Professor Malcolm McDonald literally “wrote the book” on strategic marketing and has over 40 best-selling guidebooks available today. He has worked as marketing and sales director for Canada Dry and is currently chairman of six companies. He has some great ideas. One of our favorites is that because a marketer’s job is to understand customers, they should have a very central role in company decision-making. Today let’s look at a more specific idea and find out why it is so important to have a financially quantified value proposition.
What is a financially qualified value proposition?
A value proposition is simply an explanation of the benefits you offer a customer with your unique selling proposition (USP). Your USP tells customers why your product or service is unique or special. Your value proposition explains why they should care. And your financially quantified value proposition puts that reason in clear dollar terms.
For instance, our un-bank, Airwallex is unique in that they offer no-fee international payment transactions within their network and $10 SWIFT transactions. If you are using a bank and paying $25 for international wire transfers for your transactions, you will save, at a minimum, $15 multiplied by the number of transfers you need to do. There is also no monthly fee, so if you are paying a fee to a bank you can add that to your savings if you close your bank account and move to Airwallex. That’s a well-qualified financial value proposition. Although we left out their great exchange rates. We love them so much, we are going to give them some free advice: they should put an interactive savings estimator on their website. Now that’s a great financially qualified value proposition because it speaks to each customer’s particular and unique needs.
Financially qualified value propositions provide a big pricing and sales advantage
Malcolm often finds himself disappointed in his colleagues in the industry. Few meet his high standards of excellence. In 20 years of research, he has found that few companies, even when you are studying market leaders like 3M and Rolls Royce, have a financially qualified value proposition. But doing so would convey a big advantage. If you can show customers what your product or service can do for them in specific financial terms, you can charge 15 to 25 percent more than competitors who don’t. If you don’t quantify benefits, you will have to compete on price. Lowering your margin destroys profits. And on top of that, McDonald’s research shows you can close 5 to 10% more leads with a qualified proposition and reduce your sales cycle 10 to 20%. So, like another favorite of ours, Seth Godin, McDonald urges marketers to make their companies special, not cheap.
Generally speaking, marketers are doing a terrible job of quantifying value propositions
This is a recurring theme in McDonald’s work. Almost nobody is really striving for excellence. Mediocrity is the norm. McKinsey research shows that only about five percent of companies have financially quantified value propositions. McDonald thinks it’s even lower, maybe around 2%. That’s great news for those seeking a competitive edge!
Malcolm concludes “If only five percent of companies have got [financially quantified] value propositions, what on earth do marketing managers think their job is?” Ouch!
How about you? Does your value proposition meet McDonald’s standards? Or are you going to go financially qualify it right now and get an advantage over 95% of your competition?