Navigating Value Price Profit: How Organizations Create and Sustain Profitable Growth

By Dr. Colm Reilly

The original meaning of the term “value proposition” has devolved into a vague sales and marketing notion that does not match its intended use. It is often used to mean benefits, a unique selling point, or differentiation and therefore is often regarded as falling under the Sales and Marketing departments within an organization.
In this book, Dr. Colm Reilly tackles the misconceptions that surround what a value proposition is and why it is important. He answers the four core business questions which are:

1. Why are value propositions needed for a business to be profitable or for a not-for-profit organization to succeed?
2. How can organizations build and use value propositions?
3. How can an organization use a value proposition to serve both internal and external customers?
4. What are the ethical values that should drive an organization in understanding how to create fair and equitable enduring value for themselves and their customers.

The book shows how Value propositions are in effect an alignment tool within an organization that manifests the core ethical nature of the business. In a business world where returns appear volatile and business cycles are disruptive, Dr. Reilly proves a guidebook that shows that a core and ethical value proposition in business will always endure and guide an organization to sustained success.

• Language: English
• Publisher: AuthorHouse UK
• Release date: Jul 20, 2023
• ISBN: 9798823083119

Book preview

© 2023 Dr. Colm Reilly. All rights reserved.

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ISBN: 979-8-8230-8312-6 (sc)

ISBN: 979-8-8230-8311-9 (e)

Published by AuthorHouse 08/31/2023

CONTENTS

1 BACKGROUND AND A LITTLE MORE THAN

Background

Book Structure

What Are Customers and Who Are They?

What Do You Really Think about Customers?

The Lessons of Childhood

All You Need

Technology and Customer Power

Alphabet Street

Client-Focused, Not Client-Run

2 VALUE PROPOSITION

Why Do You Need to Build a Value Proposition?

Some Definitions

Exploring the Value-Proposition Concept

Value = Benefits Minus Costs

Introducing the Value-Proposition Builder

Focus

From Top Level to Specific

BRAIN

Top Level

Market

Opportunity

Function

Conclusion

3 THE VALUE-BASED APPROACH TO BUSINESS

The Value-Focused Enterprise

Value Creation, Alignment, and Decision-Making

Strategic Intent

The Value Pyramid

Level 1: Component

Level 2: Offer

Level 3: Solution

Level 4: Co-Created Value

Transactional and Consultative Selling

B2B Service and Solutions Providers and the Consultative Selling Imperative

Strategic Value Pathway: Customer Intimacy. Sales Mode: Consultative

4 CREATING A VALUE PROPOSITION

5 UNDERSTANDING MARKETS

Define the Specific Group(s) of Customers to Target

Key Questions to Ask

Narrow and Deep Beats Broad and Shallow

Understand How to Enter Those Markets

And Never Forget Critical Thinking

6 IMMERSIVE PROFITABILITY

Focus on Customer (I,E., Delivers Profit)

The Value of Research

The No-Research Option

Worthless Research

Types of Research

Become the Customer

Spend Time with Your Customer

Avoid Intermediaries

Be in Your Customer’s Business

Observation

Understanding versus Listening

Understand Competing Alternatives

Ascertaining What the Customer Values

Value Challenge

The Value Interviews

Background to Relationship

Value

Cost (Including Price and Risk)

General

Price

Risk

An Observation on Risk

Offerings

Marketplace

Recommendations and Suggestions

Output

Summary

7 THE OFFER

Step 1. Categorize your current portfolio

The Whole Product or Whole Service

Map to the Value Pyramid

Profitability

8 BENEFITS

Potential Benefits

Translating Benefits into Messages

Value Experience is Critical

The So What? Challenge

The Value Difference

9 ALTERNATIVES AND DIFFERENTIATION

Assessing Alternatives and Differentiation by Looking at Substitutes

What’s Your Difference?

