Value Proposition
Value Proposition
Value Proposition
Value delivered to the customer results in a satisfied customer who will pay a reasonable
price in return for the product or service. Value is the worth, importance, or usefulness to
the customer. In business terms, value is the worth in monetary terms of the social and
economic benefits a customer receives from paying for a product or service. To be
successful, firms must offer products that meet the needs and values of the customer. The
needs of the customer often include ease of locating or accessing the product as well as its
qualities and features.
Helps identify and assess the benefits you are offering customers and how well your product
meets their needs, wants and expectations. Clearly answers the questions: What exactly are
we offering customers? Why is it valuable to them?’
A value proposition isn't just the product or service you agree to deliver to the customer --
it's the ingredient of your business that solves a problem competitor can't.
Your value proposition is your unique identifier. Without it, people don't have a reason to
work with you over somebody else.
While your value prop should help differentiate you from the rest of the industry, keep in
mind it's not a slogan, tagline, or even a way to position yourself in the market. Those types
of copy are important accessories to your brand, but your potential customers and
employees don't choose one business over the other based on a high-level mission
statement. Your value proposition goes deep into the problems you want to solve for
people, and what makes you the right one for the job.
Developing a new innovation requires answering four fundamental questions, which define the
proposed innovation’s value proposition:
(a) What is the important customer and market need, not one that is just interesting to you?
(b) What is the unique, compelling new approach to address this need?
(c) What are the specific, quantitative benefits per costs (i.e., customer value) of that approach?
(d) Why are those benefits per costs superior to the competition and alternatives?
The five key values held by a customer can be summarized as product, price, access, service, and
experience. These five values are listed in Table 3.6, along with specific descriptors for each value.
Price, for example, can have high value to the customer when it is fair, visible, and consistent. A
product may have value if it has high performance and quality, and is easy to find and use. Most
technology-based products are initially focused on performance and functionality [Markides and
Geroski, 2005],
1. Product: Performance, quality, features, brand, selection, search, easy to use, safe
Consider Wal-Mart, where price is the dominant value of its offering. Wal- Mart differentiates itself
on product in terms of selection and quality. By contrast, the values offered by Target are dominated
by product and differentiated by price. Many firms focus on good service, which is about human
interaction. For example, Honda has great service as its dominant value, and its secondary,
differentiating value is product.
Access can be described by ease of locating, connecting to, and then navigating the physical or
virtual facility of a business. Very good accessibility is offered by Amazon.com, and its'website is
relatively easy to navigate. Accessibility can also be described as convenience of-expedience; For a
customer with a high demand for time, convenience is very important. A readily accessible website
can be very valuable to a time-starved customer.
Zappos.com sells shoes and other clothing and accessories through its website. The company is
known for providing an excellent customer experience. According to Zappos, “Customer service isn’t
just a department, it is the entire company.” As a result, the company has a 75 percent repeat
business rate, and enjoys a very good reputation through word-of-mouth referrals.
' Apple Computer realized that by opening retail stores, it could ‘make buying its products more of a
recreational experience. Apple Stores provide a place to gather casually and leam how to do
interesting things with Apple products. Customers can do everything from buying a computer or
phone to learning how to record their own music and interacting with other Apple aficionados. As
important, these extra services that Apple Stores provide are complimentary to all customers.
Most customers seek a provider of a product or service who saves them time, charges a reasonable
price, makes it easy to find exactly what they want, delivers where they ask, pays attention to them,
lets them shop when they want to, and makes it a pleasurable experience. Any firm that fashions a
value proposition to that set of customer values and actually delivers on that promise should do
well.
The product value is described by its performance, range of selection, ability to search for it, and
quality. Volvo built its business on the idea of product safety. Volvo became the first car company to
offer three-point, lap and shoulder seat belts. Home Depot focuses on providing a very wide
selection of quality product^ The differentiating (secondary) value for Home Depot is its service. The
primary and secondary values for selected leading firms are shown in Table 3.7. .
One value of product is range of selection or choice. Often to appeal ted many different customers, a
firm offers many versions of a product. Howevets too much choice is often debilitating [Schwartz,
2004], If a firm offers extensive choice, it .should help the customer search and select the right
version^ Amazon and TiVo offer such help to their customers.
Remember, a firm must meet at par the three remaining variables. Consider the plight of today’s
department stores. Their primary value is product splmion However, they are struggling to be
accessible to today’s shopper and just be at par on service, price, and experience.
