5.3.1 Value Proposition in Business Markets¶
In the business market, value propositions are critical in establishing why a customer should purchase from a particular supplier. There are three primary types of value propositions in B2B markets: All Benefits, Favorable Points of Difference (POD), and Resonating Focus. Each has its unique approach, strengths, and weaknesses.
1. All Benefits¶
Definition¶
This value proposition lists all the benefits that an offering can provide to the target market. It highlights every characteristic, feature, and quality of the product or service.
Characteristics¶
- Ease of Creation: It is the simplest value proposition to develop as it focuses solely on the supplier's perspective.
- Lack of Knowledge: There is minimal understanding of the customer’s needs and competitor offerings.
- No Clarity on POP or POD: Without knowledge of competitors' propositions, the focus may lack differentiation.
Challenges¶
- The offering might not align with the customer’s actual needs.
- Can lead to price competition if differentiation is not clear.
Example¶
A company selling gas chromatographs highlighted its ability to maintain a high degree of sample integrity. While this was valuable for R&D labs, it was irrelevant for commercial labs that already ensured high sample integrity as part of their processes. This led to a failure in creating value for the new segment.
2. Favorable Points of Difference (POD)¶
Definition¶
This approach emphasizes the unique advantages of an offering compared to competitors. The focus is on what sets the product or service apart.
Characteristics¶
- Customer-Centric: Requires understanding the customer's needs and competitor offerings.
- Relative Value: Highlights differences but might not convey the actual value to the customer.
Challenges¶
- Focuses on differentiation without fully addressing how it adds value to the customer.
- Risk of overlooking critical customer requirements.
Example¶
An IC maker pitched its superior service as a POD while competing against a rival offering a 10-cent cheaper price. Despite the superior service being worth just 0.2 cents to the customer, the salesperson reduced the price by 10 cents, losing significant revenue. Had the IC maker understood the customer's value model, it could have charged a higher price instead.
3. Resonating Focus¶
Definition¶
Resonating Focus is considered the gold standard in B2B marketing. It focuses on delivering a value proposition that aligns directly with the critical business issues of the customer.
Characteristics¶
- Deep Customer Understanding: Requires knowledge of the customer’s business, challenges, and goals.
- Simplified Focus: Emphasizes the most important PODs and POPs that resonate with the customer’s needs.
- Problem-Solving Approach: Demonstrates how the offering can improve the customer’s business.
Approach¶
This value proposition goes beyond features and differentiation. It aims to enhance the customer's business by considering their end customers (B2B2C perspective).
Example¶
Sonoco, a global packaging supplier, aimed to provide packaging solutions to a European consumer goods manufacturer. Instead of focusing on multiple features, it emphasized: - POD 1: Redesigned packaging to increase manufacturing efficiency, reducing labor costs by enabling a shift from a 7-day, 3-shift schedule to a 5-day, 2-shift schedule. - POD 2: Created an appealing packaging design to attract more customers and boost sales revenue. - POP: Matched the pricing of competitors.
This approach solved the customer's business problem by reducing costs and increasing profits, showcasing the true value of the offering.
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