What is a “Value Proposition”?

A key aspect of a successful marketing strategy is the clear definition and communication of a sought-after value proposition. A good way to think about the firm’s value proposition is consider what is different and beneficial about the firm’s (or brand’s) offering/s in the marketplace.

Over time, firms/brands will develop and enhance multiple offerings for their target markets. If consumers perceive that the firm/brand offers good value then they are more likely to become and remain customers.

Therefore, the greater the perceived value – or the greater choice of value (across different offerings) provided by a firm, then the greater their market share is likely to be, as shown in the diagram below.

As can be seen, the firm/brand will only win new customers (that is, increase brand penetration) if the target market perceives that their offering provides good value AND that it is superior/different to a competitive offering.

If a firm/brand fails to effectively communicate these two requirements to its target markets then the consumer is likely to be lost to a better offer from a competitor.

In simple terms, a value proposition is the overall package of perceived value (that is, key benefits less costs) offered by a product (or by a firm or brand).

A Value Proposition is MORE Than a Statement

A customer value proposition (CVP) is more than just a statement—it’s the complete set of benefits a company offers to its customers. Think of it as the reason why someone should choose one brand over another. A strong CVP helps a business stand out in a busy market by explaining why its products or services are better or more relevant than others.

Why Does a CVP Matter?

A well-designed CVP is at the heart of any good marketing strategy. It tells customers why they should care about what the business offers. This is essential because, in a market full of options, businesses need to show how they’re different and valuable. A compelling CVP can build customer loyalty, improve the company’s reputation, and even boost sales.

What Makes an Effective CVP?

For a CVP to work, it needs to be clear, relevant, and unique. Here’s what it should include:

• Clear Benefits: The CVP should make it easy for customers to see what advantages they will gain. This could mean saving time, getting better quality, or enjoying a great experience.
• Cost and Value Balance: Customers should feel that the value they receive is worth what they’re giving up, like money or time.
• Unique Features: A CVP should highlight what makes the product or service different from competitors. This could be a special feature, unique customer service, or something else that stands out.
• Functional and Emotional Connections: The best CVPs make customers feel good about their choice. This could be due to great user experiences, a trustworthy brand image, or positive feelings they associate with the product.

Example: McDonald’s Value Proposition

McDonald’s provides a great example of an effective CVP.

The fast-food giant’s value proposition combines various elements that appeal to its customers, such as convenience, speed, and consistent quality. McDonald’s focuses on delivering meals quickly, at an affordable price, and with a familiar taste that customers around the world recognize and trust.

This balance of functional benefits (speed and affordability) and experiential benefits (familiarity and comfort) shows how a CVP can be constructed to resonate with a broad audience.

Positioning vs. Value Proposition: Key Differences

It’s important to note that while a CVP communicates what a company offers, whereas positioning is about how the company wants to be seen in the market relative to competitors.

Positioning takes the CVP and shapes it into a clear message or image in the customer’s mind. For example, while McDonald’s value proposition focuses on convenience and speed, its positioning emphasizes being a family-friendly, affordable option for quick meals.

This distinction means that a brand’s value proposition is part of its broader strategy that feeds into its positioning. The CVP tells customers what they can expect, while positioning ensures that they remember and associate that value with the brand.

How Does a CVP Impact Companies and Customers?

For the Company

• Motivates Employees: When employees understand the CVP, they can see the company’s goals more clearly. This can motivate them to work better and stay focused.
• Guides Strategy: A CVP helps a company stay on track with what customers need and want. This can guide how they create new products, market them, and allocate resources.
• Improves Resource Use: Companies that have a clear CVP can use their time and money more wisely by focusing on what helps deliver their value best.

For Customers

• Easy Decision-Making: A clear CVP helps customers know why they should pick one product over another. It makes choosing easier because they understand the benefits.
• Higher Satisfaction: When a company lives up to its CVP, customers feel satisfied with their purchase and trust the brand more.
• Builds Loyalty: A strong CVP doesn’t just attract customers; it keeps them coming back. Happy customers become repeat buyers and may even tell their friends about the brand.

Value Proposition FAQs

1. What is a customer value proposition (CVP)?
A CVP is the complete package of benefits and value that a company offers to its customers, explaining why they should choose the company’s product or service over others.

2. Why is a CVP important for businesses?
A CVP helps companies clearly communicate their competitive advantage, attract and retain customers, and guide internal strategic efforts for better resource allocation.

3. What are the key components of an effective CVP?
Key components include clear benefits, cost considerations, unique differentiators, and both functional and experiential elements.

4. How does a CVP differ from positioning?
While a CVP outlines the value a company offers, positioning focuses on how the company wants to be perceived in the market relative to competitors.

5. Can a CVP change over time?
Yes, a CVP can and should evolve to reflect changes in market trends, consumer preferences, and competitive landscapes.

6. What role does differentiation play in a CVP?
Differentiation highlights what sets the brand apart from competitors, making the CVP unique and compelling to customers.

7. How does a CVP impact customer decision-making?
A strong CVP clarifies the benefits customers will receive, making it easier for them to choose a product or service and feel confident in their decision.

8. What industries benefit from having a strong CVP?
All industries can benefit from a well-defined CVP, but it is especially important in competitive markets where customers have many options.

9. How does a CVP align with a company’s overall strategy?
A CVP aligns with a company’s strategy by guiding marketing, product development, and customer engagement initiatives to ensure consistency and effectiveness.

10. What are common mistakes companies make with their CVP?
Common mistakes include making the CVP too vague, failing to differentiate from competitors, and not aligning the CVP with actual customer needs and experiences.

Related Topics

• Difference between positioning and a value proposition
• Value proposition example for McDonald’s
• How to identify a value proposition
• Please note that customer value is discussed in several other articles on this website, including a discussion of the different ways that consumers can perceive value, examples of benefits and costs, the difference between benefits and features, and how customer value differs from customer satisfaction.)