Value proposition for manufacturers in three easy steps

Paul Boughton

Manufacturers that compete in mature markets with highly undifferentiated offers and capabilities are especially challenged with articulating a unique value proposition, according to Gartner. Analysts have therefore identified a three-step process to help such companies uncover the unique attributes of their value proposition, enabling them to differentiate themselves.

Richard Fouts, research director at Gartner, states: "Most value propositions fail to stand out in the market because they lead with the corporate ego or the provider's product or service features, rather than the value of the business outcome the customer can achieve with the provider's solution. Many marketers construct value propositions in the style of tag lines or marketing slogans. These attempts do not fit the definition of a true value proposition. Moreover, they miss out on opportunities to communicate competitive uniqueness or superiority."

In 2008 Gartner surveyed over 600 IT buyers, asking them to identify both the strengths and the weaknesses of marketing and sales efforts across all types of technology providers. Fouts says: "More than half the respondents said the biggest weakness or shortcoming in IT sales and marketing efforts is the lack of a quantified value proposition. The survey data also showed that, on average, buyers are 2.5 times more likely to buy products if a vendor is able to effectively quantify its value proposition."

Even vendors that sell innovative approaches in emerging markets are not freed from the challenges of constructing a value proposition. Fouts continues: "In an age of podcasts, micro blogs such as Twitter, social networks such as Facebook and MySpace, and other social media, there is more market noise than ever, making it more important to have a value proposition that rises above the noise."

Gartner has created a framework that will expand marketers' thinking about the value proposition to include value, capabilities and customer experience (including that delivered during the presale phase) to help their organisations rise above the market noise.

Fouts says: "Often the best way to get a better understanding of a concept is to break it down. Project managers are especially good at this. They have learned to deconstruct big problems into smaller, more manageable chunks of work before integrating the results into the larger end solution."

Gartner recommends that marketing executives undertake a three-step process to construct a quantifiable, unique value proposition to move their organisations above the market noise. These steps include:

Step 1: Analyse value from a price/performance perspective. Even if a vendor shies away from price/performance in its marketing, it is the first place most buyers begin their purchasing process. Many vendors are often surprised to see that, over the years, the functionality and features they provide have failed to keep up with competitors. In fact challengers will often offer richer product capabilities at similar or lower prices to bring attention to their higher, more distinct value, making price/performance analysis an important first step in the value proposition exercise.

Step 2: Analyse your business proposition. Marketing executives must determine how their way of doing business adds value. For example, how do they compete in terms of service, their financial proposal for doing business, or customer experience? They must think "before and after the sale" to get a broad view of how they extend value with customer experience.

Step 3: Put "value" and "proposition" together. Put the results of the above two exercises together. By putting the results of the above two exercises together, and by quantifying the business outcome and experience that a customer can only get from a specific provider, marketers get much closer to constructing a value proposition that only they deliver.

Additional information is available in the Gartner report "Marketing Essentials: How to Craft a Unique Value Proposition" (reference 963613). The report provides detailed information about the recommended Gartner value proposition tool including several real world examples of how the process helps vendors get above the market noise. The report is on Gartner's Web site.

For more information, visit www.gartner.com

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