value proposition is a promise of value to be communicated and acknowledged. It is also the customer's belief about how the value (benefit) will be delivered, experienced and acquired.
Value propositions may apply to all organizations, or parts thereof, or customer accounts, or products or services.
Creating a value proposition is part of a business strategy. Kaplan and Norton said "The strategy is based on a different customer value proposition, satisfying customers is the source of sustainable value creation."
Developing a value proposition is based on the review and analysis of the benefits, costs, and value organizations can provide to customers, potential customers, and other constituent groups inside and outside the organization. It is also a determination of value, where Value = Benefit - Cost (cost including economic risk).
Video Value proposition
Overview
Value proposition is a statement that identifies the clear, measurable and proven benefits that consumers get when they buy a particular product or service. This should convince consumers that this product or service is better than others in the market. This proposition can lead to a competitive advantage when consumers choose a particular product or service over other competitors because they receive greater value.
The phrase "value proposition" (VP) is credited to Michael Lanning and Edward Michaels, who first used this term in a 1988 staff paper for consulting firm McKinsey and co. In this paper, entitled "business is a value delivery system," the authors define the value proposition as "a clear and simple, real or unreal benefit statement, which the company provides, along with the price estimate, will charge each customer segment for benefits ". In the definition of a clear and modern cut, Labeaux defines a value proposition as a statement that clearly identifies what benefits a customer will receive by purchasing a particular product or service from the vendor. According to Hassan, however, there is no specific definition for Value Proposition.
Creating and delivering value propositions is a significant issue for marketing planners to consider in planning strategies. Value propositions vary across different industries and market segments within an industry. Capon and Hulbert connect the company's success in the market with value given to customers. They introduce the principle of customer value, with customer insights that drive the company's marketing activities. Customer value should also drive investment and production decisions, as customers feel value on the benefits of the products or services they receive. As a result, as the environment changes, and their customer experience and desires change, the value they seek changes. As a result, companies are pressured to invest more resources in marketing research to gain deep customer insight, improving the value proposition.
Consumers are always looking for the best possible deal with the best quality and how these products or services will contribute to their success. Value proposition is the promise that the business will provide consumers to ensure the best value. Value proposition is a creative statement that represents a unique selling point. Without this statement you lose the opportunity to tell consumers why they should take over your competition. An important goal in business is to convince customers that they are getting more benefits. Coming from a customer perspective, buyers not only ask how these products differ from what they already use, but what value these products or services may have. Customers are looking for answers that can improve or replace a product or service. Customers will never buy a product or service if they feel they are not receiving the best offer. Therefore, value propositions are important to business and their success.
The value proposition is to distinguish brands from competitors. To understand and get an idea about value proposition, it is important to analyze the business through the marketing mix: identify what the product or service is, the price of the product or service, where it will be sold, and how the product or service will be promoted. Identifying these key questions helps clarify and make the value proposition more clear. Another strategy that has been used to help the learning process and business growth is the balanced scorecard. This concept was developed by Robert Kaplan and David Norton in 1990, to help communicate value propositions in a way that businesses can understand. Maps create a visual representation of business objectives and targets so that they can be more easily approached. Through these theories the proposition becomes more clear and displays to the consumer why this product or service is so special to the market. Once a business determines what makes this item or service so outstanding compared to a competitor, it can start to guide the business more clearly. This can lead to marketing concepts and ideas. Value propositions help businesses understand what their main focus and goals are in the business and help understand consumer needs.
When creating a value proposition, it is important to think about these key questions: What is a product or service? Who is the target market? What value does the product or service provide? How is this different from a competitor? Many businesses that can answer this will have a relatively strong value proposition because they know how their product or service differentiates from competitors. But it's more than understanding and recognizing what makes them different; it's about making statements involving customers to buy goods or services. There are many benefits that a value proposition can offer to a business. These benefits include strong differentiation between companies and competitors, increased quantity, better operating efficiency, and increased revenue. By also creating a more personal and honest relationship â € <â €
Maps Value proposition
Model builder value proposition
Value proposition development is an organizational approach to building value for customer experience. Only by constructing your value proposition will provide superior and superior customer value. The Value Proposed Builder Model states six stages for analysis:
- Markets: Analyze and identify specific market segments, or clients, or target individuals within those clients for whom solutions have the potential to deliver value and profitability.