What are the primary and secondary values for Google? It offers prod- uct as its primary value with fast, relevant results for the most ill- described inquiry. Its secondary value is access,
which is embodied in the easy online connection right to the search page without annoying pages or advertisements obscuring the search box.
The value proposition states who the customer is and describes the values offered to this customer.
The value proposition for Amazon.com could be described as:
An easily accessible Internet site that is convenient all of the time to provide a wide selection of
books, CDs, and videos at a fair price to the busy, computer-literate customer.
We provide a friendly, comfortable, well-located place offering a wide range of fresh, customized
quality coffees, teas, and other beverages for dte person who enjoys a good experience and a good
beverage.
Home Depot and Lowe’s stores are the two large home-improvement chains in the United States.
Home Depot’s dominant value is product selection, and its secondary value is service. Lowe’s has a
dominant value of accessibility and a secondary value Of product selection. These value differences
lead to clearly separate value propositions offered to the customers of these two competitors.
The unique selling proposition (USP) is a short version of a firm’s value proposition and is often used
as a slogan or summary phrase to explain the key benefits of the firm’s offering versus that of a key
competitor. For example, Hewlett-Packard uses a USP as follows::
USPs are useful for succinctly ifesefrbing a new venture to would-be investors, customers, or team
members. In the jargon of investors, it is often called ‘‘the elevator pitch.” This is a short description
of your venture that can be told during the brief ride on an elevator between getting on and getting
off. The USP is widely used i^Hpllywood for screenwriters to “pitch” their movie idea in a single
sentence. For example, die pitch for Spiderman, is “After a chance encounter with a spider in a
chemical lab, a teenage boy realizes that he has super powers that he must use to save the city and
win the girl he loves.” New ventures can use their value proposition and unique selling proposition
to. clarify the business values offered to the customer. This will help all stakeholders understand the
purpose of the firm’s business concept.
A key role for the value proposition is to set you apart from the competition. Most people check
out 4–5 different options/service providers before they decide. You want your offering to stand
out in this important research phase.
So how do you make your offer unique? Often, it’s hard to spot anything unique about your
offering. It requires deep self-reflection and discussion.
If you can’t find anything, you’d better create something. Of course, the unique part needs to be
something customers actually care about. There’s no point being unique for the sake of being
unique (e.g. “the ball bearings inside our bicycles are blue”). Even if what you sell isn’t unique,
you can still come up with a great value proposition.
Remember: You don’t need to be unique to the whole world, just in the customer’s mind. The
closing of a sale takes place in a customer’s mind, not out in the marketplace among the
competition.
Sometimes, little things tip the decision in your favor. If all major things are pretty much the
same between you and your competitors, you can win by offering small value-adds. I call them
boosters.
These things work well against competitors who don’t offer them. Boosters can be things like:
Free shipping;
Free setup/installation;
No setup fee;
Customizable.
You get the idea. Think what small things you could add that wouldn’t cost you much but could
be attractive to some buyers.
Make sure the booster is visible with the rest of the value proposition.
Why is it important?
• It forces you to look at your product or service from a customer standpoint so you can
ensure that it matches their needs, wants and expectations. This helps you create effective
marketing messages, align your team’s perception and communication of the product or service,
and convince investors of its potential.
Some of the benefits you can expect when you create a clear, compelling value proposition for
your brand
Potential customers can quickly understand what your company has to offer: Most
customers already know what they’re looking for when they research online. So, if it’s not
immediately clear that your company can meet their needs, they’ll likely look elsewhere.
Creates a strong differential between you and your competitors: Almost regardless of what
you do, you have competitors. An effective value proposition tells the ideal customer why
they should buy from you and not from the competition. In other words, it provides your
company with a unique differentiation.
Attracts the right prospects and increases not only the quantity but the quality of
prospective leads: A company’s value proposition targets your company’s ideal customer
and explains why your solution is the best option. This increases your chances of attracting
the right prospects for your business and finding higher quality leads that are more likely to
convert to customers.
Improves customer understanding and engagement: A powerful value proposition helps
your customers truly understand the value of your company’s products and services. It also
helps your ideal customers to see how your services benefit them and are their best
available option. With this increased understanding, customers are more likely to become
engaged with the services or products you offer.
Provides clarity of messaging: A strong value proposition makes it immediately clear to your
customers what you offer. Additionally, it also makes sure to communicate your message
clearly on all the main entry pages. These include your home page, product pages, and
category pages.
Examples of Value propositions