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.

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.

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.

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.

Fig. 2 - BMW - the ultimate driving machine

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.

Fig. 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.

Fig. 4 - Slack - a productive communication tool