Winning proposition: customer value that also pays off

What is a winning proposition?

A value proposition that creates more value for customers than the competition's. What counts is net value: the subjectively perceived value minus the price someone pays for it.

Customers buy from you when this net value is higher than with comparable offers. That sounds obvious, and it has an uncomfortable consequence.

You don't decide whether you're differentiated. Your customers do. A feature that is highlighted in your brochure and plays no role in the sales conversation is not a differentiator. It's a cost.

Net value also explains why price cuts rarely create a position. They raise net value for a moment and any competitor can copy them the next day. Value that rests on a capability can't be copied.

The term comes from Willie Pietersen's work and is treated in the book as the core of the target picture. It comes second there, right after the impact promise and before the choice of target markets.

Why does it also have to be a paying proposition?

Because differentiating value attracts customers and nothing is won yet. The differentiation also has to produce superior profits, meaning a bigger gap between revenue and cost than your competitors achieve.

Competing for superior value creation therefore has two fronts: customers and costs. Play only the first and you build a loyal customer base that doesn't sustain you.

In mid-sized companies, this shows up regularly in special requests. A supplier meets every request, customers are delighted, and the margin has been below the competition's for years. The value is there. It just isn't paid for.

The reverse holds too. Look only at costs and you get cheaper and interchangeable. Both fronts have to be played at the same time, and that's exactly what makes working on this module uncomfortable.

So the test question always has two parts: do customers see the difference, and does it show up in our price or our costs? Both answers have to be yes.

How do you build a value curve?

The value curve shows how strongly you deliver on individual features of your offer compared with your competitors. It takes shape in five steps.

For the assessment, you draw on the customer and competition modules from your situation analysis. The judgment of the market experts in sales and marketing belongs in there, but it doesn't replace the data.

When it comes to features, stick to what customers actually evaluate. The temptation to include fifteen features is strong, because they're all in the data sheet. A curve with fifteen points shows nothing anymore, because on average all providers look alike.

If your customer groups differ widely, you need several curves, one per segment. An averaged curve across all customers describes no one.

What do the four questions do?

They resolve an apparent contradiction. If you think of Porter's generic strategies, something should feel off: isn't quality leadership incompatible with low costs?

Not necessarily. The art lies in betting on features that create additional value for customers and cost you little. Conversely, features your target customers consider dispensable can be reduced or dropped.

• Create. Which feature that isn't part of the industry standard today should be added?
• Raise. Which feature should be far more pronounced than usual?
• Reduce. Which feature can be well below the standard?
• Eliminate. Which feature can you drop entirely?

The last two questions are where the real work happens. Eliminating and reducing cut costs and take away value at the same time. That trade-off is what turns a wish list into a position.

What does this look like in practice?

The book illustrates it with the wine industry. For a long time, good wine was sold exclusively in dark glass bottles with a cork, and the attributes that mattered were the prestige of the winery, the complexity of the wine and the breadth of the range.

Canned wine sets the curve differently. Prestige and complexity go down, and attributes appear that didn't exist before: portability, small serving sizes, a different attitude toward life. For wine connoisseurs, the offering is worse. For a group of customers who never bought at all before, it's the first one that fits.

The point of the example isn't the can. It's the insight that an offering is allowed to lose on traditional attributes if it wins clearly on new ones and reaches a different group in the process.

Apply this to your own field by looking for the attributes everyone serves because everyone else does. One of them is almost always expensive and carries no weight in the buying decision.

How do you put it into one sentence?

First, list plainly what you're changing about your offering's attributes. Then sum up those changes in a single sentence. The book suggests a template for this.

"We do X differently or better than the competition in order to create benefit Y for customers Z, and thereby achieve better prices or lower costs."

Two examples from the book show how different the result can look. An airline operates at the lowest costs in its industry and offers trips that compete on price with driving. A test track positions itself as the automotive industry's preferred partner for driving experiences on one of the most demanding circuits in Europe.

Don't follow the template slavishly. The point is to capture the value in a first memorable sentence. The part about your own gains also doesn't have to be communicated externally, but internally everyone should know it and stand behind it.

Test the sentence against your last twenty wins. If it explains why you got them, it holds. If you need a different explanation every time, it describes an intention, not yet a position.

The counter-test is the most important step. Could your competitor write the same sentence about themselves? If so, it describes an industry given, not a position. In that case, go back to the four questions.