Defining a clear value proposition

June 19, 2012

When someone asks you about your company, do you have a clear, succinct message about what your company does or what makes it special? For small- to medium-sized companies, it is critical for owners and for employees to understand your company’s value proposition and to articulate it to customers, prospects, vendors and even friends & family.

Many people confuse a company’s mission statement or vision statement with its value proposition. The key difference is that the value proposition is created from the customer’s perspective rather than the company’s. A mission statement often defines “what” a company is and does. A value proposition defines the reason why a customer would buy your product or services in exchange for some cost or sacrifice. It is the reason why a customer would choose your company or product over the competition – assuming you provide more value to them regardless of cost.

For most marketers, the value proposition is closer to a positioning statement. It includes the “who” (target audience), the “what” (frame of reference), the “how” (key benefit), and the “why” (how it is unique). Most companies have a hard time aligning on their key unique selling proposition because they want to list all of the features and benefits rather than focusing on the one that will truly make the company or product stand out. I think this is from fear that the competition will try to own the other features or benefits. The reality is that if there is a unique selling proposition, you should focus on generating awareness and understanding about that one key benefit to out-position the competition in general. And it should always be benefit-based rather than about features – customers care about the value to them, not to the list of features that are important to the company or manufacturer.

One of the best explanations of value proposition is from Simon Sinek, the anthropologist turned strategist. Sinek has written a book called Start With Why, where he asserts that truly great companies start with the “why,” rather than the “what” or “how.” He calls this the “Golden Circle.” To Sinek, the Golden Circle is an “idea…that explains why some people and organizations are more innovative, more influential, command greater loyalty and are able to repeat their success over and over.”

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He believes that companies that have a purpose – those in the center of this circle – tend to be category leaders and are able to innovate more quickly than companies that just make goods. His theory states that customers don’t buy products but rather buy why the company makes them. For instance, Apple makes computers along with many other devices. But Apple’s “Why” is about innovative, purposeful design which allows them to make computers, audio devices, to become the largest seller of digital music online, tablets, and so on. Their purpose does not limit the categories or products they can sell.

Sinek speaks up to 20 times a month to organizations, corporations and even the military. His purpose-led theories are helping transform brands and individuals to really understand their purpose and their value proposition to inspire others. If you have not seen any of his presentations at TED, please take a moment to watch the clip below. It will be worth your time.

Simon Sinek TEDx video

After you have watched this video, you should think about your company’s value proposition and your personal value proposition. Write them down on a piece of paper. Are they aligned? Can you articulate them? If you can, then make sure everyone around you knows what they are. If you are in a business, make sure your employees understand it. It is much easier to come to work believing in what purpose or “why” of the organization rather than working hard for the “what” your company does. And once customers understand this value proposition, then you are off to the races.