The Start-Up Marketing Blog: 7 Questions to determine your value proposition

What is a value proposition?

One of the challenges for Start-Ups is understanding what their value proposition is.

Many companies struggle to articulate their value to the market and ultimately there are two causes. Either the company has a Product Problem or it has a Marketing Problem. Both problems impact the commercial viability of the company but arguably having a marketing problem is easier to resolve than a product problem. All you need is time, money, resources and buy-in.

To develop a coherent Value Proposition for your company you need to ask, and answer seven simple questions.

Developing a value proposition

If you have a strong, coherent value proposition that aligns strategically with the companies objectives you will get quick and concise answers to all seven of the questions. More importantly all the stakeholders will answer the questions in the same way. If the value proposition is clear then you have a marketing problem. Roll up your sleeves and get working the fate of the company is in your hands.

However, the most likely scenario is that as you develop the value proposition you will uncover uncomfortable truths that may need to be addressed before the company can be truly successful.

The role of marketing in developing the value proposition

It is marketing's role to develop the value proposition. Often in technology companies, this process requires diplomacy, tact and a great deal of persistence particularly if people fail to understand the strategic importance of marketing or why the company needs a value proposition at all.

There are two important things to remember when developing a value proposition:

1. It is a collaborative process - you can't develop and impose a value proposition on a company or product organisation. The value proposition has to resonate and align throughout the business. The whole business has to understand and agree with the value proposition.

2. No one likes a smart ass - the process of developing a value proposition can uncover uncomfortable truths or challenge long-held beliefs. This process may be uncomfortable. It may highlight failings in the company or by individuals. When developing the value proposition be generous, give people time and data to understand what you are saying. The benefit of hindsight is enormous.

Demonstrating the Value Proposition with Burgers

A certain well known, and litigious, fast-food chain is hugely successful because as a company it understands its value proposition. I shall use to illustrate the seven questions.

The most successful companies know and understand their value proposition. It allows the business to focus and align around the important issues. Understanding your value proposition means that you understand your strengths and weaknesses.

Seven Simple Questions to define a value proposition

These are the seven simple questions that define the value proposition. They do not require in-depth technical expertise or knowledge of technology, but they may be deceptively difficult to answer.

I worked for a company that had firmly believed that it served the Communication Service Provider (CSP) market. All of its programmes, documentation and marketing activity were focused on the telecommunications market. Very soon after asking these questions, it became apparent that actually it wasn't able to address the CSP market, but was much more appropriate to address specific enterprise segments. Four years of failing to get traction because the value proposition wasn't clear.

1. What (business) problem are you solving?

2. How do you solve this problem?

3. What makes you best placed to solve the problem?

4. How do you obtain it (Product/Service)?

5. How is it delivered?

6. How do you know it works?

7. Who will benefit the most from it?

What problem are you solving?

Working in a technology start-up this is often the question that throws the 90-95% of the company who work on the product. Their focus is on the technology, not on solving a business problem. However, without a fundamental understanding of the business problem it's very hard to develop a minimal viable product (MVP) that will give the company rapid commercial traction.

The question can be broken into two:

1. What is the high-level problem you're solving?

2. What is the specific problem you're solving?

Burger Chain: High-level - Solving World Hunger. Specifically - Providing high quality, affordable fast-food in 118 countries around the world

How do you solve the problem?

Working in technology start-ups its important to point out that this is a trick question. 

When I ask this question of key stakeholders their eyes light up and I get a very in-depth explanation of their software, widget or gizmo often at a level that requires a PhD or two to follow. This isn't a "detail" question this is a "can you tell me concisely what the software, widget, gizmo does in a way a layperson can understand" question.

If your chosen problem is solving World Hunger you may solve the problem in a number of different ways, but specifically, that could be:

a. Developing drought-resistant crops for the Developing World

b. Ensuring disadvantaged children get access to free meals during school holidays

c. Creating edible protein from insects etc.

Burger Chain: We provide fast-food to eat-in or takeaway.

What makes you best placed to solve the problem?

This is a question that asks about your unique selling points (USPs) or key selling points (KSPs) if what you do isn't truly unique. There is often a lot of focus on unique, but in reality, as a company, you may not do something truly unique but you may do 4 or 5 things really, really well. Your USP may be doing 4 or 5 KSPs better than anyone else. Don't try and find a USP when there isn't one.

For a technology company, this may also be where you mention IPR or Patents or a unique approach to the problem.

Burger Chain: We have 38,000 restaurants in 118 countries and are a globally recognised brand.

How do you obtain it? (Product/Service)

How do you find or access the product or service you offer is a critical question. 

Do sell direct? Do you use a sales channel? Do you have an online presence? 

At a more fundamental level, you are asking about the customer onboarding or implementation process to get the product. For software companies, a fundamental question should be "how do you licence your software?", and importantly "how can you police the licence conditions?" Software without these fundamental controls can easily be replicated or stolen. Customers can buy the software for 1 year's licence and then use it in perpetuity if the company has no way of controlling or cutting off usage at the end of the licence period. 

This question is multi-faceted and potentially uncovers a whole series of questions about a companies sales-operations process and its readiness for market.

Burger chain: You walk into one of our restaurants and order your food to eat-in or takeaway.

How is it delivered?

