Compelling Value Proposition
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The Importance of a Clear Compelling Value Proposition What is a CVP (often called USP)? According to Wikipedia, the term USP (Unique Selling Point, or Unique Selling Proposition) was created by Rosser Reeves of the Ted Bates Ad Agency. The idea was that each product should have a specific benefit that was unique to it (hence different from the competitors), and it must be a compelling proposition such that it can move a lot of people to buy the product or service. When done well, this proposition could be captured by a memorable phrase or line. Some of the classic USP’s include: Federal Express with its: “When your package absolutely, positively has to get there overnight.” M&M’s: “… melts in your mouth, not in your hand.” Domino’s when it first came out: “… Delivered … in 30 minutes or less … or it’s free.” Burger King: “Have it your way!” Wendy’s: “Where’s the beef?” Avis: “We try harder.” Notice the benefit, the uniqueness, and the compelling proposition that is proposed.
Compelling Value Proposition Recently, Spike Humer, author and marketer gave a lecture in which he posited that he much preferred the term “Unique Value Proposition” because providing value to a customer was the goal, and not just making a sale. We agree, but believe that more than unique, the proposition should be compelling. The CVP must be real and tangible rather than just an interesting ad line. Many companies spend a fortune on developing great brand strength with a strong CVP and a memorable line, but the real test is: do they believe in it with every fiber of their body? A lot of cynicism arises because of the disconnect between what a company says it stands for and what they actually do.
Recently, one of the more humorous, and biting, videos was titled “United Breaks Guitars” and can be seen at http://www.youtube.com/watch?v=t53LYUamBZI. It has been viewed more than 5 million times. (We knew this link had gone viral when a family member from Brazil sent us a link to watch this!) Now compare “United Breaks Guitars” with the “Fly the Friendly Skies” slogan backed by the haunting Gershwin melody. It is true that the airline business is in distress, but a wonderful positioning of the “friendly skies” has been virtually destroyed by the callousness of the airline and its workers. The point then is a USP, or a CVP, is not a marketing gimmick. Rather, it is a declarative statement of intent, belief, action, and a promise to the customer. Do not make promises that you cannot keep. (For that, you should just run for Congress.) Think about Nordstrom. It is known for its legendary service. The story, as most of you know, goes something like this: a customer came in with a set of tires he wanted to return. The sales person inquired as to the price he had paid and provided a refund. So far, nothing unusual, right? The only catch was that Nordstrom is a shoe and clothing store – it does not sell tires! Were they stupid? Or did the notion of service reach a truly exalted level? And how about an employee who understood what service meant and was not afraid of some supervisor chewing him out? As the credit card commercial would say: the price of the tire refund - $600; the ensuing publicity and image – priceless.
Components of a CVP 1. What do you do? (Beer, etc.) 2. Define target market (adults) 3. Explain problem being solved (Quenches thirst, makes you look good, attracts the opposite sex)
Compelling Value Proposition 4. Why you provide a Compelling experience (“Michelob was made for weekends”) Tie it to a memorable line if you can. But the most important thing is to internalize your CVP, embrace it, live it, make sure your workers understand it and are empowered to act accordingly. It is the “compellingness” that provides value above the “commoditization.” If everyone sells the same thing, there will always be someone who will sell it for less. This segment of the market will always be fighting for survival. But find a “compelling” value for your customers, and you may well earn the right to survive and thrive.
The strategies must be derived from the CVP The airline industry has lost money cumulatively since the birth of aviation. Think about this. For the 100 or so years the industry has been in existence, it has lost money. This is a pretty dismal industry; one that Warren Buffett concluded was impossible to make money in. So how is it that Southwest Airlines has been profitable for 33 straight years? In an article in Porfolio.com, written by Joe Brancatelli, titled “Southwest Airlines’ Seven Secrets for Success”, he asks: “What does Southwest know that no one else in airlines does? It keeps things simple and consistent, which drives costs down, maximizes productive assets, and helps manage customer expectations.” What is the CVP of Southwest? Low Cost. And its strategies are all derived from this CVP. It uses only one kind of plane – hence lower maintenance cost, faster ground turn around, better utilization of equipment. No frills, no fees. Point to point flying results in higher efficiency. Simple in-flight service; again, low cost. In the swelblog archive (dated 2-11-09) the following data appeared in a chart:
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Airline
2007 CEO Comp
Employee Average
Ratio
$ million
Comp $ 000
United
$10.3
$73
142
Continental
$7.3
$70
104
Northwest
$7.7
$78
99
US Airways
$5.4
$63
85
American
$4.6
$81
57
Air Tran
$2.7
$51
53
Delta
$3.7
$71
52
Alaska
$1.4
$76
18
Southwest
$1.3
$91
14
jetBlue
$0.8
$63
13
AVERAGE
$4.5
$72
63
Not surprisingly, the total compensation for the CEO of Southwest was modest compared to his peers. When the CVP is the driving force of a company, and all the srategies, and behaviors, are consistent with it, a company will generally outperform its competitors. This “law of gravity” holds even in a disentegrating industry.
A few CVP types Jay Abraham, in his works, offers a handful of CVP types: Preemptive: In an industry, where the products might be similar, the first one to stake out a clear positioning will claim the high ground. The classic case was Schliz beer a few decades back. Today, there are several delivery companies, from FedEx to UPS to DHL to the US Postal Service. FedEx was the first one to claim the mantle “absolutely, positively has to get there overnight”, and hence remains the leader.
Compelling Value Proposition Discount/Low Price: Here is Walmart with its new slogan “Save Money, Live Better”, which is a good example of a Compelling Value Proposition, while its previous slogan “Always low prices” was more representative of a Compelling Selling Proposition. In either case, value – in the form of low prices – is the unifying strategy. Service Oriented: Nordstrom, Costco, and even Amazon personify this positioning. You can return just about anything to Costco (other than electronics) anytime. The limit on electronics was limited to three months, only when people started returning their old iPods whenever a new one came out! But imagine the strength of their promise. It provides security. Most customers are fair. True, a few will misuse the privilege, but the loss associated with such customers is miniscule compared to the growth in business associated with satisfied customers. Quality Snobs: Neiman Marcus, Rolex, and Maserati are just a few names that come to mind. What else can be said about this grout that they haven’t already said about themselves? Here is a fun homework assignment for the reader: What is Disney’s UVP? Does it deliver? Do its strategies flow directly from this UVP?
Summary: Without a Compelling Value Proposition, a company is doomed to the land of commoditization, always struggling to survive. However, by providing a Compelling Value Proposition to its customers, it earns the right to delight them, who then allow it to make a profit, sometimes a very handsome profit. A CVP is not an empty marketing slogan. Rather it defines what the company is committing to deliver to its customers; hence all its strategies, behaviors, actions must be absolutely aligned with this commitment. And, please do not forget to tell your employees about this commitment.
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