Introduction
In the realm of business and commerce, understanding the value equation is paramount. The concept of "value" forms the bedrock of every transaction, determining the success or failure of your offerings. In this comprehensive guide, we will unpack the mechanisms behind value creation, helping businesses navigate through their offer creation process. To catch fish, you need an offer. 'Offer' is the starting point of any conversation designed to initiate a transaction with a customer. If your ads aren't converting or your sales team is struggling to scale, the offer is usually the issue. Your offer is the number 1 driver of success in any campaign. Depending on the uniqueness of your offer, it allows you to sell your product as a 'category of one'. This perspective shifts customers away from making price decisions in comparison to other offers but instead focuses on the offer's inherent value. As a result, you're no longer constrained to the market's pricing, increasing your margins.
Decommoditize Your Offer
To distinguish your business from the competitors, you must decommoditize your offer. A de-commoditized offer commands higher CTR, higher conversions, higher average product price, more leads, sales, and profits. This means your offer should be unique and not easily replaceable or interchangeable with others. Commercial gyms are a great example of highly commoditized products that customers typically choose based on the cheaper price.
Consider two examples: a B2C gym offering a 99$/mo fitness course vs. a 6-week fitness challenge that costs 600 dollars. If you finish it and achieve the weight loss goals, it's completely free. If you're not satisfied, you get your money back. For a B2B service, consider a $1500/mo monthly retainer (highly commoditized) vs. an offer where you only pay when you receive clients. Both these examples illustrate how you can restructure your offer for maximum impact without changing what you're doing.
The Three Levers of Success
Success pivots on three levers: Market, Offer, and Persuasion. The market should be growing at a usual or increasing pace relative to the economy/general population. Avoid dying marketplaces. If your offer is excellent and making continuous sales, you're already crushing it. Persuasion is the last lever used when the market and offer are efficiently combined. We aim to use persuasion the least as we can scale and convert easier with the first two.
Choosing a Market
When picking a market, focus on four variables: Pain, Purchasing Power, Accessibility, and Growth. Customers must be in absolute pain, needing a solution that you provide. Your target audience must have the purchasing power to buy what they desperately need. The platforms must exist that your target market pays attention to, ensuring you can get your offer in front of them. And finally, you want a growing market.
Submarkets within Markets
Nearly every single business ever made focuses on three sectors: Health, Wealth, and Relationships. These three issues form the core of the human condition. Under these, there exist various submarkets like Real Estate investments, Wealth management, High Income Skills, Stock Market, Agencies, Sales Teams under Wealth; WeightWatchers, Keto, Factor, 90 day challenges under Health; and Dating Apps, Dating Coaches under Relationships.
Riches are in the Niches
Success lies in explicitly defining your avatar within one of these sub-markets. 'Time Management for Outbound B2B Power Tools and Gardening Sales Reps' is a much more potent and profitable offer than a generic 'Time Management for Anyone' book because of its specificity. When you can articulate your customers' problems better than they can, you establish yourself as an expert in their minds and can justify higher prices for your offers.
Price to Value Discrepancy
If your offer isn’t converting, you might be charging the wrong price. People make purchasing decisions when they believe the value is higher than the price paid. They continue to buy as long as there's a discrepancy between perceived value and cost. To achieve repeat business and gain referrals, the product’s value has to be exceptional. If you can’t bring return customers and can’t find customers as an established business, your product/offer probably isn’t that good. Always aim to raise the value/perceived value of the product rather than lowering prices.
High Price = High Value
Price is a label of value. Charging higher prices psychologically makes your product better. The goal is to be so much more expensive that a consumer must pause and think ‘this can’t be the same solution as everyone else’. This perception makes you a category of one. You can then re-invest those higher margins into becoming a much better product than anybody else on the market.
The Value Equation
Creating a high-value offer can seem akin to conjuring value from thin air. The underlying problem may be that your offer is not perceived as valuable enough by your potential customers. The key to optimizing your offering revolves around four primary elements:
- Perceived Dream Outcome: Customers willingly pay more if the end result is particularly meaningful to them. Solving expensive problems and providing value from the start is critical.
- Perceived Likelihood of Achievement: Convincing your customers that they will succeed with your product or service reduces the perceived risk of a negative outcome.
- Time Delay: The timeframe between the initial and final result can be pivotal. Finding ways to accelerate this process increases perceived value.
- Effort and Sacrifice: The level of effort a customer needs to invest in achieving the result should be minimal.
Consider an example comparing a high-cost solution such as cosmetic weight loss surgery with a low-cost gym subscription. Both can provide the same outcome (weight loss), but the former usually involves less time and effort, thus appearing more valuable.
The most successful companies reduce the time delay and effort, bringing those factors close to zero. Companies like Amazon, Netflix, and Uber have done this brilliantly by making their products and services instantly available and easy to use.
Crafting a Grand-Slam Offer
A great offer doesn't just solve one problem; it addresses the entire problem landscape of your customer. Here's how to do that:
- Identify the Dream Outcome: Understand what your customers want. Make the outcome seem easy and painless.
- List out Perceived Problems: Identify the possible hurdles your customers might face while trying to achieve the desired outcome.
- Turn Problems into Solutions: Each problem identified is an opportunity to add value by providing a solution.
Let's consider a software company hesitant about hiring an agency. Its perceived problems may include concerns about onboarding, system setup, staff training, and responsiveness, among others. Turning these problems into solutions would involve addressing each concern directly, offering a solution that not only negates the problem but enhances value.
The Sales Continuum and the Delivery Vehicle
There's a direct correlation between the ease of selling and the difficulty of fulfillment. Something easy to sell is usually hard to fulfill, while something hard to sell is easy to fulfill.
Start by offering high-margin solutions to a specific market (the "hard sell"), gain revenue and credibility, then use that to offer cheaper alternatives to a wider audience (the "easy sell"). Tesla is a classic example of this approach.
The delivery vehicle, or the 'how', is the method you choose to deliver your solution. This could be in the form of one-on-one interactions, small group discussions, or large group settings. It could be do-it-yourself (DIY), done with you (DWY), or done for you (DFY). Understanding the right mix for your offer is crucial.
Trim and Stack for Maximum Profit and Value
Identify high-value, low-cost solutions from your list and integrate them into your offer. These solutions should solve multiple problems. Include a few high-cost, high-value items for a powerful impact.
To define the value, consider whether the solution is financially valuable to the customer, if it assures them of success, if it minimizes their effort and time investment, and if it leads them closer to their dream outcome.
To define the cost, strive for solutions with 80% or higher gross margins. Ensure the solutions are profitable for your business.
Bonuses
In addition to the core offer, provide bonuses that amplify the value of the initial product. They create a perception of higher value and encourage customers to perceive a massive price-to-value discrepancy. This is an effective way to tap into the customer's primitive brain, making the offer seem more compelling.
In conclusion, creating a high-value offer involves understanding your customers' dream outcomes, turning their perceived problems into solutions, choosing the right sales and delivery methods, and stacking high-value, high-profit solutions. This way, you not only address all their problems but also create an irresistible offer that propels your business towards success.
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