Be it the leading brands of the world or small businesses in your locality, they will have one common attribute – They will know what their product is and how to sell it. But herein lies the dilemma. If you know only part value of your product, and if you know only some areas where your product can be used, or if you do not know what the competition is up to, than you can lose your customers.
This is the reason why formulation of a customer value proposition is very important.
Let us understand customer value proposition from our day to day experience. If you meet any sales person, he will try to show you a catlog or a presentation of the product he is trying to sell. The catlog will highlight all the key features of his product, it will show the price as well as products in different price range and ideally, the sales person will communicate verbally with you of WHY his product is better than the competition and what are his products USP’s.
The salesman is just trying to put across a Customer value proposition. He wants to make you understand the value of his product, and why you should buy his product. If you are in top management, If you are a CEO of a small business organization, or even if you are in the junior most position in sales, you need to know what is your products value proposition.
Typically a customer value proposition consists of the following criteria’s.
Product – What is your product and what are the features of your product. A customer can be impressed if you have a lot of USP’s and if you highlight these USP’s. If you don’t show all the features of your product, than the customer is most likely to lose interest.
Segment – Are you approaching the right segment for your product? If you target a wrong segment, the customer value proposition will probably be lost on your customer. He will not at all be interested in the proposition because he is not the target audience.
Price – Deals are made and broken on the basis of price. Is your price too high or too low as per your target segment? Is your competitor giving a better price? A complete value proposition will understand the dynamics of pricing and the proposition will be made accordingly.
Value – You may not be interested in a local toothpaste brand, but you will definitely be interested in Colgate. You may not show interest in a local made Cola, but you will like it when offered a Coke or a Pepsi. The brand carries value. The best practice is to highlight your brand and its heritage while preparing a customer value proposition.
Competition – Whether you want to listen to this or not, but the truth is your customers are equally interested in your competition. They will choose you only if you have the right customer value proposition which meets the customer’s requirements.
How to Make a Customer Value Proposition?
A customer value proposition is important for an organization as it helps the organization understand the complete market environment and how it will affect their own products. Where value proposition outlines the key benefits of the products, customer value proposition will highlight the business environment, the competition, and more importantly the reason which compels the customer to buy your own product.
1) Who is your target audience
Your customer value proposition cannot be made if you don’t know your target segment. This CVP is going to be presented to these target audience itself. Thus, If Mahindra holidays are targeting only the holiday travellers than its products will be different as compared to another company which is targeting business travellers.
2) What does your target audience want
Before developing your product, it is necessary to understand what does the customer wants? This can be done through a market research in your industry, or if you have an insight for a product which is missing in the market and which will find a wide application. In both the cases, you will know what the customer wants and this will create an immediate value for your product. On the other hand, if the product already exists in the market, than you need to ask what features will differentiate your product from the others. You need to devise your marketing strategy in such a manner that these features are highlighted.
3) Benefits of your products
Once you know what the target audience wants, you need to design the product with the right features and then highlight the benefits of your products. Always remember that your marketing mix is dynamic. Thus if your product has many benefits, the price of the product will be more and vice versa. Thus, you might again need to look at your target audience and depending on your demography, diversify the customer benefits that you are going to advertise. This helps create a much clearer customer value proposition.
4) How are you better than your competition?
Do not ignore your competition, because your customer certainly will not ignore them. Be realistic and accept the facts that just like the customer has approached you, he is going to approach the competitor. The customer might openly ask you why he should buy your product, or he might go to competitors, collect information and then make his own decision. It is your job to understand what the competition is doing and thereby build the customer value proposition in such a manner that your product appears stronger than the competition.
5) Commitments to the customer
As a famous marketer once said “Brand is a promise”. Once you sell your product to your customer, you have made a promise to the customer that the product is up to his expectations. However, if you fail in your post purchase service, the customer is likely to shift to another brand. Thus it is very important that you outline your own commitments well in advance. Many electronics brands provide customers with warranty cards, product usage guidelines as well as company policy along with the purchase of the product. This is to ensure that the customer understands your commitment to the product and at the same times understands that you have your limitations.
Thus your customer value proposition can end on the commitments that you are ready to make to the customer. If your target audience is right, you have marketed the right product in the right manner, you know who your competition and where you stand against the competition and finally if you make the right commitments to the customer – your customer value proposition is up to mark.
Overall, Many marketing activities are covered while building a proper customer value proposition. The complete organization, its heritage, people involved, products which the organization makes, the value proposition of these products, their price as well as their features, all help in making the right customer value proposition and hence the decision for the customer.
Successful companies understand that value proposition is the most important part of business. And to stay ahead of competition, you need to build value as per what the customer wants, and not as per what the company can provide.
Here is a video by Marketing91 on Customer Value Proposition.
