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Customer Value Proposition
Transcript of Customer Value Proposition
"to make customer value propositions persuasive, suppliers must be able to demonstrate and document them." Anderson et al 96
Superior Business Performance
"Customer value propositions make a significant contribution to business strategy and performance." Anderson et al 98
“Why should our firm purchase your offering?”
Favorable Points of Difference
“Why should our firm purchase your offering instead of your competitor’s?”
“What is most worthwhile for our firm to keep in mind about your offering?”
Types of Customer Value Propositions
Using Customer Value Proposition
Make A Deal
Customer Value Proposition
Customer Value Proposition
Presented By: Abby Gaffney and Erica Johnson
Demonstrate Customer Value in Advance
Know your product's value to better differentiate yourself from the next best option.
Document Customer Value
"Demonstrating superior value is necessary, but suppliers must also document the cost savings and incremental profits their offerings deliver." Anderson et al 97
Value Word Equations
- provides the ability to show points of difference and points of claim relative to the next best option
Companies Implementing Value Word Equations
Anderson, James C. et al. "Customer Value Propositions in Business Markets." Harvard Business School, 2006. 90-99. Print.
Companies Documenting Customer Value
All benefits customers receive from a market offering...
Simply lists all of the benefits that the offering might deliver to target customers
The more, The Better
Requires the least knowledge about customers and competitors...
Requires knowledge of the market, however
Easiest value proposition to construct
Potential Drawback: Benefit Assertion
Claiming advantages for features that actually provide no benefit to target customers
Product/service may not be as beneficial as presumed
All favorable points of difference a market offering has relative to the next best alternative...
Explicitly recognizes an alternative
"points of difference"
, or factors making an offering either superior or inferior
Requires detailed knowledge of the alternative
Requires detailed understanding of the customer’s requirements and preferences
Offers cost savings and/or solves the customer’s problem in a different way
Potential Drawback: Value Presumption
Assumes that favorable points of difference must be valuable for the customer
Focuses on the few elements that matter most to target customers
Simply communicates value with regards to customer’s business priorities and critical issues
More is NOT better!
Requires knowledge of market, alternatives and customers
Demonstrates and documents the value of superior performance
Effective, but not easy to develop
May include: points of parity, points of difference and/or points of contention
Potential Drawback: Inadequate Customer Value Research
Demands customer insight to succeed
Requires time, effort, persistence, & creativity
"most value propositions make claims of savings and benefits to the customer without backing them up... Customer managers, increasingly held accountable for reducing costs, don’t have the luxury of simply believing suppliers’ assertions" Anderson et al. 91
No consensus on what actually constitutes what is a customer value proposition
Widely accepted in businesses for a persuasive offering or pitch
High-Performance Gas Chromatographs Company
Hoped to supply 5 million units to an electronic device manufacturer for its next-generation product
Competitor's price was 10 cents lower per unit
Customer valued this offering, with a worth of actually 15.9 cents more per IC unit
Salesperson offered 10 cent concession, unaware of product's value over competitor
Integrated Circuits (ICs) Company
A global packaging supplier headquartered in Hartsville, S.C.
Redesigned packaging provided 6 favorable points of difference relative to the next best alternative
However, they emphasized...
Point of Parity
Same Price, Better Performance
Points of Difference
Cost savings from fewer shifts
Revenue and profit growth
Sonoco did not neglect to mention the other favorable points of difference, but they were selective in which points had more weight.
Sold to R&D laboratories in large companies, universities, and government agencies
: Maintain a high degree of sample integrity
Seeking growth, it began marketing to commercial laboratories
: Prospects routinely tested soil and water samples, and maintaining sample integrity was not a concern.
Value Case Histories
- document the cost savings or added value that customers have actually received
- value assessment tools to demonstrate the value customers would likely receive
Companies Demonstrating Customer
Value in Advance
How Royal Building Products Uses Customer Value Proposition in their Business Strategy