To Sum It Up

10 VALIDATION

TCO

ROI

C–B

11 COMPLETING THE TEMPLATE

12 MESSAGE DEVELOPMENT

Don’t Throw Your Money Away

Augmented Benefits

Creating a Message Framework and Hierarchy

ONE

Prioritize the Value Messages

THREE

Categorize by Message Type

FOUR

Draw It All Together

13 IMPLEMENTATION

Four Constituencies, One Goal – Alignment of Value

ONE

Information Systems

TWO

Channel Partners and Strategic Alliances

THREE

Co-Creative Teams

FOUR

Individual Relationships

FIVE

Suppliers

What Does It All Mean for Sales and Marketing?

Selling Costs

Salespeople and Tools

Interfunctional Issues

Tools to Help Salespeople Create Value

Recognition of Need

Evaluation of Options

Resolution of Concerns

Settling Terms

People

Understanding the Who

Transform the Sales Team into Value Merchants

Value Compensation

Selecting and Developing Salespeople and Teams

Sales Opportunity and Qualification Tools

Selecting the Right Sales Opportunities

Qualify or Die

Research

Good Question

Follow the Process

Offering Management

Step 2. Offering Management Process

Organizing and Managing Offering Developments

To Proceed or Not to Proceed?

The Gateways to Development

Who Makes the Decisions?

Step 3. Offering Life Cycle Mapping

Step 4. New Offerings

New Strategic Tools

A Portfolio of Value Propositions

Crossing the Technology Chasm

14 PRICING

Price Elasticity of Demand

Competition-Based Pricing Strategy

Competition-Based Pricing Strategy in Marketing

Cost-Plus Pricing Strategy

Cost-Plus Pricing Strategy in Marketing

Dynamic Pricing Strategy

Dynamic Pricing Strategy in Marketing

Freemium Pricing Strategy

Freemium Pricing Strategy in Marketing

High-Low Pricing Strategy

High-Low Pricing Strategy in Marketing

Hourly Pricing Strategy

Hourly Pricing Strategy in Marketing

Skimming Pricing Strategy

Skimming Pricing Strategy in Marketing

Penetration Pricing Strategy

Penetration Pricing Strategy in Marketing

Premium Pricing Strategy

Premium Pricing Strategy in Marketing

Project-Based Pricing Strategy

Project-Based Pricing Strategy in Marketing

Value-Based Pricing Strategy

Value-Based Pricing Strategy in Marketing

Bundle Pricing Strategy

Bundle Pricing Strategy in Marketing

Psychological Pricing Strategy

Psychological Pricing Strategy in Marketing

Geographic Pricing Strategy

Geographic Pricing Strategy in Marketing

How to Create a Pricing Strategy

Evaluate Pricing Potential.

Determine Your Buyer Personas.

Analyze Historical Data.

Strike a Balance between Value and Business Goals.

Look at Competitor Pricing.

Pricing Models Based on Industry or Business

Product Pricing Model

Digital Product Pricing Model

Restaurant Pricing Model

Event Pricing Model

Services Pricing Model

Non-Profit Pricing Model

Education Pricing Model

Real Estate Pricing Model

Agency Pricing Model

Manufacturing Pricing Model

E-commerce Pricing Model

Pricing Analysis

How to Conduct a Pricing Analysis

1. Dynamic Pricing Strategy: Ryanair

2. Freemium Pricing Strategy: Zoom

3. Penetration Pricing Strategy: Netflix

4. Premium Pricing: Away

5. Competitive Pricing Strategy: Shopify

6. Project-Based Pricing Strategy: Wedding Planners

7. Value-Based Pricing Strategy: Ticketmaster

8. Bundle Pricing: Insurance

9. Geographic Pricing: Pharmaceuticals

Get Your Pricing Strategy Right

15 STARTING AND SUSTAINING

Are the Conditions Right?

