By Karen Utgoff
Many business owners, entrepreneurs, executives, marketers, and product managers are hard pressed to express a value proposition crisply or craft one that holds up well in the real world.
Can you? If you aren’t sure, read on.
What is a value proposition? In short, it’s the answer to why customers buy and why they buy from you. Strong value propositions reflect a deep understanding of your customers and serve to unify and align marketing — promotion, packaging, pricing, distribution, product, etc. — efforts.
Sound value propositions address customers’ operational, economic, or emotional concerns.
Operational value propositions appeal to customers who need to solve, ease, or prevent problems, that is, change the conditions under which they operate. For example, a new drug might cure a previously incurable disease, slow its progress better than existing treatments, or prevent those at risk from contracting it. When a breakthrough technology is at the core of the product, an operational value proposition typically appeals to visionaries — early adopters who are most likely to be open to and excited by the promise of a new, relatively unproven offering.
Economic value propositions resonate with customers who are cost-driven. But cost can be measured in a number of ways. Customers may seek the lowest purchase price, more predictable total cost of ownership, or some other cost-related benefit. Economic value propositions can be powerful or painful depending on how low-cost is defined and achieved. Wal-Mart achieves every day low prices through superior logistics and supply chain management forcing others to lower prices or find some other way to compete.
Emotional value propositions appeal to customers’ feelings, attitudes, ethics, and/or self-image. Designer labels command a premium price from customers who see themselves as fashionable and perhaps affluent, even as others fail to see any significant difference with a no-name version that may be from the same contract manufacturer. Products branded as “all natural” or “low fat” may draw the interest of health conscious customers even when the only change is relabeling to accentuate product attributes that were already present. Fad products such as the legendary pet rock may offer fun, frivolity, or the cool factor to customers. Clothing associated with a school, club, or team offers a sense of belonging.
Multidimensional value propositions mix operational, economic, and emotional appeals and are especially powerful. Customers buy for different reasons in response to evolving conditions, public opinion, marketplace developments, and even modes. One-dimensional value propositions can lose their relevance in the face of short-term changes and it can be very challenging to adjust without abandoning long-term focus. By recognizing the inevitability of evolving customer needs and market uncertainty, multidimensional value propositions enable leaders in product, marketing, and sales to effectively maneuver while maintaining long-term focus. In addition, such value propositions can more easily address the needs of different individuals involved in product selection and purchase decisions.
Hybrid and electric car manufacturers put forth an economic value proposition based upon their lower long-term operating costs and strong value on the used car market. In addition, they include an emotional element that aligns with owners’ self-image as environmentally responsible as well as an operational element based upon the distance that can be traveled between fill-ups. Recently, the drop in gasoline prices has devalued their economic benefits which may cause marketers to put more emphasis on emotional components of their value propositions and/or their vehicles’ potential to go further on a single tank than conventional models.
As products and markets mature, competition often intensifies pressure to focus on an economic value proposition and commoditization leads to a complete focus on lowest price. Businesses that commit to operational and/or emotional elements as part of their overall value proposition create potent tools to resist commoditization. Apple is an example of a company that uses this approach effectively in the personal computer market.
Organizations that take a nuanced approach to defining value propositions are better able to use them to maneuver in the marketplace while maintaining strategic focus for the long run and providing a benchmark for alignment of product development, pricing, marketing communication, sales and other key market/customer-related activities.
In a future post, I’ll get into some good practices for crafting multidimensional value propositions.
© Copyright 2015 Karen Utgoff. All rights reserved.