Value Proposition

The Value Proposition is the reason why customers turn to one company over another. It solves a customer problem or satisfies a customer's need. – Alexander Osterwalder 

Value Proposition Value Proposition

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Table of contents

    A pizza brand claiming to deliver a fresh and crunchy pizza within 15 minutes at your doorstep is just a meaningless marketing gimmick, right? Well, the answer is a big NO! It is not just a bold statement but a promise that the brand has made to its customers. The brand will coordinate all its operations to deliver the promise. This statement or promise is called a brand value proposition. In this article, we will walk you through all the essential concepts of the value proposition.

    Value Proposition Definition

    We all have heard the statement “customer is king” many times, but what does it mean? Well, one of the reasons is that customers have many options when it comes to shopping. From beauty care products to digital devices, there are many alternatives to choose from. Brands compete to catch customers' attention, and the best way to do so is through a value proposition.

    A value proposition is a benefit a brand promises to the customers through its products/services.

    Value proposition serves as a promise to customers as they weigh up options when making a purchase. It tells them why they should choose a brand over the others. It is an opportunity for a brand to communicate what it intends to deliver to the customers. A well-crafted value proposition "hits the spot" by solving a specific problem customers face. It is a perfect way for brands to catch customers' attention, win over their trust, and build brand loyalty.

    Check out our explanation Brand value to learn more about building customer relationships and brand loyalty.

    Why is a value proposition important?

    A value proposition is the marketing and sales statement combined into one. It is a statement on which a brand positions itself in the market. It serves as a guide to drive product sales, marketing, and other promotional activities. It is a tool to build customer loyalty as the brand shares what value it wants to deliver to the customers. The potential customers, who can identify with the communicated value, will potentially become long-term customers.

    Coca-Cola is a giant in the beverage industry. It proposes the value of making a difference in the world by sharing happiness and love with family, friends, and community.

    Value propositive coca-cola example StudySmarterFig. 1 - Coca-Cola's value proposition - sharing love and happiness


    Elements of a Value Proposition

    There are three main elements of a value proposition i.e., identify the target market, determine the value, and communicate and deliver the value to the customers.

    • Identify the target market – The first step in setting a value proposition is identifying the target market. For this purpose, the demographics of a market need to be considered. The company must clearly understand the customers it wants to cater to. This means identifying the problems and the needs of potential customers.

    • Determine the value – Once the company has identified the target market, it must focus on the value it wants to provide to those customers. At this point, the company already knows what its target market needs and problems. The primary goal here is to determine a value that fulfills the target market's requirements. For instance, if the target market is quality conscious, the company must create its value proposition around that.

    • Communicate and deliver the value – At this stage, the company must communicate and deliver the proposed value to the customers. Communicating the proposed value clearly and consistently is vital to catch the target audience's attention. The second part is about delivering the communicated value to the customers.

    Check out our explanation Customer Value to learn more about how companies communicate their product value to customers.

    Unique Value Proposition

    Many of us often confuse value proposition with unique value proposition. At first, it might seem that these two terms are similar, but there is a key difference between them. As mentioned before, a value proposition is more like a brand’s promise to the customers that it can solve their problems with its products or services. Whereas the purpose of a unique value proposition is to make a brand stand out from its competition.

    BMW's value proposition is the “Ultimate Driving machine.” It promises its customers that they will experience the best drive in their cars. Whereas its USP revolves around combining technology and luxury.

    Value prosition BMW example StudySmarterFig. 2 - BMW - the ultimate driving machine
    Value propositionUnique value proposition
    It promises the customers that the product/service will solve their problems. It is a statement that makes a brand stand out from its competition.
    It serves as a guide to direct a brand's operations towards a specific goal. It serves as a differentiator.
    A brand has only one value proposition. A brand can have multiple unique value propositions.

    Table 1. Value proposition vs Unique value proposition

    Types of the Value Proposition

    There are many types of value propositions, but the common three are brand, product, and category value propositions:

    • Brand value proposition – In this type, the brand promises the customers that the association with the brand would benefit them. It focuses on how the brand wants to create value for the customers. For instance, a brand promises to use environmentally friendly practices. The customers who value such a position will likely connect with the brand on a personal level.

    • Product value proposition– This type of value proposition is based on the product. It aims to create an association between the product and the customers. The company communicates that using a certain product will help customers in their lives.

    • Category value proposition – When a company wants to focus on a specific product category, it develops its value proposition and communicates it to the target market. If the value proposition resonates with the target market, the sales of that product category will improve.

    Value Proposition Examples

    Let's look at the value propositions of two famous brands:

    Value proposition: Uber

    The focal point of Uber's value proposition is to offer convenience to customers in booking taxis. It offers a better solution than the traditional way of booking a taxi. Customers just need to add the destination, and the taxi will come and pick them up from where they are. It also offers a cashless payment option to customers.

    Value proposition Uber example StudySmarterFig. 3 - Uber - a convenient way to book your taxis

    Value proposition: Slack

    Slack's value proposition is centered around productivity. It aims to help clients to handle work communications more effectively by providing a modern, efficient, and user-friendly interface. Slack is popular among all types of firms, especially international firms with employees from multiple time zones.

    Value propsition Slack example StudySmarterFig. 4 - Slack - a productive communication tool

    Value Proposition - Key takeaways

    • A value proposition is a promise that a company gives to its customers. It tells the customers why they should choose a brand over the others.
    • A well-crafted value proposition hits the target to solve specific problems customers face.
    • Value proposition serves as a guide to drive product, marketing, and sales activities.
    • Three main elements of a value proposition include: identifying the target market, determining the value, and communicating the value to the customers.
    • There are three types of value proposition: brand value proposition, product value proposition, and category value proposition.

    References

    1. Fig. 3: Self-driving Uber prototype (https://commons.wikimedia.org/wiki/File:Self_driving_Uber_prototype_in_San_Francisco.jpg) by Dllu (https://commons.wikimedia.org/wiki/User:Dllu) licensed by https://creativecommons.org/licenses/by-sa/4.0/deed.en)
    Frequently Asked Questions about Value Proposition

    What is a value proposition? 

    A value proposition is a benefit a brand promises to the customers through its products/services.

    What are examples of the value propositions? 

    A brand promising convenience and superior product quality are examples of value propositions. 

    Why is value proposition important in marketing? 

    A value proposition is important in marketing because it Improves customer understanding and engagement. 

    What is another word for a value proposition? 

    "Selling point" is another word used for value proposition. 

    What is unique value proposition? 

    A unique value proposition is a statement that shows customers in what ways a specific brand/product is different from others. 

    Test your knowledge with multiple choice flashcards

    A value proposition serves as a guide to drive the product, marketing, and sales activities.

    The demographics of a market need to be considered to _______ a target market. 

    It is essential to communicate the proposed value clearly and consistently to catch the attention of the target audience.  

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