{"id":2542,"date":"2016-08-01T14:53:32","date_gmt":"2016-08-01T19:53:32","guid":{"rendered":"http:\/\/flevy.com\/blog\/?p=2542"},"modified":"2016-12-29T16:13:11","modified_gmt":"2016-12-29T21:13:11","slug":"how-compelling-is-your-value-proposition","status":"publish","type":"post","link":"https:\/\/flevy.com\/blog\/how-compelling-is-your-value-proposition\/","title":{"rendered":"How Compelling Is Your Value Proposition?"},"content":{"rendered":"<p>First, let&#8217;s define\u00a0<a href=\"https:\/\/flevy.com\/browse\/flevypro\/customer-value-proposition-2369\">Value Proposition<\/a>. \u00a0Here&#8217;s what Wikipedia has to say:<\/p>\n<blockquote><p>A value proposition is a promise of value to be delivered and acknowledged. \u00a0Creating a value proposition is a part of business strategy. Kaplan and Norton say &#8220;Strategy is based on a differentiated customer value proposition. Satisfying customers is the source of sustainable value creation.&#8221;<\/p><\/blockquote>\n<p>Why is having a clear and compelling Value Proposition so important?<\/p>\n<ul>\n<li>It\u00a0solves a customer problem or satisfies a customer need.<\/li>\n<li>It\u00a0is the reason why customers turn to our company vs. a competitor&#8211;i.e. it is a source of Competitive Advantage.<\/li>\n<li>It\u00a0is the foundation to a company&#8217;s business model&#8211;other components include Profit Formula and Key Resources &amp; Processes.<\/li>\n<\/ul>\n<p>Most companies believe they already have a compelling Value Proposition&#8211;a product offering that&#8217;s the best thing since Pokemon Go. \u00a0<em>But, do your customers agree? \u00a0<\/em>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)? \u00a0This disconnect is known as the the Value Perception Gap.<\/p>\n<p>To close the Value Perception Gap, we need to have an offering that is truly compelling. \u00a0A compelling offering must both<\/p>\n<ol>\n<li>demonstrate high value to the customer (customer says, &#8220;I need&#8221; or &#8220;I want&#8221;); and<\/li>\n<li>be highly differentiated (customer says, &#8220;the alternatives aren&#8217;t as good&#8221;).<\/li>\n<\/ol>\n<p>A useful tool for determining those attributes that fulfill these criteria is the Value-Differentiation 2&#215;2 Matrix, which defines categories\u00a0of offering attributes:<\/p>\n<ul>\n<li><strong>Table Stakes &#8211;<\/strong> Features that are important to customer, but are provided by all competitors at a similar level.<\/li>\n<li><strong>Game Changers &#8211;<\/strong> These are the must-haves that allow you to truly craft a compelling Customer Value Proposition.<\/li>\n<li><strong>Neutrals &#8211;<\/strong> Features that are irrelevant to consumers.<\/li>\n<li><strong>Fool&#8217;s Gold &#8211;<\/strong> These are distinctive, but do not drive true value. These &#8220;nice-to-have&#8221; attributes alone will not meet the customer&#8217;s basic needs.<\/li>\n<\/ul>\n<p><a href=\"https:\/\/flevy.com\/browse\/flevypro\/customer-value-proposition-2369\"><img decoding=\"async\" class=\"aligncenter size-full wp-image-2543\" src=\"https:\/\/flevy.com\/blog\/wp-content\/uploads\/2016\/07\/value-differentiation.gif\" alt=\"value-differentiation\" width=\"1024\" height=\"768\" \/><\/a><\/p>\n<p>At a minimum, we must have the Table Stake attributes. Without these, we aren&#8217;t a viable player in the industry, as we are not even meeting the customer&#8217;s basic needs.<\/p>\n<p>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.<\/p>\n<div class=\"aside\"><strong>Are you a management consultant?<\/strong> \u00a0You can download this and hundreds of other <a href=\"https:\/\/flevy.com\/pro\/library\/frameworks\">consulting frameworks<\/a>\u00a0and <a href=\"https:\/\/flevy.com\/pro\/library\/consulting\">consulting training guides<\/a> from the FlevyPro library.