Unique Value Proposition Explained

Unique Value Proposition

On a recent training course with a client, I heard about an interesting concept that they apply within their business. They call it Unique Value Proposition – Level 3.

I am sure many of you have come across the concept of a USP, or Unique Selling Proposition, and are all familiar with the concept of a Value Proposition. Well, surely you would want to have a Unique Value Proposition (UVP) to stand you apart from your competition?

On this subject in a discussion between Richard Law (former CEO of GBG) and Michael Porter they came to the following conclusion:

If your product or service is significantly better (+20%), in the eyes of buyers, than the next nearest competitor, your proposition will be so compelling that the buyer will choose your product or service, not only as an alternative, but as a replacement.

If you think the name Michael Porter sounds familiar, that would not be a surprise. He is a famous academic considered a business thought leader. His books like Competitive Strategy, Competitive Advantage and On Competition as well as his models such as 5-Forces Analysis, Value Chain and Generic Strategies are staples of any business education. The chances are even if you haven’t heard of him as a Product Manager you have used a tool, technique or concept he created. It’s a great stamp of approval in my book!

The resulting model identified three levels of Unique Value Proposition (UVP).

Alt text: •UVP3 - Always win head to head and displace an incumbent supplier consistently and in volume • UVP2 - Win head to head in new opportunities and occasionally displace existing suppliers • UVP1 - Lose head to head in new opportunities and at risk of being displaced as incumbent

3 levels of Unique Value Proposition

I found the concept very interesting. The idea that you can have a Unique Value Proposition, but it is still not enough to win or retain business is insightful. After all, you might miss all the things that customers care about, but you can still be unique!

To get more insights into the approach I had a short interview with David Aitken Head of Group Projects at GBG…

PHIL: How does UVP3 work in practice?

DAVID: We start by identifying our competitors, then assess the size and respective shares of the market. We then move on to a SWOT analysis for both ourselves and our competitors. After that, we identify the key buying criteria of our customers and assign a weighting to each. We then score our products against these criteria.

PHIL: What sort of elements would you typically identify as key buying criteria and how do you weight them?

DAVID: Typical generic examples might be the feature set, usability, speed and reliability as well as things like the business model and support elements, very much the sort of things that you cover in the Proposition module of your course. The weighting we apply then tells us what the score of each element is out of, with more important factors having a higher weighting.

PHIL: How do you assess that you have achieved UVP3?

DAVID: It’s quite simple – we take the score for each element and add them up. In practice, it is quite similar to the sort of list you might have on the axis of a blue ocean strategy canvas, but instead of having a common scale it depends on how important each element is to our customers. We do the same exercise for our competitors and then compare. Ultimately, we are looking to have a score that is 20%+ more than our closest competitor to consider we have achieved UVP3.

PHIL: How often do you track your UVP level?

DAVID: At a minimum, we track annually, but on some products it is more frequent. Sometimes we reassess triggered by an updated release from our competitors to see how that impacts us, and other times we project our assessment based on the value we are working on to see where that will position us after release.

PHIL: How do you share the UVP status?

DAVID: We have a dashboard that we maintain that includes all the key information about how our product stacks up, including how we assess our competitor status. It is a powerful management tool as our senior managers are now very familiar with reviewing our products in this simple and visual way. Getting all of the data for the dashboard initially was hard work, and it takes some effort to maintain it, but it delivers lots of value, so it is well worth it.

PHIL: How is this dashboard different from a typical product dashboard?

DAVID: Our UVP3 dashboard focuses on how we assess that we deliver value versus our competition instead of focusing on in-life performance metrics like revenue or subscribers. It is all about how our product proposition stacks up so that we can deliver value to our customers, which then ultimately translates into more customers that helps drive other metrics.

PHIL: Why do you use UVP3?

DAVID: UVP3 provides us with a powerful tool that helps us align with and underpin our product strategy at GBG, supporting our Vision, Objectives and Strategy. At its heart, it gives us a clear and consistent approach to measure and manage how we provide stand-out value to our customers. It builds on fundamentals that every Product person should be doing and gives us a clear picture of our differentiation.

PHIL: Any final comments?

DAVID: One valuable lesson we learned in applying the approach was that it is essential to wear an “honesty hat” when determining buying criteria, even more so when scoring. You can’t just choose things you know that you’re good at as the buying criteria. You need to figure out what is important to your customer. If you can incorporate feedback, either via sales or better direct from your customers, it is very powerful. In some cases, the buying criteria will be different for different market sectors, it is possible to have different UVP3 scores for the same product! When it comes to scoring, you shouldn’t give yourself a generous rating each time. Look for evidence to support your scoring? Getting an external viewpoint can be useful here too.

Thanks, David for your insights, from what I have seen and heard about UVP3 it sounds like a great and mature approach to assessing customer value versus the competition! Measuring value is hard but establishing a mature and systematic approach like this is a great way to go and sharing that information with stakeholders in a consistent manner is powerful.

Phil Hornby
Product Focus Associate and Independent Consultant

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