ISB(PGID-72015026)

CUSTOMER VALUE PROPOSITION

A value proposition refers to the value a company promises to deliver to customers should
they choose to buy their product. A value proposition is part of a company's
overall marketing strategy. 

 A customer value model can be developed, on basis of which; the company's price
can be higher comparing to current price by the reason of being superior to others.
A company's value proposition tells a customer the number one reason why a
product or service is best suited for that particular customer.
 A value proposition should be communicated to customers directly, either via the
company's website or other marketing or advertising materials.
 Value propositions can follow different formats, as long as they are "on brand,"
unique, and specific to the company in question.
 A successful value proposition should be persuasive and help turn a prospect into a
paying customer.

The three kinds of Propositions are as follows

1. All benefits

When asked to construct a customer value proposition, most engineers and designers
simply list all the benefits that they believe their product might offer to their end customers
- the more benefits they can think of, the better. This approach requires the least knowledge
about the end customer and is therefore easiest to do.

The main drawback of the All Benefits value proposition is something called “benefit

assertion”. Here, the product creators claim advantages for features of their product that
actually provide no benefit to the targeted end users. This dilutes the effect of the few
genuine differences.

2.Favorable Point of difference

It focuses suppliers on differentiating their offerings from the next best alternative, a
process that requires detailed knowledge of that alternative, whether it be buying a
competitor’s offering or solving the customer’s problem in a different way.

☐  Drawback
 •   The value of difference may not be same to each and every customer
 • Choosing one Point of difference may be difficult to portray the best value
 •  Without complete knowledge of customer specifications, value proposition is difficult to
differentiate with Point of difference

3. Resonating focus

Providing a customer value proposition by making their offerings superior on the few
elements that matter most to target customers, demonstrating and documenting the value
of this superior performance, and communicating it in a way that conveys a sophisticated
understanding of the customer’s business priorities.

Building a successful CVP

A good Customer Value Propositon can be built by using the following

 Points of parity are elements with essentially the same performance or functionality
as those of the next best alternative. . Points of parity are the bare minimum for
competitive businesses. Points of parity are the reasons consumers add your brand
to the list of alternatives for consideration. These attributes are not brand
differentiators.
  Points of difference are elements that make the supplier’s offering either superior or
inferior to the next best alternative.
Points of differentiation are the attributes that make your brand unique. It is your
brand’s value proposition, its competitive advantage These attributes must be
consistently reflected in your brand slogan, and advertising.

 Points of contention are elements about which the supplier and its customers
disagree regarding how their performance or functionality compares with those of
the next best alternative

Points of contention are elements about which the supplier and its customers disagree

regarding how their performance orfunctionality compares with those of the next best
alternative.

The Building Blocks of a Successful Customer Value Proposition

Substantiate Customer Value Propositions

Value word equations enable a supplier to show points of difference and points of
contention relative to the next best alternative, so that customer managers can easily grasp
them and find them persuasive

This value word equation uses industry-specific terminology that suppliers and customers in
business markets rely on to communicate precisely and efficiently about functionality and
performance.

Demonstrate Customer Value in Advance

Prospective customers must see convincingly the cost savings or added value they can
expect from using the supplier’s offering instead of the next best alternative.

Document Customer Value

Suppliers also must document the cost savings and incremental profits (from additional
revenue generated) their offerings deliver to the companies that have purchased them.
Thus, suppliers work with their customers to define how cost savings or incremental profits
will be tracked and then, after a suitable period of time, work with customer managers to
document the results.

Superior Business Performance

Suppliers recognize that constructing and substantiating the focus value proposition is not a
one-time undertaking, so they must make sure their people know how to identify what the
next value proposition ought to be.