Customer value proposition should exclude the tangible and intangible benefits of a product.

Creating and maintaining a high-growth, high-profit business in your marketplace—one where sellers, leaders, and customers all thrive—is essential. That’s why, for many years, I’ve advocated putting value-based selling at the centre of your work.

Understand, however, that selling from a value standpoint isn’t a singular, indivisible concept. It’s not a thing you simply seek and obtain. It’s about far more than adopting a return on investment (ROI) framework, in which an input of X delivers a value of Y. You must be broader in your approach! That way, you’ll engage in more conversations with multiple stakeholders in each opportunity, creating more connections and improving your closing ratio. Here’s how you do that.

Value-based selling—when done skillfully—has multiple inputs. Each input redefines how you and your customer see the worth of a product or service. And these inputs often overlap. In particular, there are two groups of inputs you must look at: 1. tangible versus intangible inputs, and 2. personal versus operational ones. Let’s look at the first group now.

The Tangibles of Value-Based Selling

Tangibles are measurable, verifiable facts. In value-based selling, the big ones are money and time. Here are two examples of how clients of mine have put this to work.

First, this client of mine is an internationally known agricultural machinery company. They make a product that helps farmers plant more seeds in far less time than their competitors. Smart sellers on that sales team emphasize the tangible benefits of what greater efficiency means for farmers. In a good planting season, using this product means higher profits for the producer. And in a difficult planting season, it’s the difference between making money and not making money. That same seller also emphasizes the monetary value of the time saved by using this more efficient planting equipment.

Second, consider the example of a software maker who specializes in serving medical clinics. Top-performing sellers in their business recognized their clients struggled with having highly-trained, high-wage medical staff who spend too much time on administrative work. By showing—in tangible terms—the immediate savings of automating those burdensome tasks, clients quickly took notice. Just as compelling, they showed those clients the added benefits of having reduced burnout and low morale among staff, which translated into less churn, better performance, and higher profitability.

The Intangibles of Value-Based Selling

Just as the tangibles focus on what’s known to be true, intangibles emphasize what people can sense is true. These are less quantifiable, but they are just as powerful because people are motivated jointly by reason and emotion. Risk, for instance, is a powerful intangible. It shapes how your customer can perceive your product or service—along with their need for it. 

A client of mine who makes a range of chemicals for use by manufacturers employs intangible benefits in their selling strategy. Recognizing that their customer needs to reliably make products that tightly match OEM specifications, it’s highly valuable to not have to worry about expensive warranty claims that would otherwise arise.

Similarly, a company that makes dashboard cameras has their sellers use intangible benefits when pitching to trucking companies. They ask emotionally charged questions, such as: “How much is it worth to you to avoid having to pay expensive liability claims?” 

Mastery of value-based selling is about fully understanding a range of inputs. This first group of inputs—tangible versus intangible—is focused on defining the facts and feelings that motivate your customer to buy from you. In the next article in this series, we’ll look at the challenge from a standpoint of two more inputs: personal versus operational.

What Is a Value Proposition?

A value proposition in marketing is a concise statement of the benefits that a company is delivering to customers who buy its products or services. It serves as a declaration of intent, both inside the company and in the marketplace.

The term value proposition is believed to have first appeared in a McKinsey & Co. industry research paper in 1988, which defined it as "a clear, simple statement of the benefits, both tangible and intangible, that the company will provide, along with the approximate price it will charge each customer segment for those benefits."

Key Takeaways

• A company's value proposition tells a customer the number one reason why a product or service is best suited for that particular customer.
• A value proposition should be communicated to customers directly, either via the company's website or other marketing or advertising materials.
• Value propositions can follow different formats, as long as they are "on brand," unique, and specific to the company in question.
• A successful value proposition should be persuasive and help turn a prospect into a paying customer.

Value Proposition

Understanding Value Propositions

A value proposition stands as a promise by a company to a customer or market segment. The proposition is an easy-to-understand reason why a customer should buy a product or service from that particular business. A value proposition should clearly explain how a product fills a need, communicate the specifics of its added benefit, and state the reason why it's better than similar products on the market. The ideal value proposition is to-the-point and appeals to a customer's strongest decision-making drivers.

Companies use this statement to target customers who will benefit most from using the company's products, and this helps maintain a company's economic moat. An economic moat is a competitive advantage. The moat analogy—coined by super-investor Warren Buffett of Berkshire Hathaway—states that the wider the moat, the bigger and more resilient the firm is to competition.

A great value proposition demonstrates what a brand has to offer a customer that no other competitor has and how a service or product fulfills a need that no other company is able to fill.

Components of a Value Proposition

A company's value proposition communicates the number one reason why a product or service is best suited for a customer segment. Therefore, it should always be displayed prominently on a company's website and in other consumer touch points. It also must be intuitive, so that a customer can read or hear the value proposition and understand the delivered value without needing further explanation.

Value propositions that stand out tend to make use of a particular structure. A successful value proposition typically has a strong, clear headline that communicates the delivered benefit to the consumer. The headline should be a single memorable sentence, phrase, or even a tagline. It frequently incorporates catchy slogans that become part of successful advertising campaigns.

Often a subheadline will be provided underneath the main headline, expanding on the explanation of the delivered value and giving a specific example of why the product or service is superior to others the consumer has in mind. The subheading can be a short paragraph and is typically between two and three sentences long. The subheading is a way to highlight the key features or benefits of the products and often benefits from the inclusion of bullet points or another means of highlighting standout details.

This kind of structure allows consumers to scan the value proposition quickly and pick up on product features. Added visuals increase the ease of communication between business and consumer. In order to craft a strong value proposition, companies will often conduct market research to determine which messages resonate the best with their customers.

Special Considerations

Value propositions can follow different formats as long as they are unique to the company and to the consumers the company services. All effective value propositions are easy to understand and demonstrate specific results for a customer using a product or service. They differentiate a product or service from any competition, avoid overused marketing buzzwords, and communicate value within a short amount of time.

For a value proposition to effectively turn a prospect into a paying customer, it should clearly identify who the customers are, what their main problems are, and how the company's product or service is the ideal solution to help them solve their problem.

Frequently Asked Questions

What Is the Purpose of a Value Proposition?

A value proposition is meant to convince stakeholders, investors, or customers that a company or its products or services are worthwhile. If the value proposition is weak or unconvincing it may be difficult to attract investment and consumer demand.

What Is an Employee Value Proposition?

An employee value proposition (EVP) applies to the job market. Here, a company that is hiring will try to frame itself as a good place to work, offering not only monetary compensation but also a range of benefits, perks, and a productive environment. In return, the job candidate will need to convince the hiring company that they have the appropriate skills, experience, demeanor, and ambition to succeed.

What Happens if a Value Proposition Fails?

If a company cannot convince others that it has value or that its products or services or valuable, it will lose profitability and access to capital and may ultimately go out of business.

Which of the following defines a value proposition?

Is the net profit expected from a given investment expressed as a percentage of the investment?

Which of the following is true of the direct denial method of responding to an objection?

What does the manufacturer provide that is the best source of specific information about a product?