Value Proposition refers to the benefits provided by a company to its customers. These benefits are imparted through the company’s products and services which solve problems faced by customers, or fulfill one or more of their needs.
Some values are quantitative, like the price of a product/service or the speed of its delivery. Other values are qualitative, like customer care services or design of a product.
A business may create value by considering the following factors when developing its products & services:
Innovation– Some products and services have entirely new value propositions which have not been offered by others before. For example, before Uber came into existence, taxis were hailed by hand or phone. Only when Uber started offering on-demand, automatically dispatched rides with a route optimization feature did people enjoy such unprecedented benefits when hailing rides.
Performance– Businesses may create value for customers by improving the performance of their products and services. For example, OpenAI is continuously working to launch better versions of ChatGPT to enhance customer experience.
Customization– Some companies create value by customizing products and services according to the needs of individual customers or customer segments. For example, on the website of Lush Cosmetics, customers can customize gift boxes for their loved ones by including any Lush product and as many products as they want.
Price-Some companies offer similar products/services as others, but at lower prices. This is a common tactic of generating value for customers. For example, MAC is a high-end cosmetic brand which cannot be afforded by everyone. The dupes of its best-selling products are offered by companies like Maybelline at much lower prices. This makes Maybelline’s products affordable for a larger number of people. It generates value for customers by letting them use products which are similar to Mac’s but cost much less.
Cost reduction-When companies help customers to cut costs, they generate value. For example, Kore Facilitation offers Third Party Recruitment Services to its clients, for which it does not charge any fee. The company handles the entire recruitment process of clients, from screening resumes, shortlisting and interviewing candidates, making job offers and managing payroll, which have been traditionally handled by in-house HR teams. This saves clients a lot of money. To know more on how this works, contact us here!
Risk reduction-When customers purchase certain products-especially expensive ones- they value additional features which mitigate the risks of their purchases. For example, when buying laptops, customers look for warranties so that they can get their laptops fixed at little to no cost if those break down after purchase.
Convenience- When a product/service is easy to use, it generates value for consumers. For example, paying utility bills is much easier using Mobile Financial Services (MFS) like Bkash than going to a bank and standing in queue for a long time. The convenience of using a product/service may convince customers to choose one company over another.
Brand– Consumers may use products/services of a certain brand because they find pleasure in flaunting the brand they’re using. It may act a symbol of social or economic status for them. Examples of such brands are Michael Korrs, Movado, Coach, Gucci, Chanel, etc.
Accessibility– When products and services are easily accessible to customers, they are more likely to be used. For example, Bangladesh has a mobile penetration rate of 89.9%, but only 38.9% people use the Internet. Bkash was able to capture a large share of the market by making its services accessible to those who do not use the Internet.
Design– The design of a product/service is an important consideration for value creation. For example, many consumers prefer to purchase two-door refrigerators, while many prefer refrigerators with a single door. It is important to design products keeping in mind the needs and wants of a business’s target market and its various customer segments.
In conclusion, a business’s value proposition should be developed on the basis of its customers’ needs. Customer needs vary from segment to segment, so it is important to conduct thorough market research when designing products/services targeted to a specific segment.