If You Don’t Create Value, Don’t Do Business
1.What is value proposition?
There are many definitions, but it simply means creating value for the customer. In theory, each company can create three types of value. The first type is a rational value – the company sells a product that helps the customer gain money, save time or make life easier (for example, Dropbox). The second type is emotional value – the company creates a good feeling in the customer and connects them to a particular community (for example, Spotify). The third type of value is more abstract and is generally understood to have a positive impact on society or the environment (for example, Patagonia). When brand and business are good, the company should be able to create all three types of value.
2. What is not a value proposition?
The value that your business gives people does not lie in technology or the product itself, but in product benefits for the customer. While startups often talk about the technical characteristics of their products, corporations often fall in love with their own products. In the end, companies only talk about themselves and completely forget the customer. Why this approach only leads to short-term success is explained by Milan Šemelák in the Focus on the customer, everything else is secondary.
3. Why is value proposition important?
When a company is aware of the value it creates, it also knows its market. It knows who the customer is, and can therefore fine-tune sales strategy. Additionally, the right value works great as the employees’ main motivator to work. If the company loses focus, the business will, sooner or later, fall apart. Without a value proposition, the company’s image is shattered, which is most visible in their marketing. Companies often communicate a lot of different things instead of constantly elaborating on what unique value they bring to people.
4. How can I create it?
Just one simple conversation that goes deep and begins by modeling your customer (who he is, what he needs, how he behaves and how he will use your product) is sufficient. Once you know the customer, you know what he needs. You suddenly come up with five or six things you can offer him. As Milan Šemelák says: "I want the company to concentrate on one thing, and therefore I urge it to make one or two words from the whole conversation, which is a very difficult process, because it is necessary to avoid all the buzzwords." It is interesting that many companies make big money on giving consultations on how to create a value proposition, while paper and pencil are enough to work it out yourself.
5. When should I create it?
Making a value proposition should be the very first thing to start with. As mentioned above, if you don’t have it, you won’t know what you want to sell, how you should promote it and what to show to investors. Without value proposition, you’ll be losing time, focus, and money. Milan Šemelák adds: "Value is the first thing I ask every startup about. I want them to say one sentence: ‘I, the customer, I am with your business because you give me …’ It’s fascinating that almost nobody is able to answer this question or else people use big clichés." That’s why we advise you to devote enough time to value proposition.
6. How often should I check value proposition?
We recommend that you work with value proposition on an ongoing basis. It's a guideline that you'll come back to when launching a new product and doing marketing campaigns as well as when pitching and doing presentations. If a value proposition is well-formulated from the beginning, it won’t change significantly during the following years of your business. It can only change if the customer, the product or the direction of the whole company change.
7. Who should create a value proposition?
Just as the company's vision is determined by its founder or executive director, it should be the same with proposition of value. Given that it is the formulation of key ideas towards employees and customers, the only person with a strong enough mandate is the organization's leader.
8. How long does it take to create value proposition?
It always depends on the founder. If he's open to it, he can change the rhetoric of the company, create a brand on it and accustom all the products to it, which takes usually a few weeks. The bigger the firm, the longer the process lasts, because dozens of people want to express their opinion on the value proposition. It takes an especially long time in corporations.
9. Does it make sense to refer to a competitor in the value proposition?
If you bring a clear value, sure, do it. It’s the most effective way of communication and marketing. For example, O2 Slovakia wants to remove everything unfair from telecommunications. Because they take concrete action against unfair behavior instead of just talking about it, they can attack those who act unfairly. It would be a shame not to refer to competition because people will notice you. However, most companies don’t create such a value, so it’s better not to mention others.
10. Does value proposition help in company branding?
Yes, sure. The brand is a combination of the value you bring people and the attention people give you. When you have an interesting product, you talk to people about it and they listen to you – they have a feeling that they’ve heard what you are saying for the first time in their lives – and you’ve created a brand. Most startups think branding is about design or advertising, but it’s not. According to Milan Šemelák, most corporations and advertising agencies want to attract people's attention, but by merely shouting at them with advertisements and not working out the value first, customers won’t buy into it.
Milan Šemelák is a marketing strategist and creative thinker. He works at the UP21 Incubator as the Chief Strategy Officer, helping startups to formulate long-term strategies and marketing activities. Among other things, he has founded Unicorn Attacks consulting company and leads strategic activities of the technology company STRV in the US. In the past, he served as Chief Disruptive Officer at the Oliver Group in London and together with Michal Nýdrle, he built the first local in-house agency for O2 in the Czech Republic and Slovakia.