We have been discussing what a Property Management Plan is and how important it is to the property and the manager.This websites can assist you with writing your own Property Management Plan as a Prop

by Malcolm McDonald Kogan Page. (cyf Copying Prohibited.

Reprinted for Personal Account, American Public University System [email protected] Reprinted with permission as a subscription benefit of , All rights reserved. Reproduction and/or distribution in whole or in part in electronic,paper or other forms without written permission is prohibited. Page 2 of 10At the end of this chapter you will:

Understand what a value proposition is Know how to quantify your value propositions Understand the crucial importance of the name – the brand – you give to your value propositions Before moving to the real action, there follows a chapter on value propositions and branding, as to understand these essential prerequisites of successful strategy-making will help to make the resulting plans much more powerful.

The very word 'value' is highly contentious, because it totally depends on whose point of view is being taken and the context in which the word is used.

Before I give you my own interpretation of the term, (which will be used throughout the remainder of this bookyf O H W P H V K D U H Z L W K \ R u some common usage of the term. I will do this as briefly as possible and only in the interest of not wishing to be labelled a biased consultant.

Firstly, there is Michael Porter's well-known concept of value chain analysis in (The Free Press, 1980yf 3 R U W H U s concept of value added is an incremental one; he focuses on how successive activities change the value of goods and services as they pass through various stages of a value chain. The analysis disaggregates a firm into its major activities in order to understand the behaviour of costs and the existing and potential sources of differentiation. It determines how the firm's own value chain interacts with the value chains of suppliers, customers and competitors. Companies gain competitive advantage by performing some or all of these activities at lower cost or with greater differentiation than their competitors.

Secondly, there is Alfred Rappaport's equally well-known research on shareholder value analysis, (The Free Press, 1986yf 5 D S S D S R U W V F R Q F H S W R I Y D O X H D G G H G I R F X V H V O H V V R Q S U R F H V V H V W K D Q 3 R U W H U D Q G D F W V P R U H D V D I L Q D O J D W H Z D \ L Q G H F L V L R Q - making, although it can be used at multiple levels within a firm. It is the process of analysing how decisions affect the net present value of cash to shareholders. The analysis measures a company's ability to earn more than its total cost of capital. Within business units, SVA measures the value the unit has created by analysing cash flows over time. At the corporate level, SVA provides a framework for evaluating options for improving shareholder value by determining the trade-offs between reinvesting in existing businesses, investing in new businesses and returning cash to stockholders. This was touched on in the opening chapter.

A third way of looking at value added is the customer's perception of value. Unfortunately, despite exhaustive research by academics and practitioners around the world, this elusive concept has proved almost impossible to pin down: what constitutes [customer] value – even in a single product category – appears to be highly personal and idiosyncratic. Nevertheless, the individual customer's perception of the extra value represented by different products and services cannot be easily dismissed: in the guise of measures such as customer satisfaction and customer loyalty it is known to be the essence of brand success, and the whole basis of the new science of relationship marketing.

Finally, there is the accountant's definition of value added:

Value added = sales revenue − purchases and services Effectively, this is a snapshot picture from the annual accounts of how the revenue from a sales period has been distributed, and how much is left over for reinvestment after meeting all costs, including shareholder dividends. Although this figure will say something about the past viability of a business, in itself it does not provide a guide to future prospects.

Malcolm McDonald on Marketing Planning: Understanding Marketing Plans and Strategy, 2nd Edition Reprinted for ZU7S5/5693748, American Public University System Kogan Page, Malcolm McDonald (cyf & R S \ L Q J 3 U R K L E L W H d Page 3 of 10One reason that the term 'value added' has come to be used rather carelessly is that all these concepts of value, although different, are not mutually exclusive. Porter's value chain analysis is one of several extremely useful techniques for identifying potential new competitive market strategies. Rappaport's SVA approach can be seen as a powerful tool that enables managers to cost out the long-term financial implications of pursuing one or other of the competitive strategies that have been identified. Customer perceptions are clearly a major driver (or destroyeryf R I D Q Q X D O D X G L W H G D F F R X Q W L Q J Y D O X H L Q D O O F R P S D Q L H V Z K D W H Y H U V W U D W H J \ L V S X U V X H G .

