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How to Craft a Winning Value Proposition

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The business landscape is perpetually shifting, but the basic fundamentals of business rarely change.

Whether your company is a scrappy startup or an international juggernaut, it needs to find a way to consistently provide value to customers – and just as important, it needs to communicate that message succinctly and effortlessly.

At the foundation of these efforts exists the value proposition, a deceptively simple set of key messages that serve as an anchor for all sales and communications efforts for an overall brand or a specific offering.

Crafting the Value Proposition

Today’s infographic comes to us from Quick Sprout, and it covers the steps in establishing and communicating an effective value proposition that can help differentiate you from your competitors.

How to Craft a Winning Value Proposition

A quality value proposition is clear, easy to understand, and communicates the specific results a customer will get. It also must explain how the product or brand is different and better than competing ways to solve the same problem (i.e. competitors, legacy processes).

Nailing these criteria helps to create an effective foundation for all sales and marketing efforts, and it can also provide a useful compass for guiding any future messaging.

Discovering Value

While the concept behind a value proposition is pretty simple, that doesn’t make coming up with one a simple task.

There are literally millions of companies in the world, and likely tens of thousands that do something similar to your company. How do you stand apart from these competitors? How do you clearly articulate the value that you can provide?

One suggestion is to look at the customer experience methodically, and to fill out an exercise similar to this one created by digital brand strategist Peter Thomson:

Value proposition canvas

As Peter skillfully articulates, a value proposition is the intersection between what you make and why people buy it. This intersection is what connects business strategy and brand strategy.

Articulating Value

What good is discovering value if it can’t be articulated clearly and concisely?

After you’ve explored the customer experience, here’s a way to put it into words:

1. Identify customer benefits
Make a list of all benefits you offer to your customers

2. Link benefits to value offering
Identify what value your products bring to your customer

3. Differentiate and position yourself
Make it clear who the target customer is, what you offer to them, and how you are different

Using these points, a winning value proposition can be crafted – and if it’s something that is being shown online (i.e. landing page, product page) it may make sense to include the following elements: a headline, a subheadline or paragraph, three bullet points, and a visual element.

The Tactics

Finally, here are some tactics that are relied on to further the effectiveness of the value prop:

Tactics for developing effective value props% Use
Clearly explain the value of products and services71%
Clearly explain why the ideal customer should choose your solution56%
Develop unique value props for separate products or services52%
Target specific value props for specific buyer personas45%
Competitive research40%
Testing value props through various media20%

What other tactics do you use to craft a compelling message about your company or product?

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How the Tech Giants Make Their Billions

Collectively, the Big Five tech giants combine for revenues of $802 billion, which is bigger than Saudi Arabia’s economy. Here’s how it breaks down.

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How the Tech Giants Make Their Billions

At a glance, it may seem like the world’s biggest technology companies have a lot in common.

For starters, all five of the Big Tech companies (Amazon, Apple, Facebook, Microsoft, and Alphabet) have emerged as some of the most valuable publicly-traded companies in the world, with founders such as Jeff Bezos or Bill Gates sitting atop the global billionaire list.

These tech giants also have a consumer-facing aspect to their business that is front and center. With billions of people using their platforms globally, these companies leverage user data to tighten their grip even more on market share. At the same time, this data is a double-edged sword, as these same companies often find themselves in the crosshairs for mishandling personal information.

Finally, all of these companies have a similar origin story: they were founded or incubated on the fertile digital grounds of the West Coast. The company that has the weakest claim to such origins would be Facebook, but even it has been based in Silicon Valley since June 2004.

Sizing Up the Tech Giants

For all of their commonalities, it seems that there is less of a mold for how these tech giants end up generating cashflow.

But before we get to how Big Tech makes its money, let’s start by looking at the financials at a higher level. The following data comes from the 2018 10-K reports filed last year.

CompanyRevenue (2018)Net Income (2018)Margin
Combined$801.5 billion$139.0 billion17.3%
Apple$265.6 billion$59.5 billion22.4%
Amazon$232.9 billion$10.1 billion4.3%
Alphabet$136.8 billion$30.7 billion22.4%
Microsoft$110.4 billion$16.6 billion15.0%
Facebook$55.8 billion$22.1 billion39.6%

Together, the Big Five tech giants combined for just over $800 billion of revenue in 2018, which would be among the world’s 20 largest countries in terms of GDP. More precisely, they would just edge out Saudi Arabia ($684 billion GDP) in terms of size.

Meanwhile, they generated a total of $139 billion of net income for their shareholders, good for a 17.3% profit margin.

How Big Tech Makes Money

Let’s dig deeper, and see the differences in how these companies generate their revenue.

You are the Customer

In the broadest sense, three of the tech giants make money in the same way: you pay them money, and they give you a product or service.

