The Difference Between Purpose And Value Proposition

David StewartDecember 27, 20236 min

Brand “purpose” has been all the rage in recent years. The notion of brand purpose rests on the assumption that a brand, product, or company should stand for something more important than just the functional benefits it delivers. A purpose is the reason a product or company exists and what it stands for beyond the usual business goals and objectives, such as making a profit. It is a noble statement of how the product or firm adds value to society as a whole beyond merely solving the problems of customers. Examples of purpose-driven companies include Patagonia, Timberland, Warby Parker, and Cisco, among others. One of the pioneers of purpose-driven marketing was Unilever, which enthusiastically embraced the notion that all brands should stand for something. Thus, it came as a shock to many when Unilever’s CEO, Alan Jope, retired amid criticism that he had delivered neither purpose nor profit. Tellingly, Unilever’s share price increased immediately following the announcement of his retirement.

There is, of course, nothing wrong with embracing values related to sustainability, reduction in poverty, or improved quality of life. These are desirable goals. The problem is that they are only occasionally related to successful business strategy. There are several reasons for this. First, embracing such noble goals is rarely a point of differentiation. Second, consumers have become wise to empty virtue signaling. Finally, a necessary requisite for the sustainability of a business is profitability. Businesses that do not make a profit will not last, and they will not be able to pursue other goals, no matter how noble.

It is also the case that customers already have a purpose for the products and services they buy. They may applaud the noble goals of companies and, in some cases, even prefer the products of firms whose values and behaviors they admire. But, at the end of the day, customers buy products in pursuit of their own purposes, not those of the firm. The value for which customers are willing to pay resides in the degree to which a product provides the benefits sought by the customer. Creating and delivering such value is the key to successful business strategy and long-term sustainability.

Peter Drucker, the father of modern business management, had much to say about business and marketing. One of his more influential ideas revolved around the intrinsic value of marketing and innovation – they are producers of benefits sought by customers, while every other aspect of business is a cost. Drucker’s message is clear and timeless: it asserts that a successful business begins with the customer, or perhaps more specifically, it begins with a statement of the value a business can deliver to a purposeful customer. Successful businesses serve customers whose needs match their capabilities and who will pay for the value delivered.

Every successful business must establish a clear value proposition or a definition of what the business offers in terms that are meaningful to customers. Employees should be able to recite this credo, and all of the firm’s activities should be organized around it. Its importance rests in the fact that the value proposition defines the business. The strength of a firm’s or product’s value proposition and the degree to which it is clearly delivered in marketing communications are the single most important influences on the effectiveness of those communications. Likewise, the extent to which employees can articulate the firm’s value proposition and how they make individual contributions to delivering this value are predictors of both customer and employee satisfaction.

The Ritz Carlton describes its business as “Ladies and Gentlemen serving Ladies and Gentlemen,” BMW offers the “Ultimate Driving Machine,” and Walmart delivers “Every Day Low Prices.” These pithy value statements are delivered in terms that are easy to understand. They are successful not because they are particularly artful but because they are associated with the value offered by the firm and what the firm does better than its competitors. It promises something that is of value to customers and credibly supports that promise by pointing to the capabilities of the firm.

Good value propositions also differentiate a firm’s offerings from those of its competitors. By alluding to at least one dimension that the firm excels at relative to their competitors, it gives customers a reason to purchase the product over any others. The value proposition simply explains why an offer, whether a product or a service, is the best choice for a targeted audience in the market.

There is, however, a difference between a value proposition for a firm and one for a product or service. The value proposition of the firm provides strategic direction and a test for evaluating decisions and actions, while that of an individual offering is a statement of the reason a product exists in the firm’s portfolio at all. If reflected in everything that a firm does, it can become a powerful message that will have an impact even on a modest budget, but a weak message about an undifferentiated product offering will have no impact even with an unlimited marketing budget.

From a communications perspective, a value proposition must be prominently and consistently featured. Remarkably, a recent study of advertising over more than a decade found that less than half of the ads contained a statement of product value and a reason customers should purchase the product rather than competitors’ offerings. Persuasive messaging should highlight whatever the specific offer is in a way that gives customers a reason to choose the firm’s product(s), thus balancing consistency with emphasis on relevant support points for relevant audiences, seasons, communication tools, or other factors.

Yet, no matter how successful a business is, thanks to its value proposition, it is still critical to remember to revisit it regularly. Markets, competitors, partners, and individual customers change. Technology, relevant processes, and materials that are used to deliver value change. To be persuasive and credible, a value proposition must also change in response to such changes. It may even be that what was once valued is no longer of value, and it is time to exit the business. But whatever the fate of the value proposition, during its lifetime, it should be used as a guide for the business, employee actions, and informed marketing communications.

Purpose is, of course, important. Sometimes, a brand’s “purpose” can align with what customers value and serve to differentiate the brand in the marketplace. But, it would be difficult to find a customer who does not value sustainability or the elimination of poverty, and if such “purposes” are embraced by all firms, and we might hope this is the case, such purposes do not differentiate the firm or its offerings. If the purpose of the firm is to create a successful brand, that purpose will be best served by understanding and delivering value consistent with consumers’ purposes and preferences.

Contributed to Branding Strategy Insider by: Dr. David Stewart, Emeritus Professor of Marketing and Business Law, Loyola Marymount University, Author, Financial Dimensions Of Marketing Decisions.

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