However, most companies today accept that value added, as defined by their annual accounts, is really only a record of what they achieved in the past, and that financial targets in themselves are insufficient as business objectives. Many companies are now convinced that focusing on more intangible measures of value added such as brand equity, customer loyalty, or customer satisfaction are the new route to achieving financial results.

Common sense (and with apologies for this quasi-academic discussionyf P L J K W D U J X H W K D W G H Y H O R S L Q J V W U R Q J S U R G X F W R U V H U Y L F H R I I H U L Q J V , and building up a loyal, satisfied customer base will usually require a series of one- to two-year investment plans in any business. Also, such is the universal distrust of marketing strategies and forecasts, it is common practice in most companies to write off marketing as a cost within each year's budget. It is rare for such expenditure to be treated as an investment that will deliver results over a number of years, but research shows that companies that are able to do this create a lasting competitive edge.

So, I will quantify what a value proposition is from the customer's perspectives.

For any organization today, creating differentiation that the customer needs is more challenging than at any time in history, but it remains at the heart of successful marketing. More importantly, it remains the key to a company's survival.

The truth is that if you are in an overcrowded market where you don't stand out, all lowering prices will achieve is to erode your margins and, unless your business costs are lower than anyone else's, discounting is a losing game.

The alternative, of course, is successful differentiation. If you can't come up with something genuinely different and better, there isn't much future for your company.

However, before I explain how to go about this, I want to point out that because of technological advances, product differentiation is unlikely to win in the long run, because this is comparatively easy to emulate today.

Much more likely, differentiation will result from the way you relate to your customers.

One of the big carmakers organized a competitor comparison day, buying one example of every rival model in a particular category and lining them up in a row. Each car was silver and the badges had been removed. Not only could the assembled experts not tell them apart, they couldn't even pick out their own car.

The message? All were excellent, but striving in the same direction as everyone else is an exhausting treadmill that offers only temporary advantage. So, be excellent, but above all, be different.

Source: Alistair Dryburgh, 'Everything you know about business is wrong', , October 2014, p15 For now, let's call this 'customer service' and I will explain later in this book the myriad of forms that customer service can take. One such form is the result of market segmentation and I devote a whole chapter to this fundamental form of differentiation and competitive advantage.

For now, however, all I want you to understand is that differentiation is the key to commercial success and must be encapsulated somehow in a value proposition. Let's start by looking at Figure 3.1 on strategic purchasing.

Malcolm McDonald on Marketing Planning: Understanding Marketing Plans and Strategy, 2nd Edition Reprinted for ZU7S5/5693748, American Public University System Kogan Page, Malcolm McDonald (cyf & R S \ L Q J 3 U R K L E L W H d Page 4 of 10Based on: Kraljic, P 1 Sept 1983 Figure 3.1: Strategic purchasing It is used by most buyers in most markets, the only difference being that the vertical axis is sometimes labelled 'differentiation' (high or lowyf 7 K H P R V W L P S R U W D Q W E R [ W R O R R N D W L V W K H E R W W R P U L J K W E R [ + H U H W K H E X \ H U R U G H U V D O R W D Q G F D Q J H W L W I U R P Y L U W X D O O \ D Q \ V X S S O L H U V o not surprisingly, buys on price.

The bottom-left box, (low differentiation and the buyer does not purchase a lotyf U H S U H V H Q W V D J U H D W R S S R U W X Q L W \ I R U 6 0 ( V W R W D N e responsibility from the customer by means of outsourcing.

The top-left box, providing an SME offers something different that the customer really values, is an even better opportunity, because even though the customer doesn't buy much, price is rarely important.

By far the best box to occupy is the top-right one. Buyers order a lot and they really value the differentiation offered. Here, it is not unusual for them to pay up to 20 per cent premium to deal with such suppliers.

The bad news, however, is that the low differentiation axis nearly always leads to very low prices and margins for suppliers. This is all right, however, providing at least some of the main products or services you supply are differentiated and it is to this that we now turn our attention in the context of value propositions.

Start by having a look at your own website. Typically, suppliers' websites say things like:

We are innovative.

