What is a Value Proposition?
We have talked a lot about value propositions in the past, but what exactly is a value proposition?
A value proposition is “the compelling promise, with the desired set of deliverables and experiences, that an offering provides to a defined target audience that outweighs its total perceived cost while being differentiated from available alternatives and supported by reasons to believe.”1
For each marketplace in which you compete, you must choose, be driven by, and communicate a clear statement of
- The target customer segment(s) you will serve
- The key benefits the customer values and will pay for in each segment
A customer’s incentive to purchase is the value the customer perceives, balanced by the total perceived ownership cost.
Value propositions should be written from the customer perspective.
Develop Your Go-to-Market Business Strategy
What Customers Say About Value
Market leaders choose to excel in delivering extraordinary levels of one particular value, and their customers recognize them for it. The role of marketing is to get more people to buy more stuff more often for more money, and to achieve this goal more efficiently than your competitors. Marketing leads the development of the strategy that translates customer or consumer needs, values, and behaviors into offerings that result in profitable growth, providing sustainable competitive advantage. Marketing needs to
Understand the marketplace strategies
Develop marketing strategies
Define the offering
Position the offering—products and services
Determine the marketing mix
Develop marketing programs
Provide marketing tools
Manage marketing resources
Understand and communicate competitive strategy
Be accountable for share, end user market penetration, and brand equity growth
Building a Value Proposition
There are a few things your business needs to address in order to come up with a successful value proposition.
Assess the Market
- What is the current situation (baseline)
- How is your situation changing?
- What are the opportunities?
Segment and Target
- Which opportunities are worth pursuing? Which are not? How will you decide?
- Where will you focus your limited resources?
- How will you define "winning?"
Design the Market Mix
- How will you exploit the high priority opportunities?
- What is your plan? How will you win?
- What is the key work underpinning the plan?
- What are the key processes at which you must excel?
- Who are the right people to do the work?
- How will you continue to win over time?
Create Customer Demand
- How do you communicate the strategy in a way that is actionable?
- What do you do to stay in the forefront of your customers' minds?
- How do you motivate your customer(s) to choose you and stay with you?
Deliver and Capture Value
- Are you following the path?
- Are you being consistent in the way that you deliver value to your customer(s)?
- Do you have the proper balance between the short- and long-term?
- Are you working effectively across teams—doing what you need to do and enabling others to do what they need to do?
Manage Performance
- What will you measure to determine whether you are "winning?"
- How are you doing?
- Are there any gaps in your performance? If so, what will you do to close them?
- Have the facts/assumptions about your situation changed?
- Is the strategy appropriate?
- How do we ensure that our organizational team is prepared for the next step(s)?
1 Mohan Sawhney, PhD, Kellogg School of Management
