Customer Value Proposition

Once the business identifies customer needs and preferences the next step in the process is developing value proposition. The Value Proposition is related to the positioning strategy of the business which takes into consideration the target customers, direct and indirect competitors and general market trends (current trends and future predictions).

The customer value creation process is simply a process or approach to developing successful and attractive trade-off between

1. Customer benefits and

2. Customer total cost - both monetary costs and non-monetary costs (the non monetary investment on the customer side is the time, energy, experience, etc in the process of obtaining the product or service benefits.

The process starts with identifying those benefits which are important for the customers. Next, the identified benefits should be ranked based on how important are those benefits to your customers. Not every benefit will be of equal importance to your target market and not every benefit creates equal customer value. Further when analyzing the critical customer benefits you should segment the market and create customer segments because different product / service benefits will be of different importance to different customer segments or customer groups in the marketplace (for more information on Customer Segmentation please see the Customer Segmentation article which explains the customer segmentation approach in more details).

The process for Developing Competitive Offering - Creating Customer Value Proposition:

* Identify customer benefits

* Rank customer benefits

* Analyze competitive offerings

* Develop positioning maps

* Analyze potential positioning alternatives

* Decide on what is the best alternative for your business

What is the best positioning strategy for your business?

The perfect positioning in the marketplace is the point where your trade off between customers’ costs and benefits produces maximum value for your customers. This is the point where your competitors’ offerings are irrelevant for the customer.

The two important points for your value proposition to be successful are:

1. Maximize Actual Customer Value = Product and Service Benefits or Performance – Customer Costs associated with obtaining the benefits 1. Major Product / Service Features that drive Customer Benefits

i. Customer service

ii. Product quality

iii. Service quality

2. Major Customer Costs for obtaining the product / service benefits

i. Monetary Costs

1. Product Price

2. Service Price

ii. Non Monetary Costs

1. Time

2. Risk

3. Energy

4. Frustration

Maximize Perceived Customer Value

1. Understand your customer

2. Explain your value proposition in his / her words

Note: Pay attention to how you create your service offering by considering the following variables in your service offering mix:

* reliability

* credibility

* communication

* understanding

* responsiveness

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