This question asks you to define your delivery organisation. How do people actually receive the service? Do you order the product online and it is manually installed by a delivery team or do you order online and it is automatically downloaded within seconds?

As you can imagine complex products may require large delivery teams on-site to install products. Does the business have the organisation to deliver in this way? Do your sales operations process take into account the travel costs and time required to deliver the product? 

Tied into this for many technology companies is the question "How do you support your product/service in-life?" 

A simple question, but potentially with a complex answer. As companies scale the question about the ability to deliver if fundamental. If you need to sell 100 units a month to achieve your revenue goals but only have a delivery organisation to deliver 50 units a month "what do you do?"

Asking this question early many save a lot of heartache as companies realise that their delivery processes need to be automated or improved to deliver at scale.

Burger chain: We hand you your food over the counter and you either eat it in the restaurant or take it away, or alternatively through our delivery partners Deliveroo and Uber Eats you order online and they deliver directly to you for a fee.

How do you know it works?

This is another really important question from a potential customer. This is the Case Study question. 

Without a doubt the most important piece of sales collateral for any company is a named case study or even better a named video case study.

Reframing the question they are actually asking gives you, "How do I know that I am not taking a risk in buying this?" and the best answer is "because someone else very similar to you has taken the risk already and proved it works!"

With technology companies, very few organisations want to trial "beta" software. In the software and technology world, the first customer or "first office application" (FOA) customer gets to take all the risk on both the product and the delivery process.

For a technology company, a successful FOA that gives a named reference is invaluable. A successful FOA customer gives credibility and reduces the barriers to sale for other customers. From a marketing point-of-view, I would give a product away at cost to an FOA customer for a named case study, reference or endorsement because it makes subsequent sales that much easier. No one wants to be first.

From an operational point-of-view in a start-up there is always a huge focus on the first commercial sale, but the company not only has to sell they have to deliver as well.

If you don't have a successful FOA customer or reference then the question you ask internally needs to be "How do we ensure that it will work?" This is where a company needs to deploy its best and brightest to ensure the FOA deployment is faultless.

Once you have your FOA reference you don't stop there. Companies will want to see that there are references that are similar to their own business in terms of sector, size or geography. The more case studies you can provide the more likely the objection to your product/service can be overcome.

Burger Chain: We sell 75 burgers per second....

Who will benefit the most from it?

This is a question that asks a company to analyse their markets to understand which specific segments or sub-segments will benefit most from the product.

It is easy to think that everyone will want your application, gizmo or widget but based on your USP or KSPs there will be one or more segments that will benefit more than others. These are the segments you need to focus on first and ensure your messaging, collateral and sales effort are focused on them.

Be prepared to test these markets and your assumptions and if necessary pivot. Some markets that may seem very attractive because of size, value or budgets may actually not be appropriate. The defence industry, for example, has security accreditations and requirements that might make it very difficult for a small start-up to compete.

This question requires rigour, analysis and the courage to focus on specific segments based on the knowledge available to you at the time. Many technology start-ups try and "over-analyse" their segments and spend months trying to analyse complex markets with limited tools and data. You can't entirely remove the risk, you can only mitigate it. Go and see prospects, bid, attend conferences and network this will validate whether your chosen segments will benefit the most from your product.

When developing a value proposition make sure this question is "time-bound" otherwise you can end up in an endless cycle of analysis and uncertainty. Choose your segments, engage, fail fast or succeed fast.

Burger chain: The people who benefit most from our product want a reliable experience in terms of time and quality, anywhere in the world and need an affordable meal when time is a consideration.

Why is a value proposition important?

The value proposition is a fundamental component for any product or service-based company's go-to-market strategy.

It tells customers, partners and investors what you do, and how you provide value. Once you have a well-defined value proposition you can develop your messaging, brand, website, collateral and sales materials. It is the foundation for the commercial success of the business. Unfortunately, too few companies invest the time and effort required to get it right. Its often dismissed as "marketing blah, blah!" with lip service paid to the important role it plays in driving commercial success.

Understanding an iterative process

It would be a mistake to think that developing a value proposition is something that is done in isolation or that it is something a business only does once.

Expect several cycles to develop the value proposition, each time you complete a cycle you get closer to the true proposition and you improve the company's strategic alignment. You are looking for consensus.

Once you have an agreed value proposition don't expect it to be static. The proposition will develop and should be reviewed on a 3-6 monthly basis. Once your start-up is actively selling your sales force or channel partners will provide constant feedback on the value proposition. Take this feedback and update the value proposition based on new intelligence.

A thankless task

Developing a value proposition is a complex strategic task that may be frustrating. You may well be holding up a mirror to the organisation and it may not like what it sees. There is often a tendency to shoot the messenger.

Companies, and especially start-ups, that devote the management time and energy to developing a strong and compelling value proposition will benefit.

In summary, there are seven simple questions that help you define the value proposition. If the process of answering the questions is easy then marketing's role is to use the value proposition to develop the messaging, collateral and sales material to company needs for commercial traction.

It may be that some of the questions unearth major flaws in the company's products or processes and these may need to be resolved before the company can effectively go to market. The most important part of the process is educating the organisation to understand what a value proposition is, why it's important and what the implications are to the company if it is unable to answer seven very simple questions.

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Do feel free to comment, suggest alternatives or even contradict me. Your feedback is welcome.

To see more Start-Up Marketing Insights go to my blog.