirements:

1. McM value proposition.

2. Strategic Marketing for Growth, value proposition section.

3. Elevator statement.

4. Customer Survey Cathedral Way draft 2012.

5. Branding management 2010.

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The Lecture:

1. What is the overview of this lecture?

a. Lecture will overview the concepts of value proposition.

b. The role of branding to value proposition will be covered.

2. How is value proposition Road Mapped?

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a. Value proposition is the starting place for a marketing program.

b. Therefore, it is the first stop on the marketing cycle.

3. What is a company’s value proposition?

a. The value proposition is “why customer/clients buy the product or services.”

i. The value proposition is used to convince the customer/client that the product

or service will add value or solve the problem.

ii. The value proposition appeals to the customer/client’s strongest decision-

making drivers.

iii. The value proposition is a sales conversion tool.

b. Competitive analysis and market placement are part of understanding the value

proposition.

i. The distinctives of the product/service as compared to the competition is

relevant to the value proposition.

1. See TOM August for how to fully evaluate market position and competitive

analysis.

ii. But the market’s valuing of these distinctives is part of this determination of

your value proposition.

1. Not all distinctions have meaning to the market.

2. A survey will help to understand where these fit into the value placed by

the market.

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iii. See the diagram below off the interplay of the customer, competition, and

enterprise in determining the value proposition.

iv. Several key points on this chart:

1. The overlaps should be higher, especially with the prospect/customer.

2. It is the overlaps with the customer that are the value propositions.

3. The lack of overlap with the competition is the competitive advantages,

note that it is only those that relate to the customer/prospect that matter.

c. Customer/client decision points can show the value proposition.

i. The value proposition helps in the sales process by overcoming sales

resistance.

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ii. Therefore the following questions can help understand the value proposition:

1. How long is the sales cycle?

a. This covers the expression of interest to closing the sale.

2. Are the Decision Makers a part of the buying unit/division or another

individual?

a. Many B to B sales can have differences between the user and the

buyer. Thus the buyer values have to be understood.

3. What is the Decision process?

a. What are the points of interaction?

b. What is required to make the decision?

i. For example, an RFP may be required.

ii. Or the buyer has to get multiple quotes.

iii. Or the buyer needs a sample/test model.

iv. Or the buyer needs a formal quote.

d. What is the role of Trust in the value proposition?

i. All business is done with a component of trust.

ii. Caveat Emptor is one way to express trust – Buyer beware.

1. This means that there is no trust presumed between the buyer and seller.

2. The buyer is to do its own due diligence and take full responsibility for

price and suitability.

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3. Many parts of the world operate on this basis.

4. But better business is relational, where trust between buyer and seller is

developed.

iii. Often the establishment of trust becomes part of the sell-cycle and slows the

process.

1. Note that in Asia, trust is first established via relationship activities.

2. Then business is done.

3. This is less so in the US.

iv. Branding is part of the establishing trust.

4. When developing your value proposition what questions should you ask?

a. Why do people/customers buy?

b. What are the unique benefits of my products/services?

i. This goes to competitive analysis.

ii. This also goes to specific benefits to the customer/client.

c. What are the delivery differences of my company?

i. This goes to the competitive analysis.

ii. This also goes to specific benefits to the customer/client.

d. What are the pricing/value difference of my products/services? See below for

pricing.

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5. What steps are involved in evaluating your products and services for the value

proposition?

a. Ask your existing customers: Existing customer survey can be the most effective

way to gather information on why they buy.

b. Based on the survey review the competitor positions on the survey identified

values.

c. Compare pricing to value perceptions of existing customers. See pricing below.

d. Avoid the “built in your own image.”

i. Owner managers start the company because of their perceived need in the

market. Often this is due to their perception of a “better way” or “better

product.”

ii. Too often owner/managers of companies define the market by what they think

is best and valuable.

iii. It is the market that buys, so it is the market that needs to be looked to for the

validation of the value proposition.

e. Remember the S curve.

i. The S curve are the initial sales that come from friends and family.

ii. This gives a false sense of validation to the value proposition.

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iii. Good marketing gathers the information from these early sales and then

creates the broader marketing program based on the value proposition

coming from this customer base.

6. What makes a value proposition particularly powerful?

a. The basics of a value proposition.

i. Must be credible – can be proven and quantifiable.

ii. Must answer the question – Why should I buy from you?

1. What is special about the product/service?

2. What is different about the product/service?

3. What is different about your company?

iii. Must provide motivation to the prospect.

iv. Must be communicated and reinforced to the prospect. See branding below.

b. A good value proposition for the smaller company centers on:

i. The relationship with the customer.

ii. The service differentiation.

iii. The length of time in business.

iv. Continuity of staff.

v. Quality differences in product.

vi. Price differences in product, but see the pricing and value proposition below.

vii. Capacity to meet customer requirements, such as:

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1. Speed of delivery.

