Value Merchants. Nirmalya Kumar

the third customer value proposition alternative, resonating focus, is the most preferred. We will go even further: the resonating-focus value proposition should be the gold standard for judging customer value propositions.

      In a business world where customer managers are taking on greater responsibility and are increasingly pressed for time, to be successful, suppliers must deliver customer value propositions that are simple, yet powerfully captivating. They do this by making their offerings superior on the few elements whose functionality or performance matter most to target customers, by demonstrating and documenting the value of this superior performance, and by communicating it to customer managers in a way that conveys that the supplier understands the customers’ business concerns and priorities. The resonating-focus customer value proposition consists of the one or two points of difference, and perhaps a point of parity, that deliver the greatest value to target customers.

      This proposition differs from the favorable-points-of-difference proposition in two significant respects. First, more is not better. Although a supplier’s offering may possess other favorable points of difference relative to the next-best alternative, the resonating-focus proposition steadfastly concentrates on the one or two points of difference that deliver, and whose improvement will continue to deliver, the greatest value to target customers. To better leverage limited resources, a supplier might even cede to the next-best alternative previous favorable points of difference that customers value the least, so that the supplier can concentrate its resources on improving the one or two points of difference customers value most.

      Second, the resonating-focus proposition may contain a point of parity. This occurs either when the point of parity is required for target customers even to consider the supplier’s offering or when a point of contention, where the next-best alternative was thought to be superior but research reveals it is not, is resolved in the supplier’s favor.

      To give practical meaning to the resonating-focus value proposition, let’s consider a few examples. Sonoco approached a large European customer, a maker of consumer packaged goods, about redesigning the packaging for one of its product lines. Sonoco believed that the customer would profit from updated packaging, and by proposing the initiative itself, the company reinforced its reputation as an innovator. Although the redesigned packaging provided six favorable points of difference relative to the next-best alternative, Sonoco chose to emphasize one point of parity and two points of difference in its resonating-focus value proposition.

      Sonoco’s value proposition to the customer was that the redesigned packaging would have the same price as the present packaging but deliver significantly greater manufacturing efficiency in the customer’s fill lines through higher-speed closing and provide a distinctive look that consumers would find more appealing than the present packaging.

      Sonoco chose to include a point of parity in its value proposition because, in this case, the customer would not even consider a packaging redesign if the price were to increase. The first point of difference in the value proposition delivered cost savings to the customer, allowing it to move from a seven-day, three-shift production schedule during peak times to a two-shift, five-day operation. The second point of difference in the value proposition delivered an advantage at the consumer level, helping the customer incrementally grow its revenues and profits. In persuading the customer to change to the redesigned packaging, Sonoco did not neglect to mention the other favorable points of difference. Rather, it chose to place much greater emphasis on the one point of parity and the two points of difference that mattered most to the customer, thereby delivering a value proposition with resonating focus.

      Stressing as a point of parity what customers mistakenly presume to be a point of difference favoring a competitor’s offering can be an essential part of constructing a customer value proposition that has a resonating focus. Take the case of Intergraph, a provider of engineering software to engineering, procurement, and constructions firms—such as Fluor and Bechtel, which design, construct, and deliver process plants for their petrochemical, pharmaceutical, and power industry customers. One software product that Intergraph offers in its SmartPlant Engineering Solution is SmartPlant P&ID, which enables customers to define the flow processes (i.e., through valves, pumps, and piping) within plants they are designing and to generate piping and instrumentation diagrams (P&ID). Intergraph’s resonating-focus value proposition for SmartPlant P&ID consists of one point of parity followed by three points of difference:

       Using SmartPlant, customers can create the P&ID graphics (i.e., drawings or reports) as fast, if not faster, than the next-best alternative.

       SmartPlant P&ID checks all the customer’s upstream and downstream data related to plant assets and procedures—using universally accepted engineering practices, companyspecific rules, and project- or process-specific rules—at each stage of the design process so that the customer avoids costly mistakes, such as reiterating the design or, worse, ordering the wrong equipment.

       SmartPlant is integrated with upstream and downstream tasks, such as process simulation and instrumentation design, thus requiring no reentry of data (and possible errors).

       With SmartPlant, the customer is able to link remote offices to execute the project and then merge the pieces into a single deliverable database to hand to its customer, the facility owner.

      Intergraph has found it necessary to include the point of parity in its value proposition because some prospective customers wrongly presume that SmartPlant’s drafting and graphic drawing performance is not as good as that of the next-best alternative. This presumption sometimes occurs because the next-best alternative is built on a computer-aided-design platform, whereas SmartPlant is built on a relational database platform. To counter this misperception, Intergraph has gathered data at reference customers to substantiate that this point of contention is actually a point of parity.

      Resonating-focus value propositions have the potential pitfall of requiring customer value research. We find that customer value research is something that most suppliers, despite all the talk about customer value, have not actually done in a systematic way. Customer value research is not easy; it requires time, effort, persistence, and some creativity. Yet, as the experience of a leading resin supplier amply illustrates in chapter 4, not doing customer value research may actually be a greater pitfall.

      Customer Value Propositions and Superior Business Performance

      Constructing value propositions that resonate with target customers and substantiating them with customer value research enables suppliers to achieve superior business performance. Let us provide a proof point for this. Consider the results for Intergraph. It has posted revenue growth of 35 percent per year versus 10-12 percent for its industry. And, with today’s emphasis on profitable growth, Intergraph has a profit margin of 26 percent versus 14-16 percent for the industry.

      Some managers, though, simply view value propositions as something that the marketing folks do as a basis for creating business marketing communications such as advertising or signage for trade show booths. We believe that this view is shortsighted and neglects the potential contribution of value propositions to superior business performance. Properly constructed, customer value propositions force companies to rigorously focus on their target customer’s requirements and preferences and what it is worth in monetary terms to fulfill them. By involving managers from all the relevant functional areas in the process, at least to some extent, the creation and assessment of value propositions provide a means of forging shared understanding of what the supplier is seeking to accomplish in the marketplace.

      Viewed in this way, the value proposition statement can serve as a guiding beacon and touchstone for the agreed-on market strategy and, especially, as the answer to this question: “What do we want to accomplish?” It puts into sharper focus which firms the supplier regards as the relatively important customers, what the supplier wants to emphasize about its market offering, and what promise the supplier is making to customers about the value they will receive. Everyone in the supplier’s workforce needs to have a good grasp on these issues.

      Yet not everyone in the firm may want the greater direction and focus that value proposition statements provide. For example, some may want