<\/div>\n<p><img decoding=\"async\" class=\"alignright size-medium wp-image-2544\" src=\"https:\/\/flevy.com\/blog\/wp-content\/uploads\/2016\/07\/BoJack-210-Improve-Dude-Flashback-300x227.png\" alt=\"BoJack-210-Improve-Dude-Flashback\" width=\"300\" height=\"227\" srcset=\"https:\/\/flevy.com\/blog\/wp-content\/uploads\/2016\/07\/BoJack-210-Improve-Dude-Flashback-300x227.png 300w, https:\/\/flevy.com\/blog\/wp-content\/uploads\/2016\/07\/BoJack-210-Improve-Dude-Flashback.png 746w\" sizes=\"(max-width: 300px) 100vw, 300px\" \/>Many companies spend time and effort developing and marketing the Fool&#8217;s Gold attributes. While these attributes may also make the offering highly differentiated, the customer don&#8217;t need these bells and whistles. \u00a0Companies that create offering\u00a0with\u00a0these features don&#8217;t have an accurate understanding of what their customers truly need. \u00a0These offerings (and companies)\u00a0don&#8217;t last.<\/p>\n<p>Another powerful framework for identifying and prioritizing those attributes to create an offering of high Value Differentiation is the <strong>Value Curve.<\/strong> (The Value Curve is at the foundation of <a href=\"https:\/\/flevy.com\/blue-ocean-strategy\">Blue Ocean Strategy<\/a>, an innovative growth strategy framework for creating an uncontested market space.) The Value Curve allows us to allocate our resources by answering the questions:<\/p>\n<ul>\n<li>Which of the attributes that our industry takes for granted should be eliminated?<\/li>\n<li>Which attributes should be reduced well below the industry&#8217;s standards?<\/li>\n<li>Which attributes should be raised well above the industry&#8217;s standards?<\/li>\n<li>Which attributes should be created that the industry has never offered?<\/li>\n<\/ul>\n<p>Since we don\u2019t have unlimited resources, we can only increase value on the Game \u000bChangers by reducing or eliminating cost of non-essential attributes.<\/p>\n<p><em>What do you think makes a compelling Value Proposition?<\/em><\/p>\n<div class=\"entry\" style=\"color: #000000;\">\n<p>You can download an editable PowerPoint about the <a href=\"https:\/\/flevy.com\/browse\/flevypro\/customer-value-proposition-2369\">Customer Value Proposition\u00a0here on the Flevy<\/a>\u00a0documents marketplace.<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>First, let&#8217;s define\u00a0Value Proposition. \u00a0Here&#8217;s what Wikipedia has to say: A value proposition is a promise of value to be delivered and acknowledged. \u00a0Creating a value proposition is a part of business strategy. Kaplan and Norton say &#8220;Strategy is based on a differentiated customer value proposition. Satisfying customers is the source of sustainable value creation.&#8221;&hellip;&nbsp;<a href=\"https:\/\/flevy.com\/blog\/how-compelling-is-your-value-proposition\/\" rel=\"bookmark\"><span class=\"screen-reader-text\">How Compelling Is Your Value Proposition?<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":2544,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"neve_meta_sidebar":"","neve_meta_container":"","neve_meta_enable_content_width":"","neve_meta_content_width":0,"neve_meta_title_alignment":"","neve_meta_author_avatar":"","neve_post_elements_order":"","neve_meta_disable_header":"","neve_meta_disable_footer":"","neve_meta_disable_title":"","footnotes":""},"categories":[81],"tags":[4,122,1117,145,1116,1118,113],"class_list":["post-2542","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-strategy","tag-business-model","tag-competitive-advantage","tag-customer-value-proposition","tag-value-curve","tag-value-differentiation","tag-value-perception","tag-value-proposition"],"_links":{"self":[{"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/posts\/2542","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/comments?post=2542"}],"version-history":[{"count":4,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/posts\/2542\/revisions"}],"predecessor-version":[{"id":2773,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/posts\/2542\/revisions\/2773"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/media\/2544"}],"wp:attachment":[{"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/media?parent=2542"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/categories?post=2542"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/tags?post=2542"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}