2. Variety and customization of offering.

3. Timing and location conveniences.

c. Must communicate.

i. In part this is the elevator speech.

1. Can the value proposition be articulated in several short sentences?

2. Will the hearer get the message?

ii. Can it be put into the branding and then put into the market in a way that is

remembered and influences the receiver?

7. What are value proposition examples?

a. The ultimate driving machine – BMW message.

b. Quality is job 1 – Ford message to compete with foreign manufacturers.

c. Deliver WOW through Service – Zappos

i. Online retailer with a lot of competition.

ii. Used service as the differentiator.

iii. Developed branding and messaging to convey this value proposition.

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8. How does the value proposition affect pricing?

a. While there are many ways to consider pricing and these is covered in TOM for

March, Product Mix, pricing is relevant for marketing and value proposition. The

value proposition component is covered here.

b. The key issue for pricing and value proposition is converting the product/service

into a pricing discussion.

i. This occurs when the product/service is a commodity.

1. A commodity is something that is indistinguishable from any other of the

same.

2. For example, H2O is water and pure H2O should be indistinguishable

from one unit to another. This would make water a commodity and thus

the price would be all that matters.

3. A Toyota dealer that competes with other Toyota dealers in the area has a

commodity, a Toyota, for sale.

ii. Often we convert our products/services into commodities by focusing the

effort on pricing, rather than other factors.

1. The market will always put pressure on the pricing side of the buying

decision.

2. Therefore, pricing will tend to feel like the key value proposition.

3. But many good product/services are not pricing based decisions.

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iii. When markets get soft, the pricing effect on the value proposition can be

distorted.

1. The basics of supply and demand on price are correct to an extent.

a. The greater the supply against the same demand and the lower the

price will be.

b. The lower the price the greater the demand will be.

2. But these basics often are not true for many smaller companies.

a. The company has a finite pool of customer/clients.

b. This pool needs only a certain amount of the product/service.

c. Therefore, pricing will not change the level of demand.

d. This dynamic is especially true of business to business

product/services.

i. A manufacturer for other businesses is dependent on the other

businesses to have sales.

ii. If those businesses do not have sales, then they will not place

orders.

iii. Pricing rarely creates demand in these situation.

e. A similar effect can happen when there is very small market presence.

i. Because there is only a small pool of potential customers/clients,

lowering the price will not create new demand.

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ii. Instead, the lower price will simply reduce the revenue from the

existing customer base.

iii. There are initial pricing strategies that can help in this situation,

because it is about establishing a relationship with new

customer/clients.

1. WSJ uses a 12 weeks for $1 to get this across.

2. We have to worry about existing customers becoming upset.

3. See the March TOM on Product Mix for further information on

this important topic.

f. It is critical to understand the dynamic of price – volume.

9. How does branding fit in the marketing plan?

a. What is brand and branding?

i. Your company or product/service brand is your mark of distinction; it's what

sets you apart from your competitors.

1. When you establish and adhere to a brand management strategy, your

level of commitment reassures consumers, suppliers, and anyone else

that your company does business with that they can trust you.

2. Brand can be said to be the market’s perception of the company’s

products and services.

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3. A critical issue is whether the brand makes the product or the product

makes the brand.

a. It is always the product that makes the brand.

b. When the brand is strong, a weakening of the product will get some

level of forgiveness.

c. But a weak product never creates a strong brand.

d. As noted below, for the smaller company the energy should be put into

the product and service, not into the “branding” or “brand

management”.

ii. Changing brand and branding tends to be a challenge for the market.

1. Many companies can do this, but it can be quite expensive.

iii. For the smaller company, the branding is often given too much weight.

1. Much capital can be consumed by branding activities.

2. This capital is often better employed in basic messages, with the product

or service being the brand.

b. Branding aids the marketing process by:

i. Reducing the sale-time, because the product/service is trusted.

ii. Increasing the pricing, because the product/service is differentiated from the

competition and has clearer value. The Oreo case.

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iii. Increasing customer retention, because the customer knows and trusts the

product/service. Starbucks and other large system companies.

iv. Improves the recruiting of talent for the company, including sales people.

1. The maintenance and recruiting of good marketing resources is a part of

the revenue process.

2. Having a good brand encourages the resources to see and experience the

potential of being successful at the enterprise.

3. This reduces recruiting costs and increases efficiency.

c. Branding strategies will be touched on throughout the lectures, but this is not a

full topic for this course.

Review the material and take the quiz.