In the field of marketing, a customer value proposition consists of the sum total of benefits which a vendor promises that a customer will receive in return for the customer’s associated payment (or other value-transfer).
Put simply, the value proposition is what the customer gets for his money/time.
Accordingly, a customer can evaluate a company’s value-proposition on two broad dimensions with multiple subsets:
- relative performance: what the customer gets from the vendor relative to a competitor’s offering;
- price: which consists of the payment the customer makes to acquire the product or service; plus the access cost
The vendor-company’s marketing and sales efforts offer a customer value proposition; the vendor-company’s delivery and customer-service processes then fulfill that value-proposition.
Value-proposition as a marketing tool
A value-proposition can assist in a firm’s marketing strategy, and may guide a business to target a particular market segment.[1] Typically, there are three ubiquitous elements in a value proposition: Convince (who?), that (what?), because (why?). This framework will structure your value proposition in a cohesive manner that makes sense internally and externally.[2]
Whether for a product, service or a company as a whole, this formulation can allow a firm to see if its competencies align with the segment that it plans to target.
Theory
The company has always[citation needed] had the value-proposition of increasing its market share and growing revenue by:
- providing superior customer service
- product differentiation
- operational efficiency
A strategic analysis and planning document should contain at least five elements:
- current situation (including problems, causes and effects)
- target situation
- when to reach the target situation
- cost of reaching the target situation and opportunity cost analysis
- the benefits of both the targeting and the achievement phases
