A few years ago my wife returned from a working trip to New Zeland and informed me that we had to turn the TV to one of those little niche satelite channels so she could watch her new love, America’s Cup Racing.  She got me hooked too.  The scenes of these incredible racing sailboats fighting for gains measured in inches was fascinating.  We began to follow the races and soon had picked favorites.  It all brought back a memory of a day many years ago when I walked into an acquaintence’s office who happened to be an avid racer himself.  He had a poster nicely framed of one of these boats, going all out and leaning at what looked like a life-threatening angle… it was all waves and wind and action and you could almost smell the salt air.  It was captioned… “Winning is not a matter of life and death… it’s more important than that.”

Tech companies in good times and bad times use what’s called the value proposition to explain their products… what does their product do for the customer?  What value does it bring?  Does it save time or money or bring in new revenue streams?  Exactly what does it do for the customer that is so compelling the customers will buy it?  This is sometimes explained to newbie marketing types as making the pitch in terms of customer benefits instead of features.  A chip may use 100mA less current, but that’s a feature… the benefit to the customer is that it’s cheaper to run because it uses less power and generates less heat. Customers buy benefits… you explain those benefits by pointing to the features, but you always start with the benefits.

This example is also a case of lazy thinking.  Uses less power than what???  Why it uses less power than our competitor of course… or less power than the last generation… or less power than a competing approach.  In reasonable times, this works, but we should do better.  You see there is another competitor in the room — one we frequently don’t acknowledge.  That competitor is named, “Do Nothing.”  When product marketing people — and it is always product marketing that formulates the value proposition — in terms of less power, they have made the assumption that the customer is driven to do something… ie, save costs by using smaller power supplies and smaller fans.  The reason this works is that in normal times, customers are always thinking in terms of the next generation of their product and how they can improve it.

But when times are tough, really tough, a lot of times that assumption is wrong.  The customer may have reluctantly decided to NOT bring out a new generation at this time.  Or if you’re selling internet routers, in the past customers were always interested in buying “up”… in increasing their internet capacity.  But when times are tough, their web traffic may be down and they don’t need to do anything right now.  In bad times, you need a stronger value proposition that does NOT start with the assumption the customer is going to buy something, and that all you have to do is beat the other guys.  In tough times, your value proposition has to begin with why they should do something now, and then move onto why your solution is the best.

These days, the best value propositions are ROI based.  “The payback on this unit is only 9 months… after that you’re getting a net savings.”  Even stronger, though I hate having to use it, “this unit requires fewer people to operate”… you get the idea.

Think about what’s going on at the customer.  Internally, no one is sending messages around saying, “cancel all projects… we’re going to layoff half our engineers.”  No, what happens is almost nothing.  The messages that are sent around are along the lines of, “we’re going through tough times and we all have to work harder,” or something to that effect.  When your sales person goes in to pitch your new widget, they don’t get turned down, they get delayed… no decisions are being made… no one knows if the project is going to go ahead because parts of it are still running (the parts that either don’t cost anything to finish or are too far committed to pull back)… the parts that actually commit the company to any serious expenditure somehow can’t get out of the approval cycle.  They’re not rejected, they’re just… um nothing.

That’s why value propositions that are expressed in terms of ROI and short payback get attention.  Hard to do? Sure.  Are all products suitable for this approach? Nope.  But believe me, these days, the better you get at approaching the value proposition this way, the more sales you’ll make.