Customer Value Proposition - The Starting Point of a Business

Most of us see businesses as a way to make money for ourselves. Looking at business in this way can lead to pitfalls. For example, we might fall for a sham scheme that promises quick money, and find later that the whole thing was a sham.

On the other hand, if we look at business as a way to provide some much needed value to the business’s customers, and make money by doing it effectively and efficiently, we are more likely to come up with a sustainable business program. In this scenario, the starting point of a business is identifying the customer value proposition.

Let us start with a value proposition definition and then see how it can be developed.

What is a Value Proposition?

A value proposition is the specific and tangible benefits that a customer gets by using your product or service. It is not the product or service as such, but the need satisfaction that the consumer of the product or service derives. An automobile, for example, satisfies the transportation need of its user.

In a competitive market, many competing products will be satisfying such basic customer needs. To compete in such a market, it is necessary to develop more sophisticated value propositions. For example, the BMW car does not just satisfy the basic transportation need but also status and prestige needs of its owner.

In today’s world, it is such sophisticated value propositions that can enable a business compete successfully in the market.

Value Proposition Development

How do you develop such sophisticated value propositions?

You start the process by answering certain questions about your customer.

• What features of the product or service does this customer value most?
• Is the customer presently getting this value from existing products?
• Is there any dissatisfaction on the customer’s part about existing products?
• Is there some feature that this customer values and can be added conveniently to the product, e.g. status value added by the BMW providing a superior “driving machine” sold at a premium price.

You will need to interact closely with the customer and discover even unexpressed desires and preferences to answer the above questions. Once you have the answers, you will be ready to develop a value proposition for your product. Your next task will be to incorporate this value into your product and communicate the value proposition in a manner that “clicks” with the prospective customer.

One thing is extremely important at this stage. You are “what you do” and not “what you say.” Unless you really deliver on the stated value proposition by incorporating the valued features into your product or service, your value statement will be a mere paper statement that customers will see through.

Provided you develop a unique value proposition after identifying customer needs and also looking at competing offers, the proposition can provide a distinct competitive advantage to you. It can even create a barrier for competitors if it is also based on the unique resources available to you, such as superior design talent available in your company.

Customer value proposition is not the only kind of value proposition. There is an employee value proposition, for example. We will expand on the concept of value proposition in a separate article.

See also Value Propositions Help a Business Succeed

and Starting a New Small Business