Customer Value Proposition
Content: - The software challenge: it is invisible! - The Value Proposition Components - Developing Customer Value Propositions
The Customer Value Proposition is probably the most crucial concept in the marketing of any software product and service. The Customer Value Proposition is the framework used to shape our compelling communication with the market, the basis for calling potential clients and asking for an appointment, and the reason why clients eventually sign on the dotted line. The formal expression of the value of a product/service is: V = B - C
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The Value is equal to the Benefits of the product/service minus the Cost associated with acquiring, migrating to and rolling out the product/service. The value must be tangible and measurable. If this is not the case, you must go back to the lab and rework the entire approach. 1
Customer Value Proposition Definition
The software challenge Software is invisible.
The challenge of bringing software products to the market is associated with five fundamental characteristics:
Software has no value per se (the value is derived from using the software). The value of the software will often depend on how well you deliver the services required to apply the software to current or new business practices. The customer’s implementation, training and adoption levels of the software has a major impact on the value derived from the product. The scrap value of obsolete software is nil.
The two layers of Customer Value Proposition
For many software products you need to operate with at least two layers of Customer Value Propositions:
A.
One, which is generic to the vertical markets, we target.
B.
One, which is specific to the individual sales situation.
Being successful requires a convincing Customer Value Proposition, which outlines why your product is better than all the alternatives available to the client.
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Many software products are generic in the sense that they can be applied to many kinds of companies and in many types of industries. However, you often come to recognise that certain circumstances make your product extremely valuable. As a result, the same value proposition may be very successful in certain situations but unsuccessful in other situations.
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Customer Value Proposition Definition
The Value Proposition Components
Needs An attractive Customer Value Proposition must address compelling and critical customer pains for which the customer is prepared to allocate resources. Identifying needs involves industry and/or domain segmentation, understanding the purchasing process and buying center identification, where such needs are easily related to the value proposition. Because these needs differ significantly depending on customer characteristics, this framework element also assists with market segmentation.
Approach A Customer Value Proposition must define the solution components addressing the “whole product” challenge as well as two major parts of the value chain: the sales process and the delivery process. Thus the definition of the Value Chain is a part of the approach definition. When the value chain involves third parties participating in the sales or the implementation process we must also develop a distinct Value Proposition for these players.
An important component of the needs definition is the identification of the “Ideal Customer Profile” (defined in TBK-PFFC-003).
Competition The Customer Value Proposition must explain why and how the solution is superior to competitive alternatives available to the clients. When you have the ambition of making your software available internationally, you must repeat this exercise for each individual market.
Benefits A Customer Value Proposition must explain how the benefits of the solution delivered exceeds the total cost involved with migrating to and/or utilising the solution. The more tangible and specific the benefit/cost ratio is defined, the more impact it will have on the market.
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If you are bringing a new product to the market and/ or if you are a new player in the market, you must consider the risk mitigation issue. The customer will consider your “newness” an additional risk = additional cost, for which you must compensate if you are to win the deal.
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Customer Value Proposition Definition
Developing Customer Value Propositions Review and test of current value proposition
A.
If the Customer Value Proposition is already clear and has proven successful, and if the Ideal Customer Profile is clear and operational, you can move to Step F.
A software product, which is already on the market, will have a current Customer Value Proposition.
B.
Identification of critical improvement areas
You will identify unclear or vague aspects to the Customer Value Proposition and uncover sources that provide additional benefit-related information required to fill in the gaps.
C. Value Proposition workshop I
The Customer Value Proposition is reworked reflecting the ideal customer profile.
D. Improved Customer Value Proposition - Test
The revised Customer Value Proposition is tested with prospective clients and potential areas of adjustment are identified and documented. This process provides feedback on ways to adjust the message, to improve how it resonates within the target market.
E. Value Proposition workshop II
The Customer Value Proposition is reworked including refining the ideal customer profile.
F. Final verification and documentation
The final verification and documentation for external communication is completed.
Documentation
The Customer Value Proposition must be thoroughly documented, including descriptions of the test results from the verification process.
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The documentation must enable new sales and marketing people, who are to bring the product and service into a new geographic market, to be focused and effective from the first day.
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TBK-PFFS-002