Value Proposition Toolkit: what it is and how to test it
In a previous blog, I provided a strategy toolkit, what it is, what it’s not and 10 questions to test your strategy. So you may ask, isn’t that the same as a value proposition? Yes and No. Value proposition is an element of strategy. The element that looks outward at customers, the demand side of business. While both strategy and value proposition need to answer for “which customers, which needs and what relative price”, strategy is far more integrative, bringing the demand and supply sides together, and will contain several value propositions.
The best definition I’ve found and use for value proposition is, “the combination of experiences (benefits, trade-offs, price) any business delivers to its target customers versus competing alternatives.” And finding a unique, differentiating value proposition typically involves a new way of segmenting the market, and as Michael Porter often points out, a novel value proposition expands the market. Before Starbucks came along, customers didn’t realize that they need one nearby to get coffee. Before iPad came along, customers didn’t realize they wanted tablets. Did customers know they can pay cheaper prices for all their furniture by assembling them at home before Ikea? These are examples of companies that didn’t just meet customers’ needs, but they also transcended their unmet needs and expanded the market.
Here’s a quick and easy way to test your value proposition: Complete this sentence from your customer’s perspective, and then answer the following questions:
“If I buy your products and services, instead of (competing alternatives), I get what? The “what” is your value proposition perceived by your customers.”
Have you chosen a superior, unique, differentiating value proposition that answers this question?
Can you deliver this VP?
Is it sustainable and profitable?
Can everyone on the leadership team answer this question? Do the answers match?
Can your customers play back this answer? Have you asked? Do their answer match your intended VP?
I am available for half day strategy and value proposition workshops for you and your team. If you’re interested, you can visit my contact page or message me directly at farnaz@farnazglobal.com to schedule your complementary call to discuss.