Examine Strengths Not Weaknesses

Change Your Measurement and Reward System

Exercise Customer Selectivity

Shelter from the Storm

Provide Leadership

The Weather System

Starting the Process

Building Your Value Proposition

Market

Value Experience

Offerings

Benefits

Alternatives and Differentiation

Proof

Create Your Value-Proposition Template and Write Your Value-Proposition Statement

Ways to Use Your Value Proposition

Message Development

Sales and Marketing Tools

Sustaining the Lead

16 THE VALUE-FOCUSED ENTERPRISE

Check the Rulebook: It’s Different Now

Decision-Making, Value Creation, and the CEO Paradox

Decisive Value-Creating Companies Kick Sand in the Face of Ditherers

Capability Gaps and Unwritten Rules Sabotage Value Creation

We’ve Got a Great Solution! Where’s the Client?

Orchestrating Alignment – The Way to Value

Don’t Discount Human Nature

Where Have We Got To? This Looks like a New Planet

FIGURES

Figure 1: Inside Out and Outside In

Figure 2: Outside In and Inside Out

Figure 3: Technological Trends and Key Drivers

Figure 4: The Value-Proposition Process (VPP)

Figure 5: Value Propositions Are Developed for Each Layer of the Sales Process

Figure 6: Value Propositions Layer within a Sale Opportunity

Figure 7: Cost-Benefit Analysis

Figure 8: The Value-Proposition Builder

Figure 9: Value-Proposition Hierarchy

Figure 10: Broad Components of a Value Proposition

Figure 11: Traditional Business Framework

Figure 12: The VFE Framework

Figure 13: Value Pyramid

Figure 14: Value Pyramid: Transactional versus Consultative Sales

Figure 15: Buying Cycle Sequence

Figure 16: Garbage-Can-Model Outcomes

Figure 17: Value-Proposition Builder

Figure 18: Key Questions to Ask when Targeting

Figure 19: Focusing on Maximizing Customer Opportunities

Figure 20: Software Companies and Manufacturers Understand Customer Experience

Figure 21: Market Research Techniques

Figure 22: Customer Empathy

Figure 23: The Value Interview

Figure 24: Key Marketplace Considerations

Figure 25: Focus on Your Offering

Figure 26: Portfolio Categorization

Figure 27: Portfolio Mapping within a Supply Chain Consulting Organization

Figure 28: The Entire Production Process for a Technology Company

Figure 29: Value Pyramid

Figure 30: Value Pyramid End-User Influencers and Export Buyers

Figure 31: Benefits Map

Figure 32: Business Process Improvement Organizations

Figure 33: Sample Points of Difference Matrix

Figure 34: Demonstrating Value to Your Customers

Figure 35: Value-Proposition Definition and Misconceptions

Figure 36: Creating High-Impact, Value-Based Messages

Figure 37: Perceptual Map Degree of Difference versus Value to Customer

Figure 38: Emotional, Political, and Rational Messages

Figure 39: Value Pyramid in Relation to Message Type

Figure 40: Research Organization Value Pyramid in Relation to Message Type

Figure 41: Implementing Your Value Proposition

Figure 42: Sales vs. Marketing Conflicts

Figure 43: How Marketing and Sales Work Together in Consultative Selling

Figure 44: Creating Sustainable Sales

Figure 45: A Typical Buying Process

Figure 46: Obtaining Superior Returns Based on David Maister’s Causal Model

Figure 47: Creating Sustainable Sales

Figure 48: Offering Management Process

Figure 49: Defining Gateways to Development

Figure 50: Role of Senior Management Team

Figure 51: Key Commercial Criteria for Senior Management

Figure 52: Offering Life Cycle

Figure 53: Constituent Parts of the Product

Figure 54: Boston Consulting Group Matrix

Figure 55: Four-Box DPM

Figure 56: Market Segmentation Considerations and Approach

Figure 57: Value Experience

Figure 58: A Rolling One-Year Value-Proposition Review Process

Figure 59: The Three Layers of Organizational Change

TABLES

Table 1: Key Trends for Corporate Success Pre-COVID and Post-COVID

Table 2: FAB – Features, Advantages, and Benefits

Table 3: Summary of Value-Proposition Outcome

Table 4: Strategic Value Pathway

Table 5: Transactional versus Consultative Buyers’ Behavior

Table 6: Example of Claimed Benefits Detailed and Substantiated

Table 7: Ten-Point Value-Proposition Template

Table 8: Value Merchants versus Value Spendthrifts

Table 9: Ten-Point Value-Proposition Template

1

Background and a Little More Than

Background

The term value proposition is used ubiquitously in business today, and its original meaning has been dissipated into vague sales and marketing notions that are a significant distance away from its intended meaning and use. It is often used to mean benefits, offering, unique selling point (USP), or differentiation, and is also generally regarded as the preserve of sales and marketing and not linked to an organization’s strategy.