- Analyze and determine the value experience clients get from the organization from their current activity. You need to define a good, bad, and neutral experience. The effectiveness of the value proposition depends on gathering real customer prospects or employee feedback.
- Decide on a mix of offers that are able to leverage value experience with a defined target market group.
- Assess the benefits of the offer in the context of a value experience that you can pass on to market groups. There is a cost benefit component here that includes both price and customer risk, enabling the calculation of the value at which Value = Benefit minus Cost.
- Alternatives and differentiation are the next aspects to be analyzed, what alternative options does the market have for products or services?
- ... and support it with relevant evidence, to ensure there is a strong value proposition.
Neil Rackham believes that the statement of value proposition should consist of four major parts: capability, impact, evidence, and cost [ie the price customers expect to pay].
The organization does not directly communicate the output of the process of making value propositions (ie, statement of value propositions and templates) to external audiences; the value proposition statement is an internal document, used by organizations as a blueprint to ensure that all messages they communicate, inside and outside the organization, are consistent. Several ways organizations use value propositions include in marketing communications materials or in sales proposals.
Appropriate models to certify the customer's reason for purchasing a service or product in a summary of relative value and a summary of the differentiation for the target group are offered by Winer and Moore.
- For (target customers) that (need statement) , (product/brand name) is (category product) it (main benefit statement/strong reason to buy) . Unlike (the main competitor alternative) , (product/brand name) (main differentiation statement) .
The Geoffrey Moore position statement framework identifies added value and product objectives in filling the market gap better than alternatives. It provides a quick summary of the analogy to other existing solutions, which creates images that focus on the user's benefits over certain features or implementation methods.
Enterprise model focused on value
Creating a value-focused company (VFE) requires fundamental thinking on how to manage and manage things. This is the core of business strategy and implementation. This customer demands, and is willing to pay, a sales effort that creates new value and provides additional benefits beyond the product. Using this model, you can plan the business based on the value to be sent.
- Value-focused strategic intent: Where do you intend your organization to be in the future and what principles will guide the journey?
- Value proposition: What is a Value Proposition (Market, Value experience, Bid, Benefit, Alternative, and Differences and Evidence) and how is it compatible with Strategic Objectives?
- Value-focused operating model: What are the 'How' factors (organization, process, etc.) for the operationalization of Value Proposition to achieve Strategic objectives?
- Creation-based value creation and execution: How you will execute and manage all of these to ensure maximum Value Delivery.
Value cycle
Osterwalder and Pigneur argue that the value proposition must be learned through the entire life cycle of its value. Value elements can be created in each of the five stages of the value life cycle. These stages are: value creation, value assignment, value consumption, value extension, and value transfer:
- Value Creation: The traditional view of the value creation process does not allow the customer to take part in feeling its value. Marketing and research and development are primarily responsible for adding value at this stage based on historical data and observation. However, in modern times, customers of several companies are included in this phase.
- Appropriation value: values ​​can be created in this stage by developing, improving, and facilitating customer purchasing experience. This can be done in two steps, first improving the way a transaction is made, and second, considering customer fulfillment.
- Consumption Value: This is the essence of the value proposition. At this stage, the customer sees and feels its value through the actual use of the product or service.
Value status
The perceived value and willingness to pay correlate. Customers are willing to pay in some circumstances, some examples; when they are faced with different offerings, when they are in partnership with suppliers, when the need to buy is urgent, when there is no substitute, and when there is a high positive relationship between perceived value and price. Companies must choose the best pricing strategy to deliver value to customers and the company's perception. Capon & amp; Hulbert introduced several factors that the company must consider before making a pricing decision. Some of these factors include:
- Perceived substitutes: differentiation on bids and prices compared to competitors.
