Our July 9 event was on the topic of Developing Clear Value Propositions
For this month's high tech entrepreneurs' forum, we will present a framework for developing clear value propositions and hear from company executives and how they developed value propositions for their customers.
We have gathered a panel of successful entrepreneurs and investors to speak on the challenges they faced in creating clear value for their customers. Our panelists will share their ideas and advice on how to develop and sustain value as technology evolves and market conditions change.
- Facilitator Chuck DeVita, President, Growth Process Group Inc.
- Panelist Allen Blue,VP Product Strategy and a Founder at LinkedIn
- Panelist John Hall, Managing Director, Horizon Ventures
- Panelist John Occhipinti, Managing Director, Woodside Fund
We would also like to acknowledge Marcus Bragg, Vice President, Western Region, Right Now Technology for being willing to speak, and recognize that a client obligation brought him unavoidably out of town for the meeting.
Below is a compiled set of advice from the session. Chuck DeVita (CDevita@GrowthProcess.com) can also forward you separate a copy of his presentation.
About value propositions
- A proposition is what you hear in your head, a value is the value in the customer's head.
Advice for creating an effective value proposition
- A customer may use your product or service for a purpose not intended. As an entrepreneur, your job is to understand how customers are using your product/service, and use that information both to shape your product/service and sell it to additional customers/markets.
- To create a value proposition, first figure out the problem you are solving and for whom, then sell it to that audience.
- Be disciplined and objective about what your assumptions are and what information is validated by customers (so it becomes a fact)
- Sell to the 'Sweet Spot', the interception between the market, the product and the decision-maker's pain.
- Transform your features into economic value by saving costs, improving productivity, increasing revenues.
- Leverage high-profile reference customers to cross the chasm. Similarly, you can use early adopters (particularly high-profile ones) to help improve and refine your product/service.
- Understand the kind of pain the customer might be feeling - the fix-it-now, hang-the-costs pain like when you have a bad toothache and need to see a dentist at any cost, the on-the-tracks-of-a-incoming-train pain when customers have to do something to avoid a known upcoming problem, and the future gain/career enhancement type which would solve a company problem, and make the decision-maker look good.
- Understand the sales process for your product/service - how long it takes, who sells when, etc.,
- Entrepreneurs should understand what decision-makers are looking for and position their companies accordingly. For example, Mobile security and infrastructure development are two hot areas for IT decision-makers right now and if appropriate, entrepreneurs can position their companies to cover these needs.
- Target potential customers who are feeling the pain, don't feel like you need to educate the market about the product/service you provide.
- Keep it simple and brief, and make sure that it is quantifiable.
Advice for changing your company's value proposition as you evolve
- Your company's product might be in the discovery, learning or execution phase for product sales, and your sales processes and strategies should reflect where it is. Hire the staff, create the partnerships, implement the strategies appropriate for the company's development level.
Advice for creating a value proposition for different audiences
- Your initial value proposition, target market and product generally changes as your company evolves. Learn to stay flexible, being able to change the value proposition, target market and product line, but don't change too much - keep the things that are working for you.
- Examples of successful companies who successfully morphed their business models: Yahoo! started out as a bulletin board company; PayPal started out with a business model for beaming payment information to other cell phone users; Education was one initial target audience Apple, the other two didn't take off
Value Propositions for Web 2.0 companies
- Content should be low-cost, distribution costs are low, start-up time and costs are low
- The Value is in the unique data set, driven by an active, quality community.
- The value for a Web 2.0 company comes from the people in the community. So be careful especially in the beginning who is in the community and the way that they participate in the community. Ensure a great experience particularly when the company is just starting.
- You can't control who joins the community, but you can put processes and rules in place to channel activity of current users, target optimal early adopters, and more tightly manage the overall impact each individual user has on the community.
- Quick execution is key for Web 2.0 companies as 1) it allows the community to get involved in creating the solution and 2) an early-to-market strategy is important with low barrier-to-entry companies.
- Keep executing and refining your solution, and keep listening to the users about how they use your solution and identify product direction and pricing models based on customer feedback.
- Be inclusive and inviting about the types/groups of people welcome to join the community, but also be selective about which people from that group will be invited.
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