Apple (Revenue in 2018: $265.6 billion)

  • Apple generates a staggering 62.8% of its revenue from the iPhone
  • The iPad and Mac are good for 7.1% and 9.6% of revenues, respectively
  • All other products and services – including Apple TV, Apple Watch, Beats products, Apple Pay, AppleCare, etc. – combine to just 20.6% of revenues

Amazon (Revenue in 2018: $232.9 billion)

  • Amazon gets the most from its online stores (52.8%) as well as third-party seller services (18.4%)
  • Amazon’s fastest-growing segment is offline sales in physical stores
  • Offline sales generate $17.2 billion in current revenue, growing 197% year-over-year
  • Amazon Web Services (AWS) is well-known for being Amazon’s most profitable segment, and it counts for 11.0% of revenue
  • Amazon’s “Other” segment is also rising fast – it mainly includes ad sales

Microsoft (Revenue in 2018: $110.4 billion)

  • Microsoft has the most diversified revenue of any of the tech giants
  • This is part of the reason it currently has the largest market capitalization ($901 billion) of the Big Five
  • Microsoft has eight different segments that generate ~5% or more of revenue
  • The biggest three are “Office products and cloud services” (25.7%), “Server products and cloud services” (23.7%), and Windows (17.7%)

The remaining tech giants charge you nothing as a consumer, so how are they worth so much?

You are the Product

Both Alphabet and Facebook also generate billions of dollars of revenue, but they make this money from advertising. Their platforms allow advertisers to target you at scale with incredible precision, which is why they dominate the online ad industry.

Here’s how their revenues break down:

Alphabet (Revenue in 2018: $136.8 billion)

  • Despite having a wider umbrella name, ad revenue (via Google, YouTube, Google Maps, Google Ads, etc.) still drives 85% of revenue for the company
  • Other Google products and services, like Google Play or the Google Pixel phone, help to generate 14.5% of total revenue
  • Other Bets count to 0.4% of revenue – these are Alphabet’s moonshot attempts to find the “next Google” for its shareholders

Facebook (Revenue in 2018: $55.8 billion)

  • Facebook generates almost all revenue (98.5%) from ads
  • Meanwhile, 1.5% comes from payments and other fees
  • Despite Facebook being a free service for users, the company generated more revenue per user than Netflix, which charges for its service
  • In 2018 Q4, for example, Facebook made $35 per user. Netflix made $30.

So while the tech giants may have many similarities, how they generate their billions can vary considerably.

Some are marketing products to you, while others are marketing you as the product.

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Animation: The Top 15 Global Brands (2000-2018)

This stunning animation shows a dramatic change in the world’s most valuable global brands. Watch tech companies like Apple shoot up the rankings in style.

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Animation: The Top 15 Global Brands (2000-2018)

Time travel back to the early-2000s, and a list of the world’s most respected brands might be surprising.

Tobacco company Marlboro is still one of the top 15 global brands with a value of $22 billion, while companies like Nokia and AT&T also help to round out the group.

Aside from Microsoft, the tech companies at the time were mostly focused on hardware and services. HP was considered a top global brand at the time, and even IBM was still making PCs until the year 2005.

The Platform Revolution

How times have changed.

In today’s animation from TheRankings, you can see how the list of the top 15 global brands has evolved over the last two decades or so.

The visible shift: as soon as Google hits the rankings in 2008 (2:21 in video), it becomes clear that the money is on the software side – particularly in coding software that ends up as a dominant consumer platform.

Shortly after, companies like Apple, Facebook, and Amazon enter the fold, quickly climbing to the top. Here are the final numbers for 2018 in terms of brand value, with data coming from Interbrand:

Top 15 Global Brands in 2018

The Problem with Hardware

What’s the difference between the big hardware firms of old, and the successful ones that dot the list today?

From a business perspective, hardware companies need to have a bold and accurate vision of the future, constantly taking innovative strides to beat competitors to that vision. If they can only make incremental improvements, the reality is that their competitors can enter the fold to create cheaper, similar hardware.

Samsung, which finished 2018 as the world’s sixth most valued brand, is a good example of this in practice. The company has had the top-selling smartphone for every year between 2012-2018 – an impressive feat in staying on top of consumer trends and technology.

Despite Samsung’s success, it remains stuck behind four other tech brands on the list – all companies almost exclusively focused on platforms: Microsoft, Amazon, Google, and Apple.

Why are Platforms so Dominant?

Constant innovation is a good barrier to entry if you can keep doing it – but the platforms have an even more bulletproof strategy: being everywhere at once.

Facebook uses the powerful network effect from billions of people as a moat, and then it buys up-and-comers (Instagram, WhatsApp) to cover even more ground. As a result, competing with Facebook is a nightmare – even if you could theoretically acquire new users at $1 per user at a ridiculous scale, it would require a marketing investment of billions of dollars to make inroads on the company’s audience.

Microsoft owns various platforms (Windows, Xbox, LinkedIn, Azure, etc.) that help insulate from competition, while Google’s strategy is to be everywhere you need to search, even if it’s in your living room.

Because platforms have massive scale and are ubiquitous with consumers, it gives them the ultimate pricing power. In turn, at least so far, they have been able to establish the world’s most powerful consumer brands.

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