The Problem with Value Propositions
Value propositions can be helpful in your business if you craft them correctly, and there’s only one right way. It involves talking to clients . . . repeatedly.
The Price and Value Journey is presented by John Ray and produced by the North Fulton studio of Business RadioX®.
TRANSCRIPT
John Ray: [00:00:00] Hello, I’m John Ray on The Price and Value Journey. The term value proposition is generally credited to two McKinsey consultants, Michael J. Lanning and Edward G. Michaels. And they used the term in a 1988 paper entitled A Business is a Valued Delivery System. In the paper summary, Lanning and Michaels wrote, “A business is a system for superior value delivery. Choosing a superior value proposition and echoing it through the business system by providing it and communicating it. And managing this delivery is top management’s primary job.”
John Ray: [00:00:44] Well, how do you come up with a superior value proposition? Well, you talk to a customer, rinse, and repeat. And just keep doing that. If your value proposition is the product of sitting in a room with a whiteboard without any client interaction, all you have is your own opinion. Your value proposition is what you think, not what you know, from actual conversations that you could have had. Lots of money has been lost in business by not understanding the difference between think and know.
John Ray: [00:01:23] In their paper, Lanning and Michaels illustrate the point by pointing to IBM, who, at that time, dominated the business computer market. IBM did so with products generally deemed less advanced than the competition, yet IBM charged premium prices. Competitors explained this advantage as “superior marketing” coupled with a slick sales force who could talk customers into buying inferior products.
John Ray: [00:01:53] What Lanning and Michaels point out in their paper is that IBM was meeting the needs of customers at that time who valued reliability over the latest technology. IBM understood what clients valued and what they were willing to pay for that value. IBM understood that the value and a value proposition is the client perception of value. It wasn’t their perception of value.
John Ray: [00:02:22] If you simply internalize and run your practice based on the following two principles, you’ll not only have an effective value proposition, but you’ll be able to work through a lot of problems, including your pricing in your practice. Those two principles are (1) clients determine value, (2) a business is a value delivery system.
John Ray: [00:02:49] I’m John Ray on The Price and Value Journey. Past episodes of the series can be found at pricevaluejourney.com or on your favorite podcast app. And I’d be honored if you subscribe, if you haven’t already. And if you’d like to connect with me directly, you can send me an email, john@johnray.co. Thank you for joining me.
About The Price and Value Journey
The title of this show describes the journey all professional services providers are on: building a services practice by seeking to convince the world of the value we offer, helping clients achieve the outcomes they desire and trying to do all that at pricing which reflects the value we deliver.
If you feel like you’re working too hard for too little money in your solo or small firm practice, this show is for you. Even if you’re reasonably happy with your practice, you’ll hear ways to improve both your bottom line as well as the mindset you bring to your business.
The show is produced by the North Fulton studio of Business RadioX® and can be found on all the major podcast apps. The complete show archive is here.
John Ray, Host of The Price and Value Journey
John Ray is the host of The Price and Value Journey.
John owns Ray Business Advisors, a business advisory practice. John’s services include advising solopreneur and small professional services firms on their pricing. John is passionate about the power of pricing for business owners, as changing pricing is the fastest way to change the profitability of a business. His clients are professionals who are selling their “grey matter,” such as attorneys, CPAs, accountants and bookkeepers, consultants, marketing professionals, and other professional services practitioners.
In his other business, John is a Studio Owner, Producer, and Show Host with Business RadioX®, and works with business owners who want to do their own podcast. As a veteran B2B services provider, John’s special sauce is coaching B2B professionals to use a podcast to build relationships in a non-salesy way which translate into revenue.
John is the host of North Fulton Business Radio, Minneapolis-St. Paul Business Radio, Alpharetta Tech Talk, and Business Leaders Radio. house shows which feature a wide range of business leaders and companies. John has hosted and/or produced over 1,600 podcast episodes.
