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Secrets in Million-Dollar Presentation: Value Curve

This presentation tip is in the category:  Secrets in Top Consulting Firms' Million-Dollar Presentation

Top consulting firms often use value curves in their analysis.  A value curve is a type of model that identifies what customers need and matches up with your products’ value proposition.  During my MBA study, I have used it several times in my projects.  However, I have never realized the true value of it until I met my very good friend that I have a lot of respect for.  He is the COO of Alibaba.com, Savio Kwan.

I first met Savio a few years ago at an alumni dinner.  He stressed to me the importance of a value curve to his business: how Alibaba.com uses the value curve to localize their services to compete against other big international players.  I met Savio again one year after and he stressed to me the importance of a value curve again.  He used the following example to illustrate how powerful a value curve could be for a business:

There are many “one star hotels” that offer a list of “one star” quality services .  Their rooms are usually not very quiet and semi-far away from the downtown area.  Here is the value curve of their offerings:

As you see this value curve, these “one star hotels” are offering everything at the one star level.  Their target markets are business travellers who do not have any expectations for a hotel.  The number one driven factor is “price”.

This group of business travellers are usually people driving across cities for business meetings.  They do not have time to enjoy the breakfast and facilities of a hotel.  They usually go directly to bed and are gone early in the morning. 

One day, there is this entrepreneur who rethought about exactly what this group of business travellers are looking for and draft up a value curve for what this group of business travellers actually want:

By looking at the value curve of what this group of business travellers want, this entrepreneur realized that all these business travellers need is a quiet and clean environment as well as a comfortable bed charged at a reasonable price.  The rest does not add any values to them. 

This entrepreneur was right.  He then started his hotel chain that has hotels locate far away from the downtown area.  Thus, these hotels are usually pretty quiet. 

These hotels also do not have any entertainment facilities and don’t offer any breakfasts.  Thus, there is no need to invest money to build kitchen and hire chefs.  These hotels also do not even have receptions to deal with customers.  Customers would go to the self-serve check-in machine and do the work themselves. 

On the other hand, this entrepreneur invests all the money to bring in “four star” quality bed and hiring first-class cleaning staff to make sure the rooms are extremely clean.  This is the value curve of what this hotel chain is offering:

They exceed customer expectation in terms of bed quality, tidiness and quiet level.  Yet, the customer is still paying for the “one star” price.  Guess what happened to this hotel chain afterward?  It became one of the most popular hotels across United States and the entrepreneur became a multi-millionaire.

Savio Kwan has applied the same concept to build up his businesses as well.  Look at Alibaba.com for example. It was able to differentiate itself using the value curve and became the number one site for its category in China.  Try to use this model in your PowerPoint to impress your boss next time when you present.  You might be able to identify some new business opportunities to amaze your boss!