How to Build a Value Proposition Around Customer ROI

Value Proposition and Customer ROI

Quarterly Company Stage: Pre-Revenue

Pain, Claim, Gain, as in Customer Pain (need), Your Claim (solution) to the Customer's Gain (ROI).

The value proposition of your solution is what will carry prospective customers through the sales process. It is their recognition that what you offer will not only address their pain, but yield a marked gain. Starting at the very beginning of the sales process, prospects must see the value in your solution.

The impact: Generally, your value proposition will be used throughout your marketing and sales process. You will then be accountable to customers to deliver on your value proposition so they renew term after term. Additionally, a Customer ROI figure will serve as the backbone to your demo and streamline your development process. Ask the question - how can we further improve our Customer's ROI?

The goal: You should end with monetized figures totaling the cost of the problem you are solving and the savings your customer will see with your product. These figures will then be used to calculate an ROI and create your product's value proposition.

How can Golden Section Assist?

Background

It is important to nail your value proposition as it will be a key factor in many purchase decisions for early adaptors \[see Play: Overall Sales Philosophy\]. Resist the temptation to overestimate any savings; your goal is to maintain trust and credibility. Expect that prospects will push back on different aspects of your value proposition. Make sure it is bullet-proof and be prepared to defend

In addition, value-oriented pricing uses the value proposition as the justification for your pricing. You will need clear and compelling evidence for your value proposition.

Steps

1. What is the problem? What precise problem are you solving?
2. What is the cost of the problem in real dollars?
3. Brainstorm all intangible and tangible costs due to this specific problem. Some elements to consider: effects on labor, reputation, time, workflow, deals held up, or missed opportunities.
4. Monetize these costs.
5. What is your solution?
6. What is the value of your solution in real dollars?
7. Brainstorm all potential sources of value a Customer may experience while using your product. Some elements to consider: how your product improves a Customer's current and future workflow, use of time, allocation of resources, reputation or ability to solve future constraints.
8. Monetize these savings. Resist the temptation to overestimate any savings; your goal is to maintain trust and credibility.
9. Calculate ROI. ROI = (Total Savings - Cost of Product) / Cost of Product
10. Note: The cost of product here is the actual amount a customer will pay to acquire your product (ie a monthly fee), not the cost of the problem that you monetized in Step 2.
11. How are we unique?
12. Craft your value propositions using the ROI and uniqueness factors you have gathered. It is helpful to start with a longer description to get your message across and then distill it into its most concentrated form.
13. Include these figures (cost of problem, value of solution, ROI), along with supporting information, in your demo and marketing materials.

Troubleshooting

If you're struggling to identify the value of your product to a Customer, consult with stakeholders outside the sales team, including customers in the form of a focus group, industry experts, and developers. You are looking for those with a unique perspective who can help the sales team develop a more robust picture of the value of a product.

Intangible contributions to a product's value are difficult to monetize. Instead of forcing a dollar figure to these intangibles like reputation or other social elements, Golden Section recommends including them in the ROI Analysis as a separate list of \"Intangible Value.\" A list such as this allows your company to include these intangibles without losing your credibility for forcing a definitionally subjective valuation.