Value Propositions for Services are Different

Most, if not all product marketing and product managers have been faced with the challenge of building a value proposition that needs to resonate with not only customers, but the sales team as well.  There are 4 basic principles to consider when building a value proposition that are pretty much fundamental.  These become even more important when crafting a value proposition that positions a new service as opposed to a product. (and will increasingly become even more so with the move to "cloud" solutions)

• need to be targeted at the audience - you had better understand who the audience is.
• one size does not fit all - which is it? Company size or vertical market?
• what is the best way to craft them?  Different approaches are needed for services vs products.
• what are the potential knock on effects if the customer actually thinks about buying your value proposition? Shock, horror!  :-)

While many people will say that a value proposition simply expresses the unique value add that differentiates a product in the market, in every case, the basic value proposition has to include 3 parts in order to work at the most basic level:

• Why - what is the problem that it solves
• How - how does your product solve it
• What - what are the benefits of the solution (and proof points)

These 3 remain important, but on their own, are not enough to make an impact when building value propositions for managed services. I would argue that a value proposition that only considers these 3 basic dimensions, is primarily targeted at your sales function, and will struggle to excite a customer - its probably boring.
  
There is a key difference when it comes to defining a customer facing value proposition for a service as opposed to a product; you are in effect asking the customer to outsource an element of their business to you, which requires a entirely different level of trust.  You are asking them to allow you into their house, to let you help make dinner when the boss is coming to dinner for the first time.

There are 4 key questions that a potential managed service customer will be considering as part of the decision making process - these are absolutely key to successful positioning, and have to be addressed:

• Strategy - can you demonstrate (a) that your service is aligned to the corporate strategy and (b) that if it is outsourced that this alignment will remain
• Knowledge - you have to be able to demonstrate that by selecting your service they are gaining access to knowledge and expertise that they just do not have access to in-house.
• Performance - how is yours better that theirs, and how will it continue to be so.
• Improvement - you have to be able to demonstrate that no matter how much they improve internally, your service will always deliver better value.

If you cannot address these, I would argue that you are going to struggle under close scrutiny, and you are opening the door to the competition.  Once you have these nailed, then ensure that you have the next set of customer conundrums covered in order to really convince the customer that your proposition is safe and will deliver on its promise.

Customers will be considering exactly how they would work through the potential positive (or negative) impact on their own organisations ability to execute, if they chose your service.  If you can demonstrate that you understand the impact of implementing your service model in their organisation - job done.

These 4 areas will be in the forefront of the customer's thinking, even if they are not saying so. If you can tick these off, you are very close to addressing all of the fundamental objections that a target customer is likely to raise, assuming of course, that your  commercial proposition stacks up of course.

Last question to you:  what do you think?

Sources:  

Slack, et al (2009), Operations and Process Management, 2nd Ed