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Customer Value Proposition

Customer Value Proposition

Customer Value Proposition

Use this framework to create a compelling purchase motive

Every company has an offer. The offer is in the form of products or services or a mixture of both.  It is what a company sells. Almost always this offer is sold into a competitive environment. Successful companies are good at selling their products or services against the competition. They do this with strong sales arguments advancing the reasons why their product is the best and why it should be purchased.

This has always been the case in commercial environments. What is relatively new is the way we think about an offer. Sales orientated companies see their products and services as stock; something that needs to be sold in order to make a profit. They focus on the here and now. They watch their sales on a daily or weekly basis, all the time checking to see whether they are hitting budget.  There is nothing wrong with this, it is fundamental to most businesses. However, it has its dangers. The pressure to achieve immediate sales may lead to high levels of persuasion, so much so that customers are induced to buy something that they don’t really need. The sales teams, faced with aggressive budgets, may exaggerate the benefits of the product to meet their weekly targets.

Price is an important driver in a sales orientated company and the sales teams will always be looking to do a deal. The focus on pushing products at any price may force prices down and squeeze profits. Sales orientated companies put themselves in danger of becoming more interested in getting rid of their products than meeting the needs of their customers.

Marketing orientated companies take a longer view. They seek to understand the needs of the market and to develop products and services that satisfy those needs. They want their customers to come back for more. Marketing companies sell the sizzle rather than the steak. They push the benefits of their products and services and not just the features. Crucially, they aim to sell value. They want their customers to feel that the products and services they have bought are good value so that they become long and loyal advocates.

It is the philosophy of marketing that has led to the term customer value proposition (CVP). This rather pretentious term refers to the offer with the emphasis on the words “value” and “proposition”. There is recognition that products and services present a proposal to a customer - possibly a solution to a problem; certainly something to meet a need. Very often the CVP is a promise of a reward if the purchase is made. These components of the CVP are all the things that are valued by customers and for which they will pay a premium.

The concept of customer value propositions originated in the 1980s when Ray Kordupleski published his book Mastering Customer Value Management. The emphasis changed from picking out points of differentiation to determining what customers’ value.

In most markets, customers face a choice of alternative products and services. Many of these products and services fulfil similar needs. Customers need a reason to buy your product (or service) rather than any other. This reason could be tangible and logical or intangible and emotional. A good customer value proposition focuses on the main factors that drive customer choice. Keep it simple; in fact think of developing a USP.

In building a customer value proposition consideration should be given to all sources of intelligence:

• Customers and potential customers (from interviews and market research reports)

• Competitors products

• Salespeople

• Technical staff

• Marketing staff

• (Indeed all staff)

Customer value propositions are best built in workshops where representatives of different parts of the company can come together to debate the subject. It is possible that the workshop will find that there is a current customer value proposition and one that would be more desirable (a future customer value proposition).

When developing a CVP have in mind a very clear persona of the target for your customer value proposition.

Also, focus on just one or two of the most important benefits or features of your product. Don’t present the customer with a laundry list that will dilute the importance of all the attributes.

With this in mind the CVP must resonate with customers and be short and snappy. It must cut through the noise that is made by other companies that are talking to customers at the same time. To arrive at this pithy description of the CVP, build an elevator pitch by completing the following:

For you dear customer (ie the target audience)

…we know you value xxx (ie what the product does for the customer)

…and our product is the best on the market because xxx (ie it is superior to anything else the customer could buy)

Some things to think about:

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