Tom is a sophisticated, smart and successful investor. He had several investments to his credit that had returned multipliers well above the average. But if there was something he didn’t have, it was patience. That’s why when Martin was giving him an animated presentation of his project, I didn’t hesitate to interrupt him with queries:
My Question: But that already exists and is well spread and distributed?His answer: Yes, but mine is cheaper …
My Response: And if your competition cuts the price in half, how are you going to fight them?His Answer: Then I’m going to improve the quality…
My question to his response: Why didn’t you do it already then?His answer: Because I thought the price was enough …
My Response: Are you going to reach the same audience as your competition then?His answer to my response: I don’t know, I’m going to see how things turn out …
After the Q and A session, Martin did not have a happy day. Tom very kindly told him to study the project further before seeing it again and deciding whether to invest there or not. Although in private he had already decided that he would not.
What Martin lacked, beyond his desire and enthusiasm, was to clearly define his Value Proposition. That is, to define the factor that makes a client lean towards one or another company and where they seek to solve a problem or satisfy a need in an innovative way
This is the methodology developed by Stanford University to define the Value Proposition of any product or service or organization. It is simply to fill in the blanks with the appropriate responses that best reflect the characteristics of the product or service offered.
- FOR (target audience)
- WHO (need or opportunity)
- THE (name of the product or service)
- IS A / ONE (product category)
- WHAT (benefit).
- DIFFERENT FROM (first primary alternative / largest competitor)
- OUR PRODUCT (primary differentiation)
Example for Tesla cars:
FOR wealthy individuals and car enthusiasts WHO want environment-friendly and high-end cars. THE Tesla sedan IS AN electric car THAT delivers unprecedented performance without harming the environment. UNLIKE Audi, BMW and Lexus sedans OUR PRODUCT has fantastic mileage, unmatched performance and does not generate direct carbon emissions
Example for Trillonario:
FOR people who are looking for a much better lifestyle WHO are willing to invest a small amount of money to try to achieve it. THE Trillonario.com IS A global e-commerce platform THAT allows people to adults can play the largest and most tempting lotteries in the world. UNLIKE local lotteries, OUR PRODUCT allows you to play from anywhere in the world in a very safe and reliable way.
It sounds easy, but it is not. Choosing each word is a challenge. It makes us think more deeply about our product or service. When we say “FOR…” we are defining the socio-demographic profile of our audience. When we speak of “IT IS ONE / ONE OF…” we need to define precisely what characteristics our product has. When we enter the “WHAT…” we need to define exactly what the specific audience segment is within the defined socio-demographic profile. By defining “A DIFFERENCE…” we are clearly establishing who our competition is. And finally, we come to the most important thing, which is to establish in “OUR PRODUCT (OR SERVICE) …” which is exactly what differentiates us from the rest.
All this seems very obvious, but in practice a huge percentage of companies have not defined it. And even worse, generally the perception of the value proposition is very different among directors, managers and employees of the same company.
An adequate definition of the Value Proposition allows us to see if we are doing things well, if we are directing our efforts in the right direction and also to see when we may be making mistakes in what we do. It allows us to see if we are one of the bunch or if we really have something genuinely attractive to offer.
This is a methodology that is applied to any type of company or organization. It can be used from a magazine kiosk or the larger companies. What is the value proposition of your office, office, workshop or factory? What is the value proposition of the service you offer? What is the value proposition of your institution, school or club? What is Uruguay’s value proposition for Punta del Este?
Do you dare to do this exercise and start the path to take your company to the next level?
If you don’t know where you are going and you don’t know what you want, any direction is fine. However, when you know the question well, everything becomes an answer!