- Unique value: the customer weighs the benefits and features of the product and considers this benefit as a unique value that is fully provided by the organization.
- Price/Quality: the company should consider that the customer will attempt to have a positive price/quality relationship for the product to make a purchase decision.
Zeithaml studied three values ​​that consumers determined: Low price, Quality and value for money, and Features. The study concludes that perceived value is a customer's overall assessment of the usefulness of a product based on perceptions of what is received and what is given. Some Customers can see the value in a low price, and others can see the value in the volume obtained.
Innovation
It is believed by Lindic & amp; Marques that Value Proposition is a significant catalyst for customer-focused innovation. Kambil and Baragheh claim innovation is a phenomenon that requires a multidisciplinary approach to analysis because of its complexity. Areas such as strategic management, organizational science, and information systems marketing are essential for this analysis.
Lindic uses an example of Amazon.com; transformation from an online bookstore to one of the most important online shopping services in the world. Amazon.com has evolved through the diversification of their struggle brands before the Internet bubble burst in 2000, allowing for a great example for analysis and explanation of the potential innovations resulting from value propositions.
Amazon also represents the so-called new economy but at the same time shares many characteristics with traditional companies. In fact, offline activities represent 70 percent of its core business. As a result, we can identify innovations that are common in traditional and new economic enterprises.
Innovations implemented by Amazon.com include features such as the possibility of searching between books based on not only the title of the book, but also the keywords scattered across the content, reducing the time and energy of related consumers for find the desired item. Another innovation is a patented "one click" feature, enabling customers to purchase goods efficiently without repeatedly submitting their payment and shipping information. All these minor adjustments over time are the result of the development of value propositions, which ultimately lead to the success of Amazon.com today.
Lindic has developed a PERFA framework to evaluate the concept of this value proposition in terms of innovation. Effects that are very much in line with customer innovation with existing definitions found in the existing literature lead to the following five elements that all represent the full picture of all value propositions generated by innovation at Amazon.com. These are Performance (P), Ease of use (E), Reliability (R), Flexibility (F), and effectiveness (A).
Bonner states that innovative performance or new goods or services offered to customers is the result of superior company offerings in terms of quality, technical performance, features and capabilities to meet customer needs and demands. This perspective emphasizes innovation as a performance generator in a customer-oriented way.
Ease of use refers to the extent to which a person believes that using a particular system or product will be effortless (eg ease of search and acquisition, usability, personalization, service, and support). All others are similar, features or applications that are considered easier to use than others are more likely to be accepted by users, according to Wang. Interestingly in Tornatzky and Klein's meta-analysis of the relationship between innovation and adoption characteristics, they find compatibility, relative advantage, and complexity to have the most consistent significant relationship across different types of innovation. Complexity is defined as "the extent to which an innovation is considered relatively difficult to understand and use". Therefore, the easier it is to use innovative applications or features, the more likely it is to be accepted by the user. As a result, ease of use reduces the costs included in the equation of value propositions and increases in value.
Reliability is defined as "the ability to perform promised services reliably and accurately" according to Pitt. Raaij and Pruyn also feel the reliability as the ability of a product to deliver according to its specifications. Therefore, innovation can add value propositions to customers by performing in accordance with established standards for products and services.
Flexibility is considered necessary to keep organizational and environmental alignments altered. This illustrates the company's ability to reallocate and reconfigure organizational resources, processes and strategies in response to environmental change. In other words, flexibility manifests through the company's dynamic capabilities that enable it to integrate, build and reconfigure internal and external competencies to cope with rapidly changing environments.
Affectivity overcomes the feelings or emotions associated with working with a company or using its products and services. Atken says this is highly correlated with a sense of belonging to a particular group or class. This also correlates with the concept of co-branding, in which brand or company may be associated with product attributes or benefits derived therefrom. Such brands generate emotions and feelings among their customers.
