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Effective Value Propositions are Critical for Business Success

Businesses succeed by providing a customer value that meets the expectations of a specific group of customers. It is the starting point of a business model that seeks to clarify how the value will be provided at a cost less than the revenue it can generate. A business model that identifies the value propositions offered to all constituents, including investors, employees, suppliers and partners, can ensure not only success but also the sustainability of the business.

What is a Customer Value Proposition?

Customer Value Proposition

A customer value proposition is the customer experience that a business proposes to deliver to its customers. Typically, it will include elements other than just meeting a basic customer need. For example, people buy a BMW car not just for transporting themselves from one place to another; elements like the prestige attached to BMW ownership create a distinctive customer value.

To be effective, the business must tailor the value proposition to the expectations of the target group. This means that the business must have a very clear idea about the customer and that person’s needs and desires. A value proposition that is based solely on the business’ own idea of what the customer wants is quite likely to be off the mark.

Another key component of a customer value proposition is that it will emphasize the distinctive features of your offer compared to the offers of competitors. To do this, you need to gain a clear idea about what your competitors offer. Competition research is thus a key part of developing a value proposition.

Comparison with competitors can produce results only if the distinctive features of your offer are really valued by the customer. This again underscores the importance of having a clear insight into the specific needs and preferences of the intended customer.

What are the Other Value Propositions?

While the customer is the key player that determines the success or failure of your business, there are other important players who can help or hinder success. These include investors, employees, suppliers, partners and the public. Each of these players has their own value perspective and if you can cater to these by developing value propositions for each group, your business gains the potential to achieve superb momentum.

Let us look at some examples:

  • Investor Value: You provide not only returns on their investment, but also keep them up-to-date on developments affecting the business through regular reports
  • Employee value: Your employees get not only attractive pay and perks, but also the opportunity to learn and grow in your organization
  • Supplier Value: Suppliers are provided timely and specifically actionable information about your requirements and find that dealing with you is not only a profitable, but also a great experience
  • Partner Value: Your business partners have all the material they need to work effectively and earn excellent returns on the resources they employ while working with you
  • Value to the Public: The business helps local economic growth by buying from local suppliers, and contributes to life quality by caring for the environment

How Does the Customer Value Proposition Look?

Customer Value Proposition

Businesses deliver value propositions in different ways. Some are quite weak and fail to interest prospective customers. Others resonate with the prospects and make them quite enthusiastic in doing business with you.

  • Most businesses seek to project product features that they think will answer the question of why the customer should buy their product. They might say that their product is made with superior components and will last a lifetime. If the product is one that gets obsolete quickly, lasting a lifetime is of no real value to the customer, for example. Additionally, bland statements without supporting evidence are hardly likely to carry conviction.
  • Other businesses might seek to highlight their competitive advantages. They might even take the effort to develop comparison statements comparing theirs and competing products feature by feature, trying to answer the question of why a customer should buy from them instead of a competitor. Again, if the comparison is not based on features that are of real interest to the customer, the effort fails to click with the customer.
  • The truly successful customer value proposition will be based on a specific understanding of what motivates the customer to buy the product. Based on this understanding, even a single dominant feature of your offer might be enough get the customer buy from you. For example, the affordability feature of Ford’s Model T made it so successful that Ford reportedly did not have to buy any advertising between 1917 and 1923. Only one other iconic car, the Volkswagen Beetle, had been able to exceed the production volumes of Model T.

How do You Develop a Strong Customer Value Proposition?

Development of a customer value proposition (CVP) starts on the field, through interactions with customers. In-depth market research can bring out not only the apparent motivations that influence customer decisions, but also the not-so-apparent desires that too play key roles. Customer research is thus the starting point of CVP development.

Competition research is the logical next step. How are competitors meeting customer expectations? What features do they emphasize? Which of these seem to click with customers? As you go into such details, you might come to notice that there are some customer segments whose expectations are not met. By developing a value proposition that addresses these expectations (and delivering on it) you can tap a presently neglected market that has little competition.

The value proposition must be articulated in tangible and quantifiable terms. It must be tangible in that the benefit is clearly spelled out, e.g. savings in cost, increased revenue or higher productivity. It must be quantifiable in that a value can be put on the savings, higher revenue and productivity.

Finally, articulate the findings concisely, but very specifically to appeal to the particular target group you are focusing on.

A good resource for value proposition development is the Marketing Experiments website. CVP alone is not enough for true success; you must deliver on the CVP; otherwise, any temporary success will soon vanish in the flood of adverse word-of-mouth publicity.

A value proposition is an articulate means to clarify how you intend to satisfy a particular target group. To be effective, it must be based on a true understanding of what a typical member of the target group considers value. Such understanding can come only through interactions with members of the group. Value propositions lead to lasting success only if actual deliveries match the proposition.