5 Value Proposition Mistakes B2B Technology Companies Make [With Jose Palomino]

9 min read
May 27, 2023 8:59:37 AM
5 Value Proposition Mistakes B2B Technology Companies Make [With Jose Palomino]

Over the past 12 years, I have worked with about a dozen or so B2B tech companies, and every one of them had a problem defining their value proposition. Crystalizing the unique benefit you provide to your customers is hard for any business, but B2B technology is complex, often requires explanation, and can solve a problem your customers cannot even name yet.

I interviewed B2B Value Proposition expert, Jose Palomino, to learn more about what a great value proposition looks like and what common mistakes he sees businesses, especially B2B technology companies, make.

About Jose Palomino

JosePalominoJose Palomino started his consulting firm, Value Prop, in 2005, through which he helps small to mid-size B2B companies define their value proposition that becomes the launchpad for a solid growth strategy. He is the author of the books Value Prop and Strategic Positionings and teaches graduate students Strategic Marketing Management and Entrepreneurial Marketing.

Connect with Jose on LinkedIn

Jose, thank you so much for doing this interview with me today. We have known each other for many years now. What has it been? 15 years?

Yeah, we met way back when I consulted the Competitive Intelligence group you were in within SAP Global Marketing. I remember it clearly. We defined the competitive position and value proposition of a new SAP product called Netweaver against Oracle. Both products were highly overlapping.

At the end of the day, we came up with 32 benefits the SAP product provided. Thirty of those were equally or somewhat matched by your competition, but the remaining two became our gold dust for defining the competitive edge.

To start, can you tell us a little more about who you help and what your unique approach is?

Yeah, sure. I focus on value propositions for owner-led B2B companies, primarily in the small to mid-size market. We work with various industrial and professional service categories, but they tend to veer more toward industrial. I work with owners of businesses because I like to work with people who can see all 360 degrees of the business versus a staff member who only sees their narrow silo. You can't solve for growth, strategy, and revenue until you look at the business holistically, especially a small business.

Our approach is to first diagnose what is going on with the business. We have a 48-point diagnostic tool called the "Revenue Throughput Analyzer." So we look at a business as a throughput engine, right? Opportunities come in on one side, and revenue comes out the other. What you have in the middle is often the interesting bit because you have a lot of different dimensions that could affect the outcome.

It is far beyond lead generation, marketing, or even sales. With a company of that size, it could be customer success or lack of that function. Maybe the product is bad, or they are late with delivery. Those things make them fall behind. They could also have capital constraints because they are privately held, so the question becomes, how do you get more done with limited resources?

So we try to look at all those things. We won't address all those things, but we will call them out because that's the thing that causes the stoppage. And then, we help an owner really craft an overall strategy based on their value proposition.

The term "value proposition" means many things to many people. Can you define it for us?

I always start with the 3 cornerstone questions for any marketing effort:

  1. Who do you want to market/sell to?
  2. What problem are you solving for them that is otherwise not being addressed adequately by the market?
  3. How do you address it in any way that's any different?

Imagine you are one of three companies that regularly gets shortlisted. You have a 33% chance of winning the deal. How do you increase your chances of winning to 40 or even 50%? By showing your prospect that you have a better understanding of the customer's problem. The customer has to feel like, "They get me, they know who I am, they seem to be serving me," and then lastly, "they're approaching this in a way I haven't seen before."

In your books and podcasts, you talk a lot about a "sharp" value proposition as the starting point for strategic growth, followed by consistent value delivery, relevant marketing activities/programs, and, finally, a value-driven sales process.

Why is a sharp value proposition so important?

When discussing a value proposition, we use our I-3 Value Proposition model. It has three layers: It is innovative, indispensable, and inspirational. Let's look at each one.

The first is innovative. To what extent is your product or service new to your target audience? That could be a service layer. Many SaaS companies are moving away from service and putting everything on video libraries and self-help articles because they want to scale. And I understand that. But in certain categories, especially if your SaaS offering is industrially focused or very B2B-ish, you might want to add a service layer to build real customer success. This will differentiate you. Unlike other companies that leave you hanging to figure it out for 60 days, we will get you up and running in 14.

The second component of the I-3 Value Proposition is indispensable. What that means is that you can show how you are going to continually deliver value that will be useful to the buyer for a long time.

The inspiration for that comes from thinking about the most aptly named athlete in the world: Usain Bolt, the fastest man alive. When you look at his races, he runs against the fastest men in the world. And he wins consistently, but he only wins by fractions of a second, literally hundredths of a second. But he wins consistently. Now what is interesting about this is that after he wins, they give him the entire gold medal. They don't say, "Listen, you only won by a little bit, so we're only going to give you a little bit of the gold medal."

It is the same with sales and marketing. At the end of the day, the second-place salesperson, marketing team, or business development team gets exactly zero for their efforts at that point. They get nothing. The winner gets all of it, even if they only won by a little bit. In very competitive markets, we look at value propositions as the slightest tiebreakers that you can apply consistently.

The third element is inspirational. This is a little harder because it is a bit of an art. But how exciting are you to your target audience? An old, yet great example is the box the iPhone comes in. People kept the box because it felt special. So they kept on hitting that point, and that's the inspirational part. But it is important to point out that the difference in your value proposition can't just be strange. If you are the only coach who shows up in a top hat, that is entertaining, but my customers don't hire me as a comedian. So you have to find a meaningful difference that is not being addressed.

