What is a great value proposition?

Value propositions are very important to business because if they are done correctly they uniquely define something that a company offers to their customer that addresses their need(s).  Unfortunately many marketing people and some senior management people are so close to their products or services that they actually feel their value propositions are compelling and that their customers feel the same way too.  In reality, value propositions are usually vague, do not address the customer’s issues and if you close your eyes you cannot tell one vendors values from another.

So what are great value propositions?  Well first let’s define a value proposition and what its components.

Wikipedia’s “defines a value proposition is part of business strategy. A value proposition is based on a review and analysis of the benefits, costs and value that an organization can deliver to its customers, prospective customers, and other constituent groups within and outside the organization. It is also a positioning of value, where value= benefits- cost.”

Neil Rackham believes that a value proposition statement should consist of four main parts: capability, impact, proof, and cost.  I would add to this definition that it should have a differentiator

Investopedia states “a business or marketing statement that summarizes why a consumer should buy a product or use a service. This statement should convince a potential consumer that one particular product or service will add more value or better solve a problem than other similar offerings.”

Value propositions should address issues that are concerned with:

  • Increasing revenues or market share
  • Time to market
  • Decreased costs
  • Operational efficiency improvements
  • Customer relationship improvements

Some examples of weak value propositions are the following:

            **We have experience

            **We improve your marketing

            **We offer training

            **My favorite, we are number one provider of XXXX (provider of what???)

Some examples of strong value propositions are:

**Our Automobiles will save you 20% on gas over all other cars

**Customer can save 65% with our home insurance versus any other insurance company

**Wal-Mart   “everyday low prices”

**BMW   “the ultimate driving machine”

Why are these good value propositions; because they address a customer segment needs, are compelling, and they definitely have value.

So ask yourself this, does your value proposition address what I call the customer’s pain points, are you resonating with them in the sense that you and your potential customers are talking about the same thing? 

Second, does the value proposition provide uniqueness/differentiation as compared to the competition?

Lastly, is there a real value (benefit minus cost) to the customer?

IF you cannot answer yes to all these questions, I would strongly suggest reconsidering both your messaging and value proposition statements

RHL
5/3/11

6 comments to What is a great value proposition?

  • Jim Matorin

    Good clarification of an area we all strive to be in as in value-added, but do such a poor job of communicating.

  • lush

    Rick
    Thanks for the great comments. I think that areas like social metworking will force many companies to rethink their value propositions and how they communicate with customers.

  • lush

    Jim
    It is all about communications especially which “channel”, how many times and what is the short message, so readers will actually read it

  • Appreciated the additional perspectives.  I thought I understood the concept very well, however, in supporting the development of another consultant, I found this a helpful cleaning fo some of the cobwebs.  Thank you!

  • Great article. Regardsing the USP for BMW   “the ultimate driving machine”  I have debated this over the years as it seems to be a propular exampel of USP and Value Propositions. 

    A recent debate raged on a LinkedIn discussion blog about the best auto USPs. One poster said BMWs “The Ultimate Driving Machine” was the best in his opinion as a professional copywriter. However, when I challenged him to justify his selection, he became defensive. BMW spent a ton of money promoting their brand and tagline, but my point was that any high-end car company could have used the slogan, “The Ultimate Driving Machine.” Who is to say that Mercedes, Lincoln or Porsche wouldn’t have adopted that line if BMW didn’t take it first?”

    I asked my fellow copywriter if he honestly though that Mercedes Benz would have turned down that tagline because they didn’t think they were worthy? “Oh no, Mr. Copywriter. Only BMW deserves to be called the Ultimate Driving Machine, not our humble $183,000 Mercedes, SLS AMG Gullwing grocery grabber.”  He never responded. 

  • Prinkpinkky

    How about positioning of a company? How does it differ from value proposition?

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