Value Proposition

Updated: Sep 3, 2021

What is a Value Proposition?

Generally, the value proposition is addressed to the company’s target customers or target market segment. A value proposition is a promised value stating the specific benefits a product or service offering that will be delivered and acquired. A value proposition specifies what makes the company’s product or service attractive, why a customer should purchase it, and how it is different from those form competitors. The value proposition answers the questions, “Why should I buy from you or why should I hire you?” Proposition must be unique since it is used to communicate the differentiation points of a company to the target customers.

Importance of a Value Proposition

The development of a value proposition is really important and effective as it drives sales, builds customer base and influences customers’ decision making. It is frequently displayed on the company’s marketing materials, such as a website. Additionally, a perfect and compelling value proposition can improve the effectiveness of marketing strategies

How to Create Value Proposition

A perfect value proposition can be a key factor to make a business success. However, creating value proposition can be challenging for businesses. Here are some tips to create value propositions

1. Identify your customers

Before creating your value proposition, analyzing the market and potential customers is vital. Identify your target customers and target market segment to understand their needs.

2. Understand your costs and benefits

Identify the benefits that the products or services will deliver, along with the costs associated to provide them. To be successful in marketing, you need to design a value proposition that not only meets customers requirements but also delivers better value than the competior's value proposition, within acceptable cost.

3. Don’t forget about competitors

After analyzing target customers and your own company, it is also essential to evaluate the competitors in the market. Determine the strengths and weaknesses of your major competitors and identify ways you can differentiate your business from them.

4. Be clear and concise

An effective value proposition is clear and concise. The message you want to convey must be quickly understood by customers. It should not over 2 or 3 sentences.

5. Appealing design

Make your proposition visible and appealing on all marketing materials (e.g., website). If you have created an effective and perfect value proposition, but no one can see it, the effect of the proposition will be nothing.

Source: Corporate Finance Institute

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