What is a value proposition?

Overview

  • A value proposition is the customers perception of value.
  • The value proposition = (All the customer achieved benefits) / (All the customer incurred costs)
  • You need to understand both the customer and the competition.
  • Your growth and survival in the marketplace requires helping your customers achieve a compelling value proposition.

A value proposition is the customers perception of value.

This perception can be influenced by: facts, emotions, family & friends, social media, etc.

The value proposition = (All the customer achieved benefits) / (All the customer incurred costs)

All the customer achieved benefits can include both financial and non-financial (e.g. time savings, convenience, status, etc.)

All the customer incurred costs can include financial (purchase costs, costs to switch to your company, other adoption costs, and ongoing costs) and non-financial (time, inconvenience, loss of status, etc.)

You need to understand both the customer and the competition.

  • What is the reason the customer wants or needs something?
  • How can you help the customer with what they need or want?
  • Do your customers believe your value proposition is more attractive than the customers’ current situation?
  • How do your customers perceive your value propositions’ competitive differentiators? And weaknesses?
  • How do your customers perceive your competitors’ value propositions differentiators and advantages? And weaknesses?

Your growth and survival in the marketplace requires helping your customers achieve a compelling value proposition.

  • You must take market share and business away from competitors.
  • Enable customers to stop dealing with current suppliers and start dealing with you.
  • You may be creating a new market (e.g. Apple with the iPad)

Your next steps

Download the following one-page slide to enable discussion with your board of directors, C-Suite, and advisory board.

What is a value proposition?

Further reading

Thomas Ripsam and Louis Bouquet, “10 Principles of Customer Strategy”, PWC Strategy& website, https://www.strategy-business.com/article/10-Principles-of-Customer-Strategy?gko=083a5