Value Proposition is the new Positioning

Written by Mike Rea — 2016-09-28.

No student of English could fail to see the similarity between the phrases 'benefit statement' and 'value proposition'. Here, we argue that the value proposition is the more useful concept, and should be attracting the energy and attention of organisations to a far greater degree.

While there is disagreement, even among 'marketers', about when positioning should be done, and what it means, no sensible voice can be raised against the value proposition being a fundamental design choice to be made ahead of planning phase II, and certainly pIII. For this reason alone, perhaps, there is an argument for replacing 'positioning' with value proposition. But consider the additional truth: most 'positionings' in most companies omit any statement of value, instead attempting to link a benefit with a message (and even worse, a message that the audience in research 'liked'). However, it is harder for a value proposition to exclude a positioning, even if by default.

This article argues that, in the presence of a strong value proposition, positioning is largely redundant. The value proposition connects the academic world of discovery with real users of medicines. Drugs are moved through pipelines because someone somewhere thinks they might bring value to the lives of patients or healthcare providers - rarely, however, is that value challenged or articulated early in development, with a consequence: the drug's purpose is subsumed, so it becomes 'for rheumatoid arthritis' rather than what it was 'for' within rheumatoid arthritis - its purpose is weakened or assumed. Fortunately, there is a hard measure of whether the value proposition is there - the medicine is reimbursed and included in guidelines. Without one, or with a weak one, it is not. Unfortunately, the value proposition is still often regarded as something that can happen close to launch - perhaps because of confusion with 'price'.

(We would argue further that value should be decoupled from pricing or 'market access'. While linked, they are not the same: value is as linked to clinical development and marketing as it is to pricing. Price can be set relatively close to launch - value proposition cannot.)

Let's agree that the choice of the word 'statement' or 'proposition' is an arbitrary one - they're essentially interchangeable, in English and in use here. So, let's unpack 'value' and 'benefit', as they are the key words.

Value: the worth of something, the importance of something, the usefulness of something, the point of something… These are all calculations of benefit. It is important to consider that, in the way it is used in a 'positioning', the 'benefit' is (simply) the highest ownable benefit. Similarly, the 'value proposition' is supposed to be a statement of the highest-known value of a medicine to an audience. Value depends on quantifying a qualitative benefit (where 'benefit' is defined as the connection between a feature and a goal of the audience). So, it is evident that a proposition of value and a statement of benefit are essentially the same thing, with one working at a higher order. It articulates the answer to the question: what's the point of your drug (to a customer)?

Let us also acknowledge that 'positioning' was a statement of benefit that made more sense in the day when choosers were not following the guidance of institutional buyers or guideline makers. It is no longer acceptable to say that a drug is 'the drug of choice for physicians who want to do the best for their patients' (apologies to xxxxx xxxxxx for revealing half of their positioning statements). Now, a medicine has to prove its value, its worth, in the clinic. If 10% improvement on a scale versus placebo is of value to the patient because it allows them to do something they couldn't otherwise, that is different than simply stating that 10% as a self-evident benefit. Which of these outcomes is more compelling from an Alzheimer's Disease study? 50% increase in ADAS-Cog over standard of care, 2 point increase in ADAS-Cog, or avoidance of nursing home for one year. They may all be the same (if Aricept is believed to deliver a 4 point average effect, providing an additional 2 points on a very wide scale is allowed to be called '50% increase'). One outcome has clear value - the others need to be extrapolated to a 'valuable' outcome. Having a statistically significant effect on 'negative symptoms' in schizophrenia is easier than proving the value of doing so. But one of those choices will pay far greater dividends on the market.