Kambil argues that the concept of value proposition is too vague to be useful for innovation; However, Lindic and Marques' research shows that if decomposed systematically, value propositions play an important role in the innovation process.
It is customers who decide whether or not to buy certain products; therefore, innovation must be based on what customers truly value. A value-focused approach requires managers to rethink their perspective of innovation by placing themselves in customer shoes. Thus, managers can identify key factors among the five PERFA perspectives and make better decisions when deciding what to innovate so as to enhance the value proposition for their customers.
Strategy and marketing
Businesses can use value propositions to not only target customers, but partners, employees, and suppliers. Creative statements should be able to persuade other businesses to create alliances, which will help in the long term. Joining other businesses can be a very powerful strategy. When businesses align their strengths they seem to stand out, and there are weaknesses becoming less visible. This makes their products and services stand out for consumers. Making alliances with other companies can increase business brand awareness; create a larger customer base, new insights about the product and access to new technologies to improve the way businesses are running. This strategy creates a competitive advantage over other competitors.
Value propositions should be able to influence new employees or motivate existing employees to support business goals and plans. Employees can improve the client's business base and build stronger relationships. Treating employees well, by offering bonus or special offers, they are more likely to take on more responsibility and promote the business they work for. Alliances in this business can promote products or services by word of mouth or social media. The employee's positive attitude toward labor and products will attract new customers.
Suppliers should want to supply businesses with the products or goods needed for service with their creative and thoughtful statements. Businesses can increase their chances of the products they want and when they want them. By thinking of a well-constructed value proposition, it can lead to a very successful business. This can lead to possible alliances with suppliers that will support and help companies with the inventory and products needed to help improve business positions.
Benefits value proposition
A strong and impacted value proposition is essential for every business to effectively engage and connect with critical customers, partners, stakeholders, and internal employees, by clearly communicating how it is different, better, and worth purchasing. Value proposition is central to the overall business model and should form an anchor for all decision making, operations, and customer engagement. It's more than a bunch of words; more than one set of marketing messages; this is the framework for how businesses align their activities and outputs with the needs of their target audience, to provide an engaging experience that can ultimately be monetized through value exchange. In this case, the value proposition is the key to validating business ideas; both when you start and as you grow. These are the benefits and benefits to be considered as you go through the process of discovering, articulating, and realizing a value proposition:
Giving directions
The value proposition provides direction by defining the ideal target audience ahead, then identifying and understanding the core needs that the planned solution can meet. Clear value proposition thereby helps avoid wasting time, money, and effort by offering products or services that are irrelevant or appealing to target customers.
Creates focus
A strong value proposition focuses on the team by identifying fundamental initiatives, activities, and business aspects; this will have an impact on meeting the needs of the specified target audience. Value propositions help focus on who, why, and how the business will deliver value. It outlines what you need to provide to meet the needs of your specified audience and creates an overall great experience.
Confidence dependency
Having a strong and perfect value proposition delivers team and stakeholder clarity so that progress can be made without questioning and guessing every step, thereby fostering confidence. Belief comes from knowing that you make a difference for the people you serve, that you do it in a way that is meaningful to them, and that the action is aligned to provide a great overall experience.
Improve customer understanding and engagement
Value proposition gives you a foundation to engage with customers in a convincing and resonant way by understanding how they see your product or service. Without this alignment, you may be talking to prospects and customers in a way that creates misunderstanding or even alienation - and people who feel misunderstood do not buy. The value proposition determines factors that not only make a difference to the audience, but do so in a meaningful aspect or way for them.
Provides business value clarity
For a start without any brand recognition, you should paint a very clear picture of why you value people's time. Often though, many of the company's marketing messages end up becoming unclear and unfocused, resulting in loss of impact and persuasion. The value proposition frames not only how you create value for the audience by addressing core needs, but critically why the solution is better than what they are doing or using, or versus anything potentially out there who can do it.
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Source of the article : Wikipedia
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