Earlier posts used buyer types to explore the ways evaluators’ roles and experience shape the way they review proposals. In this and coming posts we’ll show how to use that knowledge to develop value propositions for each buyer type.
Anatomy of a value proposition
Every durable business relationship is based on value. The seller offers the buyer an economic benefit (e.g. reduced costs and/or increased revenue) at a specified price. The value is the difference between the benefit and the price.
The offer forms a value proposition. A compelling value proposition is similar to a SMART goal. It’s Specific, Measurable, Attainable, Relevant and Time-based.
Economic buyer user proposition
Here’s a value proposition for an economic buyer that meets SMART criteria:
- BuyerCo will save 20% in order fulfillment costs using OurCo’s ShipPro software solution. Following a no-cost implementation (6 weeks), direct labour per package shipped will decrease by 5 minutes, based on tests using BuyerCo costing metrics. At a monthly cost of $1,800, ShipPro will save BuyerCo $3,750, based on 3,000 average monthly shipments and $15/hour labour rate.
Collaborate with clients on value propositions
Accurate and complete value propositions can only be developed with information from both parties. For this reason, business developers need to develop close relationships that include value propositions as part of client conversations.
In competitive bid situations, pre-RFP collaboration enables more targeted and complete offers. In the case of informal proposals, well-developed value propositions can become the basis for a sole-source contract. (Even we know winning without bidding is better!)
Despite these advantages, too many sales conversations never address the underlying value proposition. This ignores the fact that both buyer and seller are responsible for hammering out a deal that’s good for their respective employers.
What if you can’t mention price?
In two-envelope systems, where you can’t include price in the narrative, you can still express economic value. Here’s an example using the value proposition above:
- BuyerCo will save 20% in order fulfillment using OurCo’s ShipPro software solution. Following a 6-week implementation, direct labour per package shipped will decrease by 5 minutes as measured by BuyerCo metrics, resulting in a return on monthly investment of more than 200%.
Be sure to also include the full value proposition, with all pricing and costs, as part of the cost volume executive summary, if permitted.