Identifying Value Proposition and Customer ROI

By Kathryn Haring - April 24, 2020

Gain insights from our experts at GST Labs. Discover the right questions when defining your Value Proposition and Customer ROI to your target market.

You have the best product or idea in the world- ready and waiting for it's chance to shine on the market. You can clearly see the value that it presents. The question is how to get your clients to see that same value? Your Value Proposition and Customer Return on Investment (ROI) are two key indicators of how you should market your product.

The Value Proposition is your innovation, service, feature intended to make your product attractive to your customer. Your solution is what will carry your prospective customers through the sales process. The goal is to offer a solution that addresses their problem. To make your product "win" the sale, your prospects must see the value in your solution from the beginning of the sales process.

The Impact:

Your Customer ROI figure will serve as the backbone to your demo and streamline your development process. Questions such as “how can we further improve our Customer's ROI” will connect your business to your clients. In Sales and Marketing, your value proposition will be used to target specific needs and wants for your clients.

The Goal:

Find the total the cost of the problem you are solving and the savings your customer will see with your product. These figures will be used to calculate an ROI and create your product's value proposition.

Background:

It is important to nail your Value Proposition as it will be a key factor in many purchase decisions for early adaptors. Your primary goal is to maintain trust and credibility, resist the temptation to overestimate any savings- that is a secondary factor. Prospects will push back on different aspects of your Value Proposition, so make sure it is bullet-proof and be prepared to defend it.

Steps to identifying the problem, solution, and market value of your Value Proposition. 

The Problem: 

  • Identify the precise problem are you solving.
  • What is the cost of the problem in real dollars?
  • Brainstorm all intangible and tangible costs due to this specific problem. Some elements to consider: effects on labor, reputation, time, workflow, deals held up, or missed opportunities.
  • Monetize these costs.

The Solution: 

  • Identify the solution to the problem. 
  • What is the value of your solution in real dollars?
  • Brainstorm all potential sources of value a Customer may experience while using your product. Some elements to consider: how your product improves a Customer's current and future workflow, use of time, allocation of resources, reputation or ability to solve future constraints.
  • Monetize these savings. Resist the temptation to overestimate any savings; your goal is to maintain trust and credibility.
  • Calculate ROI. ROI = (Total Savings - Cost of Product) / Cost of Product

**Note: The cost of product here is the actual amount a customer will pay to acquire your product (ie a monthly fee).

Targeting Your Market: 

  • How is your solution unique compared to your competition? 
  • Craft your value propositions using the ROI and uniqueness factors you have gathered. A helpful tip is to start with a longer description to get your message across and then distill it into its most concentrated form.
  • Show evidence that supports your solution to the problem. Use this in your marketing materials, demos, and sales pitch. 

Gain Outside Perspective: 

If you're struggling to identify the value of your product to a Customer, consult with stakeholders outside the sales team. An outside point of view highlights new thinking and opinions that may have been previously ignored. Key groups to contact can include current customers, focus groups, industry experts, and developers. You are looking for those with a unique perspective who can help the sales team develop a more robust picture of the value of a product.

The Value of Intangible Contributions: 

Intangible contributions to a product's value are difficult to monetize. Instead of forcing a dollar figure to these intangibles like reputation or other social elements, GST recommends including them in the ROI Analysis as a separate list of "Intangible Value." A list such as this allows your company to include these intangibles without losing your credibility for forcing a definitionally subjective valuation.

For More Information About Our Plays:  

For detailed information about our playbook and insights from our team contact us at venturepartner@gstdev.com. Our goal is to help your business come out on top - let us help get you there. 

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