Defining Value Proposition

Business and market realities of present times are forcing Organizations to re-think of their strategies as well as of their way of functioning. Every function from internal operating process, business model to product design, logistics as well as marketing and advertising is undergoing change to keep pace with the times. Management s are adapting to the fact that the need to change and innovate is here to stay. It is not a onetime exercise.

Marketing managers are faced with new dynamics in having to create strategies to build, retain and grow their brand leadership in the market using new ground rules. In the face of changing technology, increasing competition, increasing expectations of the customers and the internet media contributing to online marketing in a big way, the challenge for Marketing managers to build a marketing strategy taking into account all the above factors makes their job a lot more tougher than what it used to be in the yester years.

It is also the right time now, for the Marketing managers and managements to re-think of their focus and internal culture to bring about a change in a new direction. Companies need to focus on building a culture that promotes innovation in product and service offering and in cultivating this as an integral part of the Organizational culture. The survival of the organizations today depend upon their ability to understand the markets, the customer, identify their niche value proposition and in striving to keep ahead of customer expectations through building superior value proposition to the customer.

To understand the meaning of building superior value proposition, we would first need to understand the concept of what is a value proposition in the eyes of a customer. Different customers have different expectations from the product or service that they wish to buy and accordingly they look for different value criteria that match their expectations. Brand reputation, product performance guarantee, quality and service is taken for granted and is the basic necessity for the brand to be available in the market. Value proposition in the eyes of the customer refers to his perception of the benefits that he is deriving from the product as compared to the cost that he is paying. The customer should be able to perceive a higher value in buying your product as compared to the cost that he is paying and the benefit should also be superior to what is offered by the competition. Most customers perceive the entire transaction of time and cost spent in pre-sales activities as well as the cost of buying, delivery, installation, maintenance and after sales service as a part of the total value proposition. Apart from these, there are several other factors including perceived brand reputation, product features, expert advice and guidance provided as well as the customer responsiveness of the Organization including the speed of delivery etc also figure in the value proposition.

Understanding the customer expectation helps Organizations position their value proposition and aim to satisfy the niche customer segment as well as to build loyalty amongst the customers. This is the principle that has been adapted by most companies who stand out in their chosen value proposition and command leadership in the market. Apple chooses to build on its superior product innovation capability and commands a huge loyalty across the globe. It is not uncommon to see people queuing up in front of the Apple stores well ahead of a new release of Apple Phones. Ask any Apple customer, they will tell you that an Apple Fan is a lifetime fan and cannot think of looking at any other brand. Apple doesn’t come cheap. They are priced highest in the category. However their value proposition is based on superior product features, technology and the architecture which they continue to innovate and enhance the value all the time.

Take the case of Hertz and Mc Donald’s or Pizza hut chain. These companies have focused on speed of service as the value differentiator. It takes only a few minutes to complete the paperwork and walk out with the keys when you hire from Hertz. Pizza hut offers to give you the pizza delivery free if they do not deliver within the specified/committed time period. In these cases too, the customers are looking not for the best pricing but for the ease and speed of delivery experience and these business owners have understood how to enhance the value of their service to the customers.

All these brand leaders continue to rule over the market because they choose to focus on innovation. Needless to say that while they choose to focus on one particular value proposition of cost, product technology and feature or speed of delivery, the rest of the factors like the price, the quality and solution are not ignored. To be the market leaders, the Organizations have got to strive to perform and deliver extraordinary value proposition at all times.


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