emm-logo

4 Reasons a Quantified Value Proposition is Essential to Marketing Success

March 02, 2016 / by Sat Duggal

Value Based Pricing

qvp_calculator_duotone.jpgThe value proposition is a well-known, almost worn out, catch phrase in marketing circles. Everyone knows what it is and that you need to make yours clear to your customer, or they have no reason to buy from you.

Over-familiarity creates real problems for marketing departments that want to push the boundaries and strive for excellence in the highly competitive atmosphere they exist in today. Although the majority of marketers theoretically understand what a value proposition is and why it’s important, nearly every marketing professional we speak to is developing the wrong kind of value proposition in the wrong way, and they’re getting nowhere.

That’s why we’re hoping to inject some fresh thought into the conversation by introducing you to the Quantified Value Proposition.

What is the Quantified Value Proposition (QVP)?

Unlike the commonly understood “value proposition”, which is broad enough to include nearly any copywriting trick in the book that can make your product or service sound good, the quantified value proposition is far more defined.

That one word, “quantified” highlights the important differentiator: this value proposition is based on verifiable facts that are personalized to the individual buyer it applies to. It requires a lot more work upfront to develop a QVP, but it’s also far more effective as a result.

To illustrate the difference, let’s imagine that Company XYZ has just developed a new type of printing ink that they want to sell to printers across the country. Two teams in Marketing have been tasked with developing messaging for the sales force to use. One falls back on the same old value propositions they’ve always used, but the other decides to develop a QVP.

Option 1: “Our new ink was developed using cutting edge technology. It goes on smoother and dries faster than the comparable ink from our competition.”

Option 2: “Our new ink applies evenly due to our proprietary 12 micron pigment molecule that offers the smoothest viscosity available on the market today, meaning 6% less ink-based errors; it dries 67% faster than the ink you’re using right now, allowing you to complete orders faster; and it costs just 12% more than you’re spending now. With less ink-based errors and dramatically faster drying time, you can expect an overall 17% decrease in operating costs this quarter by making the switch today.”

Now, if you were a buyer at a printing company taking a call from an ink seller, which of the two arguments would be more likely to sway you?

Obviously, the QVP - Option #2 - sounds and feels more concrete and verifiable. Even if its claims are hard to imagine, (67% faster drying time?) you’re more likely to believe it’s possible since the simple fact that specific numbers are presented offers you the opportunity to run tests and prove them wrong if need be.

So, with the potential 17% decrease in operating costs as the clincher, you’re willing to pay 12% more and switch vendors for this new kind of ink.

Why is the quantified value proposition so important?

There are numerous reasons why the QVP is superior to one that is not quantified, and why it’s so important for marketing and sales teams today. But let’s just focus on the top four reasons:

1.   The QVP is far more compelling

A value proposition, by its very name, is intended to allow salespeople to have value-based discussions with customers rather than cost-based discussions. This gives them the opportunity to do more than maintain the status quo to maintain good relationships and offer discounts to maintain volume and market share.

Instead, when they can sell on quantified value, they have a much better chance of growing their portfolios, cross- and up-selling their customers with value added services and product enhancements. In the long run, they can help the company earn a higher ROI than if they had to find and convert new leads all the time to increase revenue.

But a value proposition like Option #1 above barely scratches the surface of value. Inevitably, the first question a savvy buyer is going to ask after the salesperson finishes that spiel is, “how much does it cost?” And the conversation is right back where it was without a value proposition at all.

Coming into the conversation armed with specific facts and figures showing exactly how much money your customer will save or earn by purchasing your product keeps the conversation focused where it should be: on the measurable $ value you’re offering to your customers, not the price they’re paying for it.

2. A QVP is easy to sell against

If your sales team doesn’t have access to an accurate Value Calculator, they’re converting at least 5% less of their prospects than they could be with this powerful tool in hand.

Essentially, a Value Calculator is a form (usually in spreadsheet or similar format) set up to allow a prospect to plug in their own current figures, industry benchmarks, and goals for the future so they can see in dollars and cents what purchasing your product will do to lower costs or increase revenue for their business.

It’s very compelling for a B2B procurement department to be able to put specific figures in the PROS column when considering whether or not to change vendors or upgrade a product line. In fact, having those figures available could easily be the deciding factor in whether or not they move forward with a purchase.

However, without an established, individualized QVP in place, those figures will be nothing more than educated guesses. A Value Calculator that is used without a QVP could even have a negative effect on the buyer’s decision because it could make it appear like your sales team is trying to use smoke and mirrors to hide the fact that their product really isn’t that different from or better than the alternative.

3. A QVP Makes it Easier to Price on Value

For many of the same reasons noted above, your entire pricing strategy is better informed and more likely to appeal to buyers.

While value pricing is superior in every way, it’s not easy to accomplish or justify without the work being put into creating a QVP. If forced to explain a value-based price without the benefit of that documented information, your sales team will be communicating in generalities and averages. This is far less impressive and could even be irritating to intelligent and experienced buyers who’ve heard it all before.

4. A QVP is a Differentiator in Itself

So many organizations rely on value propositions that are based on product features and generally stated benefits, buyers have become immune to even the most well-structured and well-presented sales pitches.

Presenting a personalized, fact-based QVP, on the other hand, can wake up drowsy procurement teams because they hear it so little. If none of your competitors are doing this, you could see huge gains in market share for this reason alone.

Over the next few weeks, we’ll be diving deeper into quantified value propositions as a means to empower sales teams, improve conversion rates, and boost revenue in a B2B context. We’d love to have your opinions and questions, so please take a moment to leave a comment on this or one of our later blog posts to join the conversation.

Register for the Quantified Value Proposition Webinar Now!

 

Keywords: Value Based Pricing