Customer Value Propositions

Have you written ‘customer value propositions’?
A.   No.
B.   We know what our ‘customer value propositions’ are, but they are undocumented.
C.   We have written ‘customer value propositions’ for some products and services.
D.   We have written ‘customer value propositions’ for our products and services to communicate what we do better or differently than our competitors.
E.   We have crafted, tested and perfected ‘customer value propositions’ for our products and serviced, aligned with customer needs, to communicate to each segment what we do better or differently than our competitors.
    [Score: A=0, B=1, C=2, D=3 & E=4]

Why is this question important?

What value do you deliver to your customer?

Which customer’s problem are you solving?

Which customer’s needs are you satisfying?

What mix of products and services are you offering to each distinct customer segment?

The Customer Value Proposition – CVP – is the reason why customers buy from one company rather than another.

A customer value proposition is a description of the experiences a target user will realize upon purchase and use of a product.  A “value proposition” is usually a simple list of benefit statements.

CVP

A Customer Value Proposition can be described as the experiences a customer will realise once they have purchased a product or service. Some consider the customer value proposition as a form of spin their marketing department can develop for advertising. This view is short-sighted and doesn’t take into account the long term negative consequences this can have for business performance.

A customer value proposition should focus on what a product or service is really worth to their customer. It is the foundation for understanding how the product will realistically be valued by the target user. However unlike a benefits statement, a customer value proposition is much more balanced and honest. It will certainly include the advantages a user will experience. It also demonstrates how the ‘value’ is realised.   It may specify a timeframe over which it will be delivered. It addresses the issues of the target user and how these are addressed. Additionally it compares the expected use of your product with the next best competitor’s alternative. It should measure what can be quantified and estimate what cannot (this can be quite difficult to do).  The sum of all of these make up the CVP.

Without customer value propositions companies are at a serious disadvantage, ignoring the fact that their target customers have preferences and opinions, and also ignoring the fact that their own product may have faults or imperfections. Ultimately this may impact negatively on their activity in the marketplace.

It is important that a business understands their target user, and the challenges that they may experience on a daily basis. They must try and understand how the customer will assess and use their product. The customer value proposition is the foundation for successful product marketing activities, bringing together customer intelligence, competitive insight, and product valuation. The customer value proposition provides a determined approach to gaining an understanding of the target user in the context of your product or service.

Kinds of Value Propositions

Researchers Anderson, Narus and van Rossum identify three different kinds of value propositions from their work with organizations throughout Europe and the United States.

All Benefits
All benefits simply lists all of the benefits that an organization provides to its target customers.  While comprehensive, it tends to suffer from a lack of credibility that comes when the value proposition is not differentiated from competitors or focused specifically on the unique needs of the customer.

Favourable Points of Differentiation
Favourable points of differentiation emphasize key differences between a firm’s offerings and those of competitors at the customer interface.  It takes into account the notion that the buyer has alternatives.  Like the all benefits value proposition it lacks specificity relative to the buyer.

Resonating Focus
Resonating focus highlights one or two critical differences between the firm’s offerings and those of competitors with the forethought that these differences represent those areas that are most vital in the mind of the customer.  While most effective, this value proposition takes considerable time to develop as it is strongly rooted in a deep understanding of customer needs.

Customer value propositions detail the attributes of your products and services that create loyalty and satisfaction in targeted customer segments.

The value proposition is central in understanding the drivers of customer satisfaction, acquisition, retention, profitability and market share.

A common set of attributes can be organised into the following broad categories:

Product / Service Attributes

  • Features
  • Convenience
  • Design
  • Functionality
  • Performance
  • Price
  • Quality
  • Selection
  • Customisation
  • Newness
  • Usability

Customer Relationship

  • Convenience
  • Recognising customer needs
  • Knowledge to satisfy customer needs
  • Response time
  • Delivery time
  • Convenient access

Image & Reputation

  • Brand image
  • Reputation
  • Status

If you sell products to other companies, you know how hard it is to win their business. To craft compelling customer value propositions:

Understand Customers’ Businesses
Invest time and effort to understand your customers’ businesses and identify their unique requirements and preferences.

Substantiate Your Value Claims
Back up each claim in simple, persuasive language that describes the differences between your offerings and your competitors that matter most to customers.  And explain how those differences translate into money for customers.

Document Value Delivered
Create detailed accounts of cost savings or added value that existing customers have actually bagged by using your offerings.

Make Customer Value Proposition a Central Business Skill
Improve and reward managers’ ability to craft compelling customer value propositions.

Generic Value Propositions

Generic value propositions were first identified in 1993.    They fall into 3 broad categories:

Operational Excellence

(Internal Process Emphasis – Operations Management Processes – e.g. McDonalds)

  • Operationally excellent companies deliver a combination of quality, price and ease of purchase that no one else can match.
  • Must excel at measures of competitive price, customer-perceived quality, and lead time and on-time delivery for purchasing.

Customer Intimacy

(Internal Process Emphasis – Customer Management Processes – e.g. Home Depot)

  • A customer-intimate company builds bonds with its customers; it know the people it sells to and the products and services it needs.
  • Must stress the quality of their relationship with customers and the completeness of the solution offered to the customer.

Product Leadership

(Internal Process Emphasis – Innovation Processes – e.g. Apple, Sony, Intel)

  • A product leadership company pushes its products and services into the realm of the unknown, the untried, or the highly desirable.
  • Must excel at the functionality, features, and performance of their product or service.