If I were to ask you what you are selling, you’d reply immediately with the name of your products, services, or perhaps your ideas.
Yet according to Forbes, three top reasons why 8 out of 10 business fail, are “not being in touch with customers,” “lack of differentiation” and “failure to communicate value proposition” which all falls into the category of founders and CEOs not having a clue what they really sell.
Since the beginning of the COVID-19 crisis, at our think tank —the Oppmakr Institue, by far, we have spent more than 200 hours of meetings with the CEOs and founders of businesses. The reason for those meetings was to see if we could set up their war room to practice our crisis strategy of “changing their business model with minimum effect on their deliverables.” I have made a brief article on our approach here in my previous article.
- 100% of the business leaders we’ve met were sure about what their products and services are,
- some 75% were sure about “what they are selling” in terms of what value proposition they are offering to their customers,
- yet, you’d be surprised to know that only 15% of those leaders knew “why their customers buy their products and services.”
It isn’t what you sell; it’s what they buy.
I believe a company must know the difference between what it thinks it sells and what people pay money to buy from that company. Because these two things could be different.
In fact, companies only have to dive into this question only a few times in their business life: when they are being born, when they are in crisis, and when they are developing new markets and products.
Decision-makers don’t care about this “philosophical” aspects of their business unless they need it. But in reality, one must know what customers perceive as the value.
How to know what you really sell?
In my experience, the key to finding out the real value proposition lies in having a kind of empathy with your already existing or potential audience. While there are many ways to define or redefine your company’s value proposition, here are three general approaches that can give you a hint.
1. Try to define your offering in numbers
Tangible value is directly related to your offering and highly measurable. It’s typically expressed in numbers or percentages. Examples might be:
- Reduce cycle time from 3 days to one
- Cut labor costs by 25%
- Save $100,000 in energy costs
- Increase market share 5%
- Improving productivity 17%
Typically tangible value gains also have related intangible value gains that aren’t as obvious, but help strengthen an already strong value proposition. For example, improving productivity means fewer workers. With a smaller workforce, the company saves a significant amount in the benefits area. Less money is spent on recruiting and hiring. These savings can also be quantified as part of your value proposition.
2. Convert intangible to tangible
Sometimes the value of your offering is not quite so measurable – such as lowered risk, increased teamwork, improved marketplace image, or better morale. The intangible value doesn’t sell well in today’s economy. Most decision-makers consider it a nice added benefit, but won’t spend money for a solution that only provides soft value.
To increase your sales success, take these intangibles, and make them tangible. Find ways to quantify their value to customers.
3. Outline Opportunity Costs
Opportunity Costs can also strengthen your value proposition. An opportunity cost is something your customers can’t do now because of their current methods of operation. For example, it’s what they could be doing with the $500,000 savings they’d get from using your product. Or it’s the business strategy and associated profits they can’t aggressively pursue because of the internal conflicts that delay decisions.