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Customer Value Proposition

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by

Erica Johnson

on 9 March 2016

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Transcript of Customer Value Proposition

Substantiate Customer Value Propositions
"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
All Benefits
“Why should our firm purchase your offering?”
Favorable Points of Difference

“Why should our firm purchase your offering instead of your competitor’s?”
Resonating Focus
“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
What? Why?

Customer Value Proposition
THANK YOU!
Any Questions...
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
References
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.

https://iterativepath.wordpress.com/2010/02/21/the-value-equation/

http://www.forbes.com/sites/rebeccabagley/2013/09/04/how-to-develop-a-compelling-value-proposition/#6b4e62fb4bb0
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
Emphasizes
"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
SUPPLIERS
CUSTOMER
EXAMPLE
High-Performance Gas Chromatographs Company

EXAMPLE
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

EXAMPLE
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.
Sonoco
Sold to R&D laboratories in large companies, universities, and government agencies

Main Benefit
: Maintain a high degree of sample integrity

Seeking growth, it began marketing to commercial laboratories

Drawback
: 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 Calculators
- 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
Full transcript