flevyblog

Flevy Blog is an online business magazine covering Business Strategies, Business Theories, & Business Stories.
MANAGEMENT & LEADERSHIP STRATEGY, MARKETING, SALES OPERATIONS & SUPPLY CHAIN ORGANIZATION & CHANGE IT/MIS Other

How Compelling Is Your Value Proposition?

First, let’s define Value Proposition.  Here’s what Wikipedia has to say:

A value proposition is a promise of value to be delivered and acknowledged.  Creating a value proposition is a part of business strategy. Kaplan and Norton say “Strategy is based on a differentiated customer value proposition. Satisfying customers is the source of sustainable value creation.”

Why is having a clear and compelling Value Proposition so important?

  • It solves a customer problem or satisfies a customer need.
  • It is the reason why customers turn to our company vs. a competitor–i.e. it is a source of Competitive Advantage.
  • It is the foundation to a company’s business model–other components include Profit Formula and Key Resources & Processes.

Most companies believe they already have a compelling Value Proposition–a product offering that’s the best thing since Pokemon Go.  But, do your customers agree?  Is there a disconnect between the value as defined by you (i.e. Customer Value Proposition) and the value as perceived by the customer (i.e. Customer Value Perception)?  This disconnect is known as the the Value Perception Gap.

To close the Value Perception Gap, we need to have an offering that is truly compelling.  A compelling offering must both

  1. demonstrate high value to the customer (customer says, “I need” or “I want”); and
  2. be highly differentiated (customer says, “the alternatives aren’t as good”).

A useful tool for determining those attributes that fulfill these criteria is the Value-Differentiation 2×2 Matrix, which defines categories of offering attributes:

  • Table Stakes – Features that are important to customer, but are provided by all competitors at a similar level.
  • Game Changers – These are the must-haves that allow you to truly craft a compelling Customer Value Proposition.
  • Neutrals – Features that are irrelevant to consumers.
  • Fool’s Gold – These are distinctive, but do not drive true value. These “nice-to-have” attributes alone will not meet the customer’s basic needs.

value-differentiation

At a minimum, we must have the Table Stake attributes. Without these, we aren’t a viable player in the industry, as we are not even meeting the customer’s basic needs.

To differentiate ourselves in a useful way, we need to develop the Game Changer attributes. Game Changers score high on both Value Proposition and Value Perception, thus minimizing the Value Perception Gap.

Are you a management consultant?  You can download this and hundreds of other consulting frameworks and consulting training guides from the FlevyPro library.

BoJack-210-Improve-Dude-FlashbackMany companies spend time and effort developing and marketing the Fool’s Gold attributes. While these attributes may also make the offering highly differentiated, the customer don’t need these bells and whistles.  Companies that create offering with these features don’t have an accurate understanding of what their customers truly need.  These offerings (and companies) don’t last.

Another powerful framework for identifying and prioritizing those attributes to create an offering of high Value Differentiation is the Value Curve. (The Value Curve is at the foundation of Blue Ocean Strategy, an innovative growth strategy framework for creating an uncontested market space.) The Value Curve allows us to allocate our resources by answering the questions:

  • Which of the attributes that our industry takes for granted should be eliminated?
  • Which attributes should be reduced well below the industry’s standards?
  • Which attributes should be raised well above the industry’s standards?
  • Which attributes should be created that the industry has never offered?

Since we don’t have unlimited resources, we can only increase value on the Game Changers by reducing or eliminating cost of non-essential attributes.

What do you think makes a compelling Value Proposition?

You can download an editable PowerPoint about the Customer Value Proposition here on the Flevy documents marketplace.

About David Tang

David Tang is an entrepreneur and management consultant. His current focus is Flevy, the marketplace for premium business documents (e.g. business frameworks, presentation templates, financial models). Prior to Flevy, David worked as a management consultant for 8 years. His consulting experience spans corporate strategy, marketing, operations, change management, and IT; both domestic and international (EMEA + APAC). Industries served include Media & Entertainment, Telecommunications, Consumer Products/Retail, High-Tech, Life Sciences, and Business Services. You can connect with David here on LinkedIn.

, , , , , ,




Complimentary Business Training Guides


Many companies develop robust strategies, but struggle with operationalizing their strategies into implementable steps. This presentation from flevy introduces 12 powerful business frameworks spanning both Strategy Development and Strategy Execution. [Learn more]   The BPM Digital Transformation Toolkit is a compilation of 3 whitepapers teaching you how to leverage Business Process Management (BPM) to drive Digital Transformation within your organization. [Learn more]
We've developed a very comprehensive collection of Strategy & Transformation PowerPoint templates for you to use in your own business presentations, spanning topics from Growth Strategy to Brand Development to Innovation to Customer Experience to Strategic Management. [Learn more]   We have compiled a collection of 10 Lean Six Sigma templates (Excel) and Operational Excellence guides (PowerPoint) by a multitude of LSS experts. These tools cover topics including 8 Disciplines (8D), 5 Why's, 7 Wastes, Value Stream Mapping (VSM), and DMAIC. [Learn more]
Recent Articles by Corporate Function

  

  

  

  

  


The Flevy Business Blog (http://flevy.com/blog) is a leading source of information on business strategies, business theories, and business stories. Most articles have been contributed for management consultants and industry executives with over 20 years of experience. If you would like to contribute an article, please email our editor David Tang at [email protected].

Flevy (http://flevy.com) is the marketplace for premium business documents, such as management frameworks, presentation templates, and financial models. Our documents are of the same caliber produced by top tier consulting firms, like McKinsey, Bain, Accenture, BCG, and Deloitte. Learn more about Flevy here.


Connect with Flevy:

   
  


About Flevy.com   /   Terms   /   Privacy Policy
© 2018. Flevy LLC. All Rights Reserved.