We have better quality.

We have a great reputation.

You can trust us.

We are the leading provider of … We get good results for our customers.

We are very responsive.

Blah, Blah, Blah … Everybody sounds the same and in the main, customers just don't care. Take a look at Figure 3.2 and I defy you to see any difference in what these suppliers claim to be offering.

Malcolm McDonald on Marketing Planning: Understanding Marketing Plans and Strategy, 2nd Edition Reprinted for ZU7S5/5693748, American Public University System Kogan Page, Malcolm McDonald (cyf & R S \ L Q J 3 U R K L E L W H d Page 5 of 10 Malcolm Frank, Senior Vice President, Strategy & Marketing, Cognizant, as presented at ITSMA's Marketing Leadership Forum, April 2006 Figure 3.2: Examples of lack of differentiation '.

The Investopedia 2016 definition of a value proposition is: 'A business or marketing statement that summarizes why a consumer should buy a product or use a service. This statement should convince a potential consumer that one product or service will add more value or better solve a problem than other similar offerings'. (See www.investopedia.com/terms/v/valueproposition.asp yf McKinsey's definition (by Lanning and Michaels in June 2000yf L V $ F O H D U V L P S O H V W D W H P H Q W R I W K H E H Q H I L W V E R W K W D Q J L E O H D Q G L Q W D Q J L E O H – that the company will provide along with the approximate price it will charge each customer segment for those benefits'. (See www.mckinsey.com/insights/strategy/delivering_value_ to_customers yf My own definition is: 'Relative value = perceived benefits minus costs'.

A value proposition should be:

Distinctive. It must be superior to competitors'.

Measurable. All value propositions should be based on tangible points of difference that can be quantified in monetary terms.

Sustainable. It must have a significant life.

Customers expect their business to be better off as a result of dealing with you and you must be able to prove that dealing with you will create advantage for the customer, not merely help them to avoid disadvantage. This is summarized in Figure 3.3 below and please note the key phrase: 'creating advantage, not just avoiding disadvantage'.

Malcolm McDonald on Marketing Planning: Understanding Marketing Plans and Strategy, 2nd Edition Reprinted for ZU7S5/5693748, American Public University System Kogan Page, Malcolm McDonald (cyf & R S \ L Q J 3 U R K L E L W H d Page 6 of 10 Figure 3.3: Creating advantage and avoiding disadvantage A value proposition has four potential parts, as follows:

added value (eg revenue gains, improved productivity, service enhancement, speed, etcyf ; cost reduction; cost avoidance; emotional contribution (eg trust, 'feel-good factor', confidence, self-esteem, risk reduction, etcyf .

The first three are comparatively easy to quantify, the last one less so, although particularly with well-known brands such as SKF, IBM, GE, 3M and the like, they are often high on the business agenda.

An excellent example of this is SKF, the Swedish bearing company. They have a global President of Value Propositions. They tailor them to each customer, but Figure 3.4 below shows a generic value proposition (reproduced with the kind permission of SKFyf .

Reproduced with kind permission of SKF, who presented the diagram at Cranfield University's KAM Best Practice Research Club in January 2015 Figure 3.4: SKF Quantified Value Proposition From this it can be seen that over the life of the bearings, the significant premium over the bearings of competitors saves the customer $30.25, representing the quantified added value.

This, of course, is a simple example and value propositions can be more complex. Look, for example, at Michael Porter's well-known value chain, shown in Figure 3.5 .

Malcolm McDonald on Marketing Planning: Understanding Marketing Plans and Strategy, 2nd Edition Reprinted for ZU7S5/5693748, American Public University System Kogan Page, Malcolm McDonald (cyf & R S \ L Q J 3 U R K L E L W H d Page 7 of 10 Porter ME (1980yf , The Free Press: New York Figure 3.5: Porter's Value Chain (1980yf It will be seen that, particularly for a large, complex customer, the opportunities to add value, reduce or avoid costs, are substantial. But this will require the supplier to spend time understanding the intricacies of how the customer's business works from end to end.

Figures 3.6 and 3.7 below give some examples of how this is possible, whilst Figure 3.8 gives a real example from Tetra Pak (reproduced from their Cranfield University talks with their kind permissionyf .

