Value Proposition - An Introduction

A Value Proposition is the sum of the net benefits that your customer receives upon purchasing your product or service at a given price. Your customer is constantly measuring it against your competitors’ offerings.

A Value Proposition can relate to an entire business unit, product lines or brands and clearly answers the question as to “why your target market should choose you over available competitors?” It is a clear statement of the tangible and emotional benefits a customer receives from using your business, your products or services. Therefore, the more defined your Value Proposition, the better.

A Value Proposition is often confused with a Mission Statement or with a company ‘Tag Line’. It is also sometimes inter-changeably used or also referred to as a Positioning Statement.

A Value Proposition is a clearly defined concise statement (in three-four sentences) that describes to customers a brand’s (or company’s) unique value-creating attributes.

A Mission Statement outlines the main strategic intent of a business (e.g. to be a Top 3 player in a market-segment, to generate profits for shareholders, to gain market share etc.). It is more an internal focus while a Value Proposition describes your position to your markets in relation to your competition.

For example, the Value Proposition of company ABC Limited’s brands is to “provide good quality products at mass-market price points for everyday people to consume as part of their daily needs.”

The Mission Statement of the same company is to “improve the quality of living of the middle-income group in the Northeast part of the United States by providing them with quality products at affordable prices”.

It is possible to use a Value Proposition statement verbatim in your Brand Positioning statement but it is generally used to express what the Value Proposition is and what the Cost-Benefit Ratio to your target market is.

That Value Proposition can then be communicated in different visual and textual ways with relevant and meaningful supporting messages that then becomes the Positioning statement. Positioning is the cornerstone of an effective marketing and communications plan and a well-crafted positioning statement defines your brand’s/company’s position in the market-space as well as in the consumer’s mind-space.

Therefore, the Positioning Statement could also be defined as the pointed and concise communication of your Value Proposition to your consumer.

Accurately positioning your product in the mind of your target customer is one of the most important aspects of your marketing strategy – your Value Proposition might be the best in the market but unless you can convince your customer that it is, you won’t win the consideration battle. (Tip: “Positioning: The Battle For Your Mind” by Ries and Trout is a defining piece on this topic)

Do I need a Value Proposition?

Yes, but of course you do!

Regardless of size, nature of business or current positions on their company/product life cycles, all businesses, brands and products benefit from a well-defined and compelling Value Proposition.

However, a Value Proposition isn’t something that you develop and forget about.  Since the definition of value is dynamic and constantly evolving, it is something that you must constantly evaluate.

Expressed differently, it is the “Cost-Benefit Ratio” that your customer sees. Therefore, this ratio must always be one where the customer “receives” (i.e. the benefit from consumption) more than what he “gives up” (i.e. the monetary or any other value in receiving the benefit). Your Cost-Benefit Ratio must also be better than competitive offerings.

Next week: how to craft a Value Proposition and a worked example…see you then!