4 Checks for your value proposition - will you succeed?

The books say that you need to define your value proposition in order to brief the ad agency and the creative people and salespersons so that they can communicate with your customers. I say that value proposition is a story you need to first tell yourself internally before you start - rather than telling it when the time comes to communicate and sell the product. You need to answer the following questions before you start the business / product ...

What is your insight ? 

what makes you enter the market in the first place? I hope its is not because you have the money - or because of everybody is doing it - or because loans are available for the planned activity ! Ideally your insight should be based on any or all of the following four things

• MARKET : unfulfilled needs or partially fulfilled needs of customers
• COSTS : ways for reducing costs without diluting the benefits for existing players
• BUILD ASSETS EFFICIENTLY : efficient ways to acquire assets (financial - structural - relational - human) which will grow well with the passage of time.
• YOUR EXISTING COMPETENCIES : can be used in a better fashion than that by your competitors.       

Market Knowledge 

Without a clear visibility of the following, you will not know what "marketing mix" you must offer to them. This knowledge enables you to decide what value must be created, for whom and how it needs to be taken to them so that they can buy it. In order to take these decisions you need to acquire market knowledge about the following 7 things : 

1. TA PROFILE : Target Customers - who are they? how many? where are they ?
2. INWARD ACCESS : can they access you ? 
3. HOW DO THEY COME TO MARKET : current buying stages / behavior ?
4. CURRENT CHOICES MADE BY TA : what category, channels selling now?
5. TA SEARCH : to what extent are they searching for you? how ?
6. TA READINESS : how far away from budget, organization, intent ?
7. YOUR ACCESS  : how will your people recognize and access them?

What value will you offer and how is it better  

WHAT VALUE WILL YOU OFFER : You cannot craft your value proposition without clearly understanding and deciding "what matters to the customer" and how much of it will you give vis-a-vis the current choices made by the TA. It will be good to remember that what matters to the customer is not the product alone but its availability, terms and condition, price, delivery, installation, training, repair etc. There are many different models for thinking this through. I suggest you use two models : 8Ps and PFSR

1. 8Ps :Product, Packaging, Price, Place, Promotion, People, Processes, Physical Evidence.
2. PFSR model : value is driven by Product, Facility, Service and Reputation

HOW IS IT BETTER : It should be ideally better than the "current choices made by TA" and also be focused on the targeted needs of the customers. Example : your car is "better than SX4 in fuel efficiency" and "meets the need of boot space for a family of 5 going for a week long trip"

How feasible is it to create and sell such an offer

1. Can you adjust the price to handle the costs you have planned?
2. Can you adjust the costs to handle the pricing you have planned ?
3. Do you have the competence to create what you have planned ?
4. Do you have the resources for what you have planned?

Vital Few Profit Improvement Techniques

Most CEOs unleash too many profit-improvement initiatives. I recommend a simple exercise to gain perspective and create a sharper focus. Look at your current P&L and classify costs into the following four costs.

1. Costs embedded in the materials - Material cost as % of sales ( Techniques : waste reduction, vendor development, negotiations, value engineering and segmentation ) ( Segmentation is probably the best technique as it enables you to incur only those costs that are valued by the target customer and hence possible to become compensated by better prices ).
2. Time costs - Fixed Costs of facilities (1) rents and running costs of  offices /spaces (2) depreciation and running of the cost of the equipment for facilities ( Techniques : productivity improvement, scheduling, more throughput, peak-weak demand adjustment )
3. Fixed Costs of people : salaries, perks and travel ( Techniques : Motivation, Aligning, Competency development, organization roles and structure planning, selection, recruitment and on-boarding, career path planning, compensation, incentives, PMS, continuous education etc)
4. Interest costs on your working capital (inventories and debtors)( Techniques : Supply chain management, range planning, channel management)

what adds value ?

For the purposes of this list, "value" is equated with WTP (Willingness to pay)

1. Product-embedded features
2. Location-embedded features ( Outlet, Site, Service Centers, Call Centers)
3. Membership-embedded features ( society membership that comes with the product )
4. Facility ( space, equipment, cash ) helps in PCS ( Product Consumption Cycle)
5. Image ( as a signal of pride, status, quality )
6. Platform ( you can extract value from yourself ) a swimming pool
7. Social Platform (Facebook type) you get value out of other members 

Basic Questions To Ask in Strategic Market Audit

• Type of customer going after and how 

• Category non-users to think of the category (development communications)
• Users thinking of coming to category to try the category (category recruitment)
• Influencing new comers to the category to come to the company ( promotion)
• Influencing a particular competitors' heavy / reg/ light / lapsed users to come
• Trying to get customers to put our company into the consideration set
• Trying to get from consideration set to trial ( conversion)
• Trying to get from customers to loyal and heavy customers