Reproduced with the kind permission of Tetra Pak, presented at Cranfield University Malcolm McDonald on Marketing Planning: Understanding Marketing Plans and Strategy, 2nd Edition Reprinted for ZU7S5/5693748, American Public University System Kogan Page, Malcolm McDonald (cyf & R S \ L Q J 3 U R K L E L W H d Page 8 of 10Figure 3.6: Sources of differentiation in the value chain Figure 3.7: How do you add value through key support activities?

Determine food packaging and performance objectives:

– Product quality – Litres of output per hour – Sustainability targets Determine distribution requirements:

– Shipping frequency and method – Wholesale and retail shelf space – Weight constraints Select machinery and packaging Provide equipment financing Management training – 15 "Train the Trainer" centres Test machinery and factory process flow Quality testing with distributors Hone product quality On-site ops.

and maintenance training Increase employee productivity and maximize availability of equipment – Human error accounts for most equipment failure Optimize parts inventory management – 4 distribution centres for parts Optimize QC:

Who does what to what equipment, when and how – Access to 65 tech service centres Periodic factory review – Avoid "if it ain't broke, don't fix it"mentality Periodically obtain feedback – Wholesaler and retailers Incorporate feedback into next iteration design Reproduced with kind permission of Tetra Pak, presented at the Cranfield University KAM Research Club, May 2014 Figure 3.8: Tetra Pak is a multi-stage, multi-level partner Although Tetra Pak is a large organization, it nonetheless is involved with a technology that hundreds of competitors also understand. The difference is that customers value Tetra Pak more highly because of their attention to detail throughout the value chain.

This is an example of a small label company reacting to food manufacturers taking responsibility for almost eliminating their stockholding.

They quantified all of the following:

It reduces your inventory from six to two weeks.

It reduces the problems when you have a stock-out.

It reduces stock-out costs (downtime, expedited shipping, overtimeyf .

It reduces inventory-carrying costs.

It reduces inventory obsolescence.

It increases sales when you can make quick changes.

It eliminates the need to place orders.

And all at the same price.

What are the advantages to the label company?

They answer the question: 'Why should I buy from you?'.

They are different from their competitors.

They reduce the risk of losing a customer to a competitor offering a price reduction.

They make it more difficult for a customer to leave.

They become better at the production and distribution processes.

They can then gain new customers.

Their sales and profits increase.

In conclusion, I hope I have convinced you that differentiation and quantifiable value propositions are crucial to profitable growth. But before proceeding to spell out in later chapters the kind of analysis that will make this task easier (that is, market segmentation and customer needs analysisyf , Z R X O G O L N H W R F R Q F O X G H Z L W K D E U L H I V H F W L R Q R Q E U D Q G L Q J .

Everything an organization does, from R&D through to after-sales service, manifests itself in the value proposition offered to the customer and, of course, this value proposition has a name on it – either a brand name or the name of the supplying company.

We have already seen in Chapter 1 that it is relationships with market and customers that create wealth for suppliers.

Successful brands:

build trust; have a price/quality trade-off – win/win; offer consistently superior value.

The result is super profits through higher volumes and margins.

Unsuccessful brands:

cut corners; reduce costs; tell lies; add some 'gold' to the packaging; etc.

The result is that they eventually become commodities and trade on price.

Although the example given in Figure 3.9 is for a large company, it nonetheless represents all the benefits of powerful value propositions represented by powerful brands.

As a key example, brands affect business value by influencing the behaviour of a wide range of Shell's stakeholders, some of which directly impact Shell's P&L (and hence valueyf Figure 3.9 helps to portray this.

Figure 3.9: Brands increasingly drive business results In conclusion and bearing mind that this is not a book on branding, the point I am making is that your brand and/or company name is the most valuable asset you have and this is only going to be as good as your value propositions.

In Chapter 5 , I will show you how to understand your markets and customers better.

Although I haven't yet shown you how to understand your markets and your customers better prior to developing differentiated value propositions, nonetheless, you can have a preliminary attempt here at putting together value propositions. Make a note of your initial efforts and check them out after reading Chapters 5 and 6 .