The Value Proposition Defined

David StewartAugust 25, 20202 min

At the heart of any successful business model is a set of customers who value and will pay for something the firm has to offer. This is the served market. The business model, and the business itself, should be defined by a statement of the value provided by the product or service offering of the firm. This statement is the value proposition.

A value proposition describes how a product or service solves problems or provides benefits for a specific group of customers. When described in this way, the value proposition identifies the served market in terms that customers can understand, evaluate, and place a value on. In other words, the value proposition states who will buy the firm’s offering and how much these customers should be willing to pay. It also defines the size of the market—how many customers need to buy the firm’s offering and are willing to pay a given price.

A value proposition is not an advertising slogan or a technical description of the product or service. It is a statement of who is it that values the firm’s offering and what they value about it. Few businesses, if any, can serve everyone profitably because customers differ. Some customers have a specific need while others do not have this need. Parents with infants need diapers; most other consumers do not. People who own pets buy pet food; people who do not own pets are unlikely to do so. Some customers value customization, and they will pay for it. Other customers desire a simple product that works and want to pay the least amount possible to obtain a basic benefit. The value proposition defines the business in terms of an explicit set of customers who are purchasing for a specific reason and at a specific price. Thus, the value proposition answers an important strategic question: which customers will the firm serve?

Examples Of Value Propositions

BMW “The Ultimate Driving Machine”

Dollar Shave Club “A Great Shave for a Few Bucks a Month”

Intuit “Simplify the Business of Life”

Lyft “A Ride in Minutes”

Netflix “Watch Anywhere, Cancel Anytime”

Ritz “Ladies and Gentlemen Serving Ladies and Gentlemen”

Target “Expect More, Pay Less”

Walmart “Save Money. Live Better.”

Zillow “Find Your Way Home”

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

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