If you really have something — net new, net useful, net wow — you can really stand out. You want a sharp value proposition to pull ahead of your competition by even a marginal amount, like a razor's edge. That gives you the win. Otherwise, you look just like your competitors. So you've got to find that one edge that can make a difference.

Being a They Ask, You Answer coach, I help organizations become the Voice of Trust in their space. When you describe the three I's, I can't help but hear that crafting a sharp value proposition is a lot about creating trust.

Well, it is, especially with corporate buyers, right? Corporate buyers are not spending their own money — they are spending their company's money. What is at stake for them is continued employment by making successful choices, right? So, trust is very big there. In IT, there was a saying, "Nobody got fired from picking IBM." At Tandem Computers, we sold an alternative mainframe. How do you overcome that?

There is another saying: "People buy from people they know, like, and trust." I don't quite agree with that, especially in the corporate world. No one cares anymore about who plays golf with whom. You need referenceable case studies. You need proof. That is why, even in a valid proposition presentation, you have to present things that seem credible.

So I've seen small software companies say that they're "changing the world of e-commerce." And then you just think about it and go, "I don't know. You are a four million dollar startup in a world of giants. Do I believe you are going to change the world of e-commerce?" If you tell me instead that you're "eliminating the confusion and processing bills of lading" then maybe I could believe that. But you're going to revolutionize the world? That is just overly grandiose. It is not believable, and then trust will not be built. So you build on credibility stones there.

In your extensive experience, why are so many companies getting it wrong? What are the key mistakes you see them make when defining their value proposition?

Mistake #1: Not bridging the gap between the product and the buyer

The key mistake people make, especially in B2B technology, is that the people who visualize and create the product are then also responsible for creating the value proposition. It is their baby, and oftentimes they have the attitude, "I already love my product. So why wouldn't everybody else?'

They don't consider how their offering looks to the actual buyer they want to attract. They just don't bridge that gap. They don't talk to customers. They don't allow the customer to tell them, "That is a dumb idea. I have no idea why I would buy that." Those are big gaps that we‌ address in a different piece of work called the "Pivotal Conversation" where we talk about the fact that the doubtful buyer cannot buy. They cannot pull the trigger if they ‌‌still have major doubts about any part of your value proposition, your offering, how you service them, etc.

This mistake is made particularly by entrepreneurs. When they hear criticism, they cringe, and then they don't look for that input anymore because hearing it is emotionally very taxing. You put your heart and soul into an idea, and suddenly people say, "Boy, that's a really ugly baby." I mean, that's tough to hear, but the better question to ask your buyer is, "Really? Tell me why you feel that way." And they will usually tell you why.

And that is a huge platform you can build value on. Either they misunderstood something in what you do, you are missing something in what you do that they need or expect, or this other company does it much more simply than what you're talking about. You can figure out ways to fix that.

Mistake #2: Trying to sell B2B technology like B2C product

Another huge mistake I see B2B technology companies make when they define their value proposition is that they try to oversimplify things. Of course, we all want to get to the one statement, the one word that captures all the magic. But in technology, things are complicated, and a clever tagline doesn't give the buyer enough information. And you can't just render it down to one sentence. You lose meaning. In the worst cases, I see people think that a clever tagline is a value prop.

They think they can sell technology like a consumer product. Let's take Nike, for example. They can get away with "Just do it" because you already have a vision of what Nike is. A slogan like "Just do it" takes it to the next level. It's Michael Jordan slam dunking. It's very exciting, right? You attach yourself to that.

Mistake #3: Not taking a (differentiated) position

Creating a value proposition is all about taking a position and helping your buyers understand how you will make their lives better. But nobody thinks of that. They think it's self-evident. For example, in the US, companies with over 100 employees have to file a federally mandated annual report on their retirement plan balances. I worked with an accounting firm once that made 90% of its revenue from benefit plan audits. No one in their space wanted to touch those because other CPA firms usually don't like them. But that was their bread and butter. Once they took a position with their value proposition as the benefit plan audit specialist, they grew. 

Mistake #4: Using jargon or buzzwords

Another mistake I see B2B Technology companies make consistently is using jargon or buzzy language. And this is especially true in the cloud arena. People tell me all the time: "You have to check out this website." I check it, but I have no idea what the company does. What does it matter to me? I don't know. Who is it for? I don't know. And I'm an interested visitor because somebody told me about the site. But the casual visitor is going to go, "Next!"

Mistake #5: Not balancing benefits and features

At least twice a month, someone says, "People are buying the hole, not the drill." It is a maxim in marketing, right? But my point is that sometimes people do geek out over the thing, the drill. Otherwise, you would only buy a car that looked like a box and took you from point A to point B. The details matter. The aesthetics matter. Those things do matter.

The "how" matters to some substantial degree. However, many technology companies go too far the other way, where all they present you with is the how. They confuse features with benefits. But you need both. It's like salt and pepper. It needs to be well-flavored and not just one spice.

Thank you, Jose, for your insights today. If you have tried to spark some growth but are unhappy with your ROI, need some expert advice on how to support your growth activities best, or want more clarity on your value proposition, feel free to reach out to Jose Palomino directly.

How does your marketing and sales measure up? Take the assessment to find out.

Get Email Notifications

No Comments Yet

Let us know what you think