An Effective Value Proposition: What it is, why it is so important to business and marketing success, and how to use it

This article was originally published in the MarketingSherpa email newsletter.

What is a value proposition?

Value proposition is a commonly used but oft-misunderstood term. In writing this article, I asked for marketers’ and business leaders’ experience with value prop. I received 102 responses (the best of which you’ll read in this article).

But the answers were all over the board. I hadn’t intended this outreach as a way to find out how effective company’s value propositions were – like most other MarketingSherpa articles, I was looking for successful examples to spark your thinking. Nevertheless, I discovered a wide range in the perception of value proposition – their value prop was described as everything from their headline to their slogan to a feature of the product.

Often marketers and business owners were headed in the right direction, attempting to communicate value, but seriously lacking in credibility, clarity, and exclusivity – crucial elements to the effectiveness of a value proposition in the marketplace. For example, “great customer service” is not in and of itself an effective value proposition.

So what is a value proposition? Like most business terms that don’t have an official scientific or government definition, it’s exact meaning can vary based on who you talk to.

Michael Lanning invented the term in the 1980s and refers to it as a strategic document that should answer five key questions. 

MECLABS Institute (parent organization of MarketingSherpa) conducted historical research into the term value proposition dating back to the 1890s (included preceding terms like Unique Selling Proposition and Basic Selling Proposition) and developed a simplified and clear definition of the term – a value proposition is the answer to the question “If I am your ideal prospect, why should I buy from you rather than any of your competitors?”

According to MECLABS research, an effective value proposition has appeal, clarity, credibility, and exclusivity. Which is why “great customer service” is not in and of itself an effective value proposition. Is it appealing? Absolutely. But is it very credible just to say you have great customer service? Very few customers who haven’t experienced your company firsthand will really believe it.

Exclusivity is often missing from many value propositions, especially in industries where it is difficult to differentiate products or service. Here is a great example of exclusivity created in the legal field. “Clients appreciate how we focus on serving the specialized needs of startups and entrepreneurs with reasonable flat-fee billing and 24/7 attorney access, all of which is virtually unheard of in the industry. Once we developed that specific value proposition it began taking on a life of its own as a key brand attribute for our law firm, and we've seen exponential growth ever since,” said William Scott Goldman, Managing Attorney/Founder, Goldman Law Group.

For more information about how to craft a forceful value prop, you can take the MECLABS Value Proposition Development on-demand certification course.

How important is the value proposition?

“In our business, our value proposition is at the heart of everything we do for our customers,” said Michael Stahl, Chief Marketing Officer, SERVPRO.

The value proposition is the fundamental reason a customer should buy from your company. It is a single, clear statement that concisely communicates the value your company creates in the world. So in a market-based economy, a strong value proposition is crucial for a company’s success and survival.

A clearly defined value proposition is essential for enabling your entire business ecosystem to understand what value it should deliver – i.e. product development, front-line service workers, customer service, etc. – and what value it should communicate – i.e. marketing department, advertising agency, etc.

But it is also crucial because it forces important business conversations, such as how to target a product offering. “When you're a leader, one of your most important jobs is to help your team say no to all the other [customer] profiles, so they can say yes to the profile you serve the best,” said Flint McGlaughlin, Managing Director and CEO, MECLABS Institute in 4 Keys to Creating a Compelling Value Proposition.

An effective value proposition can also power investing decisions. “I can say this with certainty: as an investor, a startup’s value proposition is the first place I look,” said Zain Jaffer, Founder and CEO, Zain Ventures. “It’s important that a new company spends a lot of time developing their value proposition. That first value proposition will determine their positioning with their investors and help us understand their ultimate aim. As a word of advice to new founders coming to market: you can’t spend too much time on your value proposition, and you don’t have much time to waste.”

How do I get CEOs and high-level decision makers on-board with the importance of the value proposition?

A key role of the marketer is to be an advocate for the customer and help business leaders avoid self-deception. If you can get your CEO and other high-level decision makers on board with clearly defining your company’s and products’ value proposition – for example, by being active participants in a value proposition workshop – you will naturally bring to the surface many issues you will face when attempting to market the product.

In other words, it’s easy for business leaders to walk around in the four walls of your company headquarters and think you have the best product ever and the marketing should be easy. By being forced to clearly explain and explicitly justify exactly what about that product is so great, business leaders may find opportunities for improving value delivery to the customer and creating unique, clearly differentiated value in the marketplace.

One way to get business leaders to understand the importance of the value proposition is to send them this article. That’s why we wrote it. 😊

Here is some data that shows satisfied customers are much more likely to believe that a product does its intended job…in other words, lives up to the value proposition promised in marketing – Marketing Chart: The importance of making the right promise with your marketing.

And, of course, this wouldn’t be MarketingSherpa without sharing a few case studies:

Customer-First Marketing: How The Global Leadership Summit grew attendance by 16% to 400,000

B2B Value Proposition: How a tech startup used a value prop workshop to help prepare for a public offering (4 takeaways for your brand)

Value Proposition: Marketing examples for each of the 4 essential levels of value prop

Customer Discovery: 4 mini marketing case studies showing how companies discovered what their customers wanted

But the most compelling argument – like any real conversation – is to first understand your audience. What is most important to CEO? Where is the CMO making the biggest investments? And then show how a clearly defined value proposition helps her achieve those goals and get a better ROI from those investments.

For example, the investment made with any advertising agency will provide a higher return if the agency’s creative work is based on a forceful value proposition. The product expansion your leader is planning has a higher probability of being successful if everyone on the launch team fully understands the value proposition of the new efforts. And, of course, the company is more likely to show a higher profit when it has an effective value proposition in the market because it can sell products and services with a higher margin and not have to compete exclusively on price.

