Value Proposition

 

What is a “Value Proposition”?

A key aspect of a successful marketing strategy is the clear definition and communication of a sought-after value proposition. A good way to think about the firm’s value proposition is consider what is different and beneficial about the firm’s (or brand’s) offering/s in the marketplace.

Over time, firms/brands will develop and enhance multiple offerings for their target markets. If consumers perceive that the firm/brand offers good value then they are more likely to become and remain customers.

Therefore, the greater the perceived value – or the greater choice of value (across different offerings) provided by a firm, then the greater their market share is likely to be, as shown in the first diagram below (see model on the relationship between perceived value and purchases).

As can be seen, the firm/brand will only win new customers (that is, increase brand penetration) if the target market perceives that their offering provides good value AND that it is superior/different to a competitive offering.

If a firm/brand fails to effectively communicate these two requirements to its target markets then the consumer is likely to be lost to a better offer from a competitor.

value perception and purchases
The relationship between perceived value and purchases
(Click to enlarge)
In simple terms, a value proposition is the overall package of perceived value (that is, key benefits less costs) offered by a product (or by a firm or brand).

 


Related Topics

Difference between positioning and a value proposition

Please note that customer value is discussed in several other articles on this website, including a discussion of the different ways that consumers can perceive value, examples of benefits and costs, the difference between benefits and features, and how customer value differs from customer satisfaction.)