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The Value of Propositions
Posted on March 29th, 2016 by Michael D. Brown in New Materials & Applications
As mentioned in an earlier blog, brilliant innovation that misses the market commercially is a common mode of failure of new product launches in the chemical industry. These failures are often due to new chemicals that offer little technical and/or commercial incentives to customers once subjected to the harsh realities of market and competitive dynamics. At the heart of these failures is a poorly developed and weak underlying value proposition.
The value of value propositions within the chemical industry cannot be overstated. Customers often combine multiple chemicals and ingredients to produce their products resulting in lots of complex “moving pieces” that ultimately determine the customer’s final product properties and costs. Strong value propositions rise above this complexity by showing clear and compelling reasons for a chemical producer to innovate and a customer to act. When committed to writing, value propositions:
- Are a call to action for the innovator by articulating a clear, logical and feasible vision that keeps the innovation team members focused
- Motivate customers with a simple, compelling understanding of the innovation and how it will improve their business
Value proposition is a well-worked term in the product development community with many interpretations and definitions. To be clear, my definition is a simple one:
Value Proposition: A set of facts, assumptions and perceptions that suggest the reasons why a buyer will buy a set of differentiating features that comprise a seller’s offering.
A strong value proposition should include the following details:
- A description of the intended buyer
- The resulting experience the buyer will derive by choosing the value proposition over a competitive alternative
- A description of the best competitive alternatives and/or incumbents available to the buyer
- The seller’s realistic expectations of the buyer if the value proposition is chosen
Strong value propositions in the chemical industry should deliver several of the following tangible experiences to the buyer’s products and business:
- Increased revenues and market share
- Improved product properties and/or quality
- Faster time to market
- Decreased costs – especially chemical usage, energy, waste disposal, packaging, freight
- Improved operational efficiency and yield
- Avoidance or reduction of capital spending
- Improved customer retention levels
- Improved safety, sustainability and environmental “footprint”
Value propositions should not include:
- The sales “pitch”
- A description of the seller or the characteristics of the seller’s products, processes, resources, etc.
- The seller’s corporate vision or mission
A simple example of a strong value proposition for a hypothetical new innovation in the paint ingredients space might look like this:
“PerfectCryl is a modified acrylic resin developed for industrial coatings producers to improve sunlight durability while lowering total ingredient costs. PerfectCryl has been shown to withstand UV yellowing twice as long as straight acrylic resin; furthermore, there is no need to use light stabilizer additives which will reduce the raw material cost of the coating by up to10%.
As a result, coatings producers will switch to PerfectCryl in equal weight ratio (1:1) to straight acrylic resins and will pay $2.50/lb which is estimated to be a 5% premium over straight acrylic resins”
Note that the example covers the four key elements of a value proposition:
- Intended buyer: Industrial coatings producers
- Buyer experience: Longer lasting product (2X); lower raw material costs(10 %)
- Incumbent product: Traditional straight acrylic resin
- Seller’s expectation: Customer will switch 1:1 and pay $2.50/lb (a 5% premium)
This value proposition sets clear goals for the innovation team including product performance as well as validation of the customer benefits through application development and testing.
Key thoughts to keep in mind when developing and using a value proposition:
- Develop a deep understanding of unmet customer needs and incumbent products. Make the value proposition as tangible as possible by conducting the needed market research to quantify customer costs, usage rates, safety/health/environmental (SHE) issues, capital costs and product properties.
- Craft a value proposition through consensus of innovation team members and be prepared to modify it as new information comes to light on the incumbents as well as the new product’s comparative performance and economics.
- Test the value proposition with a small number of trusted customers and distributors. Do not rely only on internal validation. Update the value proposition as actual test and trials are conducted with customers.
- Develop case histories of successful uses early in the commercial launch that can used to further bolster the value proposition and to support marketing efforts
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Michael D. Brown
President, StrategyMark Inc
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