We also need to consider that the worth of something is not self-evident, even to users, on first exposure, and rarely, if ever, from presentation of a set of features on paper. There is a strong rationale for more appropriately guiding 'market' research in this area. More work should be done by the developing company to prosecute an argument of value, rather than waiting to hear how a (necessarily) poorly-informed audience member might characterise it. If you believe that your new PCSK9 lipid lowerer will bring additional value over statins, and over the other PCSK9s, then it is for you to construct that argument and show how you might show it… Clearly there are different kinds of value it will bring to different patients, but then it remains for you to prove so. If your new gout drug will make a difference to progression of a degenerative disease, it remains for you to show that it does so, not simply to do what is needed to pass regulatory scrutiny. If I asked you 'what do you think is the point of the iPhone 5?' and showed you a set of features, or said 'what do you think of a device that allows you to do x?', which do you think is more likely to prompt a useful response? Fortunately, knowing what your drug might do, or how it might be of value, is something that you should be uniquely equipped to do.

Note that the phrase 'value for money' introduces a cost-effectiveness measure into a judgement of value. While value may be fixed in a given scenario, the 'for money' part of the equation is variable.

Consider: how much do you use Google, or Wikipedia? Most people use Google several times per day, and consider it 'invaluable' to allow them to do their jobs. When asked how much they would pay to use Google, however, the normal answer is 'I wouldn't…' Even though most respondents know that they do pay for Google indirectly, any suggestion of direct payment would now strike them as 'too much to pay' for that value. Similarly with Wikipedia. (That pharmaceuticals could benefit from such an arrangement seems far-fetched now, but it did when Google was launched, too.)

At a conference on market access recently, I asked the audience how many had flown business class to get there. With many hands raised (the pharma companies, one presumes…), I then asked the question: 'could you describe the value to you of flying business class?' Of course, many kinds of value were given: space to work, better ability to sleep… When asked the follow-up question: and, if you were paying for the trip yourself, would you have made the same choice? the number of hands fell substantially… So, with the same value to those business class seats, the 'for money' part of the equation changed the outcome when it was the subject's own money at that same price. (This simplifies the complicated value model that the airlines understand: the status, the lounge access, etc., but the truth holds.)

PJ O'Rourke once neatly pointed out the following chart, with the rather sharp observation that it matters whether you are spending your own money, or someone else's, and it then matters whether you're spending it on you or someone else (it simplifies massively: that 'someone else' being your 3 year old daughter is not the same as if it is a drug-abusing repeat offending criminal in another county, of course). While self-evident in retrospect, even this simple model suggests the reason that some brands can push price if they appeal to individual rather than institutional buyers.

So, it is clear that it is value for money that should determine price. It is also clear that the 'value' part of the equation should come first. Consider the following kinds of value proposition for a drug that impacts cognition: Additional cognition to AChEis; The Short-Term Memory drug; The Orientation drug; The Dementia drug (pan-indication); Nursing Home Avoider. Despite deriving from the same molecule (with different development plans), no payer would regard these as of equal value (and therefore equal value for money at a given price). These are propositions, not just calculations, of value. There is a value story to each of them.

We argue that these choices are readily identifiable, and directly connect the goals of audiences with features of a product. Understanding the value a market might place on a product is the role of design: the case study of the Toyota Prius and the Honda Insight is interesting here. An assumption that people who wanted a hybrid were doing so to save money led to Honda developing and marketing their Insight as cheaply as possible, whereas Toyota launched the more upmarket Prius at a higher price with a view that people who wanted to show that they cared about the planet wanted to be seen to care, and didn't want to give away too much luxury in doing so. Not only did Toyota charge significantly more per car, it also made more margin per car, and outsold the Insight by many orders of magnitude.

When pushed, most companies admit that their product will have variable value - that its 'value' delta over the current standard of care is greatest in high risk patients, for example, or in patients with higher performance status. Averaging out the value delta across all populations can only decrease the value you take to payers.

What could be the arguments against value proposition displacing positioning. 'Positioning is the place in the minds of your audience that you want to occupy' was the old mantra. The value proposition handles that challenge with ease, but makes it a more fundamental part of the product you develop. Being able to articulate what the point of the product you're developing is as unarguable as making sure it is safe. If you occupy that place in reality, it is a lot easier to occupy that place in your audience's mind.

Strategic Positioning insights and innovation.

You can't develop tomorrow's medicines with yesterday's thinking.

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