This book seeks to address these misconceptions and clarify what a value proposition is and what it isn’t, why they are needed to be profitable in business or successful as a not-for-profit organization, and, crucially, how organizations can build value propositions and use them. The book focuses on customers who are external customers to an organization. However, there are always examples of customers internally in an organization and it is noted that these two can use the concept of a value proposition. Similarly, value propositions are not just about selling. They can be used, for example, by a purchasing function to help select a supplier. Value propositions are alignment tools, and that is one of the key principles of this book – alignment. Aligning internal thinking to external thinking – be that suppliers or customers along the value chain.

Another key theme is customer experience. Customer experience, in its broadest view, is hailed by many to be the next competitive battleground. What seems missing is how to use customer experience in a repeatable way and harness it for profit. By focusing on superior customer experience, organizations can create savings. Rather than focusing on what customers do and don’t value, the focus should shift to those things that customers value and that make a profit.

This book demonstrates how creating value propositions is the perfect method for corralling and then harnessing customer experience. Since customer experience is closely allied to emotions, this model is particularly relevant to service sectors where relationships are key.

The aim of the book is primarily towards business-to-business organizations, not-for-profit organizations, central and local governments, financial services organizations, professional services firms, technology organizations, services companies, non-departmental government bodies, and nongovernmental organizations (NGOs). All can learn something from this approach, although their contexts will be different and unique.

Book Structure

Chapter 1 is an introduction to the importance of customers and maintains that a crucial tenet of moving to a value-proposition model is putting customers at the heart of everything you do.

Chapter 2 explains what a value proposition is and what it isn’t and how it belongs at many levels in an organization.

Chapter 3 explores the value-focused approach.

Chapter 4 introduces the Value-Proposition Builder, the focus of this book and the practical guide to help you build your value proposition.

Chapters 5 through 10 detail the six steps to building your value proposition.

Chapter 11 shows two outputs from the building process, the value-proposition template and statement.

Chapter 12 shows how to create messaging from your value-proposition outputs, and Chapter 13 looks at aspects of implementation across the organization.

Chapter 14 looks at the specific area of pricing of a product and how that is part of a value proposition within a business and various pricing approaches.

Chapter 15 gives a short guide as to how to get started immediately and how to keep your value proposition alive over time.

Chapter 16, the final chapter, looks at how you can become a value-focused enterprise.

What Are Customers and Who Are They?

A customer is an individual or business that purchases another company’s goods or services. Customers are important because they drive revenues; without them, businesses cannot continue to exist. All businesses compete with other companies to attract customers and are always trying to understand them, their characteristics, and their patterns. This understanding is essential to ensure that value can be communicated to them directly – and therein lies a truth. The greatest value won’t always come from a product or service but rather from the ability to facilitate the analysis of situations to get absolute clarity so that messages can be brilliantly communicated.

The important factor is the client experience. What issues does a company, product, or service address or solve for a client? Why do those issues occur, and what underpins them? And what other companies (markets, segments, specific companies) experience those issues and would, therefore, represent good sales opportunities?

These are the issues this book sets out to explain. We are talking about value propositions. And let’s make it clear from the outset that a value proposition is not what you do. It is the value experience that is delivered to a customer. A company may make wonderful things, but the value delivered is something else and something that is hugely more valuable.

What Do You Really Think about Customers?

This book is about value propositions (VPs) and how they build a chain of value within a business extending from strategy the complete way to