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.”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 money 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 a customer perspective.

Learn more about how your value proposition relates to your business strategy and your go-to-market strategy in our white paper “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 more efficiency 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, penetration of end user markets, and growth of brand equity

Building a Value Proposition

There are a few things your business needs to address in order to come up with a successful value proposition.

business needs

Assess the Market

  • What is the current situation (baseline)?
  • How is our situation changing?
  • What are the opportunities?

Segment and Target

  • Which opportunities are worth pursuing? Which are not? How we will decide?
  • Where will we focus our limited resources?
  • How we will define “winning?”

Design the Market Mix

  • How we will exploit the high priority opportunities?
  • What is our plan? How will we win?
  • What is the key work underpinning the plan?
  • What are the key processes at which we must excel?
  • Who are the right people to do the work?
  • How will we win over time?

Create Customer Demand

  • How do we communicate the strategy in a way that is actionable?
  • What do we do to stay top of mind with our customers?
  • How do we motivate our customer(s) to choose us or stay with us?

Deliver and Capture Value

  • Are we following the path?
  • Are we being consistent in the way that we deliver value to our customer(s)?
  • Do we have the proper balance between the short- and long-term?
  • Are we working effectively across teams—doing what we need to do and enabling others to do what they need to do?

Manage Performance

  • What we will measure to determine whether we are “winning?”
  • How are we doing?
  • Are there any gaps in our performance? If so, what will we do to close them?
  • Have the facts/assumptions about our situation changed?
  • Is the strategy appropriate?
  • How do we ensure that our organizational team is prepared for the next step(s)?

Learn more about our tools that can help you build your value proposition.

1 Mohan Sawhney, PhD, Kellogg School of Management

About the Author

Ronald E. SullivanRon Sullivan is a Senior Partner at Breakthrough Marketing Technology. He has worked with many businesses on innovation, new product development processes, strategy, building new business models, channels and distribution, and pricing optimization. He has significant expertise in study design, data analysis, and market intelligence.

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