My company already thinks it is using value propositions well but it is using them poorly. How can I get them to change?

“A value proposition is NOT a slogan or a tagline. We fell into this trap ourselves and spent the first two years marketing what we are, rather than marketing the results that we produce for our buyers. [When we changed], our client count quadrupled and our revenues soared,” said Liz Lathan, CEO, Haute Dokimazo.

Frankly, change is very hard and it is rare for people and companies to change proactively unless a specific problem is identified. An organization is just like a human being in that sense. Few people find religion when things are going well, they usually only find religion when things are going bad. If the current flawed process seems to be working for your organization – they are getting enough business – leaders may simply not be motivated to change and it might not be a high enough priority for them at the moment.

So you have to – wait for it – create a value proposition for why they should change.

And you have to identify the right micro-yes. Can you get them to change the approach straight out of the gate? Likely not. So what is a small step they can say yes to, to build trust and move in the right direction? Maybe try testing the new approach on a minor product launch and document the results and the team’s experience? Maybe launch a pilot project? Here’s a free template that can help you build an internal value prop for changing how your company uses value propositions – Free Template to Help You Win Approval for Proposed Projects, Campaigns and Ideas.

“What a lot of business owners get wrong is choosing a value proposition that does not truly solve a problem. At Felix Homes, our initial value prop was making the home-selling process as cheap as possible. We were missing a key piece of the value proposition which was the fact that home sellers don't just want to save money, they also want a great service,” said Tyler Forte, CEO, Felix Homes.

“After learning this, we pivoted our messaging from being the cheapest option for selling a home to being the most financially responsible way to sell a home. The key distinction is that being financially responsible means you are getting the highest price for your home while paying lower fees. It also signifies that we are not just saving folks money but we are offering them a full-service selling experience. After making this simple change, we noticed a higher conversion on our landing pages and our sales team had better conversations with qualified prospects. If there is one thing to get right when starting a business, it is focusing on a unique value proposition that solves a core problem that your customers are having.”

How can I measure the effectiveness of a value proposition?

According to MECLABS methodology, an effective value proposition consists of four elements:

• Appeal – How much do I desire this offer?
• Exclusivity – Where else can I get this offer?
• Credibility – Can I trust your claims?
• Clarity – What are you actually offering?

You can measure the potential force of your value proposition by ranking these elements on a scale of 1 to 5.

Once you have used that internal ranking to settle on a few potential value propositions, you can measure their effectiveness in the marketplace with pay-per-click ad testing or with email testing, for example.

This internal evaluation and external testing can help your team decide which value proposition to focus on. Once you release it into the world, your business results will be the true measure of value prop success.

“Your value proposition should be measurable through conversions, an uptick in market share, and deal acceleration through more targeted messaging to attract more qualified buyers. We have seen a tremendous change in our inbound requests since we made the value proposition shift. Leads come to us generally pre-qualified and ready to spend money with us, rather than going through the whole funnel where we explain who we are, what we do, and how we can help. Now our problem is scaling internally to keep up with demand!” Lathan said.

Where should a company use a value proposition?

Your company’s value prop should be infused in every customer touchpoint from first introduction to final product delivery. It should also be communicated internally to any person or company involved in creating and delivering value to the customer.

However, not every situation calls for communicating the overall value proposition of the company. There are four levels of value proposition and each situation can require a different level. For example, investors will need to understand the overall company value proposition but a PPC ad may only need to communicate a process-level value prop to get a customer to act.

“According to the landing page optimization report from 2011, the headline has very significant impact on landing page performance. Your company’s value proposition should be featured above the fold on your homepage, just as your product’s value proposition should be featured above the fold on a sales page,” said Stephen Gagnon, Founder, CodeWeb.

This also brings up the distinction between the value proposition itself (an internal document) and expressing the value proposition (communicating it to an audience.)

For example, an element of the value proposition of Blendtec blenders is that it can easily blend hard items like ice, frozen fruits and veggies, and nuts. It didn’t just take out an ad saying “Our blender can blend things that are hard to blend.” Instead, it made a video series called “Will It Blend?” where potential customers could see its product at work on ridiculous items like an iPad and crowbar. This shows the potential customer the value prop in action. The customer comes to her own conclusion that the blender can make easy work of ice and nuts.

Bright Productions biggest client by billing volume is Bubbies Fine Foods. A key element of Bubbies’ value proposition is ‘authenticity.’ “We define authenticity in terms of what the company namesake ‘Bubbie’ – a Jewish diaspora grandmother characterized by her integrity, intelligence, humor, and resourcefulness – would do in any situation, e.g., ‘what would Bubbie do?’” said Brian Petro, Owner/CEO, Bright Productions.

“In addition to the website (now on its fifth iteration), we created a popular YouTube video channel, a well-subscribed monthly newsletter, as well as Instagram and Facebook [accounts],” he said.

Creative Sample #1: Video for food company

“Bubbies’ aggregate social media numbers (the total of Instagram, YouTube and Facebook) constantly outpace all competitors in the naturally fermented foods category,” Petro said.

And remember, the value prop should be infused in every customer touchpoint. So on social media, that extends beyond a promoted video or ad to the very way customers are treated.

“Before social media was a thing, we responded to every hand-written ‘love letter,’ or genuine concern. Today, it’s a prompt and personal response to every social media engagement. What's not changed is the brand’s commitment to the value proposition of authenticity – in the culture that Bubbie grew up in, the food she created, our approach to every aspect of business, and – most of all – our appreciation of our customers,” Steve Rustad, Owner, Rustad Marketing, another marketing vendor for Bubbies.

Related Resources

Value Force: How to win on value proposition and not just price

6 Good (and 2 Bad) B2B and B2C Value Proposition Examples

How to Amplify the Power of Your Value Proposition