• Trying to accomplish this
• By emphasis on GTM - influencing the external world to buy more
• By emphasis on VP - influencing internally to transform itself
  
• By push or pull

• How are the customers coming to market 
• Not coming to market - Need unfelt - not open to product ideas
• Need felt - but not begun looking for products
• Need felt - begun searching - unclear idea of what / where the solutions are
• Need felt - found solutions - but still a niche market
• Need felt - found solutions - experience built up - + and - are known
• Segments appear in solutions

• Readiness to consider : how many people in the population - are at what stage of coming to market
• How many have you in their consideration set
• How many hot prospects - urgent need + budget + plans + authority
  

• What are  we selling : capability ? Products ? Service ? Solution ?

• X axis = Extent of customization.
  Y Axis = Extent of order size
  Z Axis = Number of customers
  
  FMCG : Low customization, low order size, many customers
  Niche FMCG : Low customization, low order size, few customers
  B2B "Supplier" : Big order size, low customization, response-credit-delivery
  B2B "Vendor" : Big order size, high customization
   

•  

Ways of being competitive over the long term

HABIT FORMING AND EXPENSIVE ACTIONS FOR INCREASING SHARE / SALES

• Reducing price
• Giving discounts
• Giving premiums and gifts
• Promotion campaigns 

These are internecine ways and can neutralize each other and reduce industry profitability without benefiting anyone except of course the customers.

Lasting Marketing Strategies 

Being  first / follower / top-3 in a market segment. 

• You were there first. 
• You identified the segment as a long term bet displaced the competitors
• You created a segment which others did not know existed
• You caught the market in its early growth phase (when many others were not looking)
• You jumped on the right platform ahead of others
• You jumped in when many collaborators were looking for potential collaborators

• IMPACT
• helps in price comparison
• helps in being in the consideration set
• helps in getting a better price
• helps in cost efficient material acquisition
• helps in cost efficient customer acquisition
• helps in being helped by collaborators.

Being in a suitable / sunrise market (now or later) 

• large
• fast-growing
• profitable
• less competitive
• suited to develop your competencies

Inimitable and unique VP / GTM strategy 

• Locating an un-served or under-served need / market - for new launches
• Locating over-served need / market - for cost reduction
• Locating a weak competitor who can be overpowered
• Based on an unknown insight
• Based on a unique offering
• Based on customization not possible earlier
• Developing an access and contact which was not possible earlier
• Developing an engagement mechanism not possible earlier
• Developing a transaction mechanism not possible earlier
• Developing a batch size for purchasing, production, distribution, marketing not possible earlier
• Developing a delivery mechanism not possible earlier
• Developing a satisfaction mechanism not possible earlier
• Developing a market sensing mechanism not possible earlier
• Developing a customer acquisition mechanism not possible earlier
• Developing a fulfillment mechanism not possible earlier

Lasting Business Strategies 

Experience Curve of you & your partners

• Repeating batch / work improves operational efficiency and productivity
• Procurement costs come down as volumes increase 
• Vendors identify you as a key account - improved service / development
• Relationship with vendors becomes deeper and improves costs
• Defectives / Rejections reduce with experience 
• You can perform value engineering with volume improvement

Knowledge of market dynamics helps in

• better supply chain / inventory planning
• planning to service the market
• targeting customers 
• planning messaging
• planning promotions

Better Leveraging current resources / assets

• Current relationships : with customers and influencers and channel
• Current brands 
• Current locations and associated taxes, interest rates, labor, real estate costs
• Current patents, contracts, quotes, memberships, approvals, MOUs, tie-ups
• Current people and experience and costs 

Current position in the industry

• Bargaining power with customers 
• Bargaining power with suppliers
• Clout with the channel, with the vendors, with the unions, with the banks
• Importance in the industry bodies and clout with the government

Symptoms of poor go-to-market effort

Many of your target customers are

1. not aware of the existence of your company / your offer / your availability
2. not aware of where and how can they access you for enquiry / request / complaint
3. not engaged by your effort compared to your competitors
4. not paying attention to your outbound communication / efforts
5. not getting a complete solution / service from - you (includes your network) 
6. not finding from you / your network what they expect when they "come to market"

Your outbound marketing effort to attract attention and interest in your offer

1. covers only a small portion of your total target audience

9 Symptoms of a poor value proposition

1. Your product is “me too” as seen by your customers
2. Customers not clear why should they choose you
3. Customers not clear where they can apply your product
4. You cannot get better price than the competition
5. Your profit margin is less than your competition
6. Your promotion effort does not seem efficient
7. Your sales force can convert less calls into sales
8. Your sales force cannot convince your customers
9. Your competitors spend less but sell more