As a non-engineer, the term “figure of merit” was new for me when I heard it used by the scientists on our team at Bandgap Engineering. For the uninitiated, Wikipedia defines it as:
A figure of merit is a quantity used to characterize the performance of a device, system or method, relative to its alternatives. In engineering, figures of merit are often defined for particular materials or devices in order to determine their relative utility for an application. In commerce, such figures are often used as a marketing tool to convince consumers to choose a particular brand.
In the context of a start-up’s value proposition, I view it as a way to simplify a complex system down into one number that is easily communicated to, and understood by, customers, investors and team members.
As an example, my current start-up Biobliss develops a trans-dermal patch that reduces wrinkles dramatically in under an hour. The value proposition would seem to be relatively simple, but this is a $3 billion category with 30 million consumers that has spawned a multitude of solutions and brands, ranging from simple creams to injections of toxic substances with unclear long term side effects. In my first few weeks on the job, I spent much of my time getting ‘out of the building’ to hear what consumers (people who use our products) and customers (spas & salons who administer and sell our products) thought about the category and our product.
We had been focusing our marketing message on the fast-acting nature of the patch – while creams take months to show results, Biobliss delivers superior results in under an hour. This sounds great and is definitely a benefit that is enabled by our unique technology. The only problem is, “fast acting” isn’t the core figure of merit in the value proposition as defined by our consumers and customers.
Over time, we came to understand that, while they wouldn’t say it exactly this way, customers viewed the figure of merit in the value proposition of an anti-wrinkle product as “efficacy-adjusted cost per day,” which is defined as:
- Efficacy = % of wrinkles reduced, where injections = ~90% and creams = ~5%
- Days = number of days the Efficacy lasts, where injections = ~90-120 days and creams = ~30 days
- Dollars = cost of the treatment, where injections = ~$600-$1,000 and creams = ~$20-30
Once we determined this way of thinking about our value proposition, we were able to rally the product development team to focus on immediate efficacy and duration of our product, we were able to understand what market segments would see the most value from our product and focus our go-to-market efforts and we were able to optimize our pricing strategy. The results have been dramatic, with customer adoption and revenue starting to rapidly build, a motivated and focused team and investors who understand our strategy at a deeper level. More to come…