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Once the business identifies customer needs and preferences
the next step in the process is developing value proposition. The
Value Proposition is related to the positioning strategy of the
business which takes into consideration the customers, competitors
and general market trends. The value creation process is simply
trade-off between 1. Customer benefits and 2. Customer total cost
(monetary and non-monetary cost). The non monetary investment on the
customer side is time, energy, experience, etc in the process of
obtaining the product or service (the benefits).
The process starts with identifying those benefits which are
important for the customers. Next, the benefits should be ranked
based on how important are those benefits. Not every benefit will be
of equal importance to the customer in general and further different
product / service benefits will be of different importance to
different customer segments in the market place (the
Customer Segmentation article explains the customer segmentation
approach in more details).
Here is a simple example of customer benefits, ranking and
positioning maps developed for the purpose of identifying potential
strategic positioning for a new business:
Process for Developing Competitive Offering:
-
Identify customer
benefits
-
Analyze
competitive offerings
-
Analyze potential
positioning alternatives
-
Decide on what is
the best alternative for your business
What is the ideal positioning strategy for your business?
The perfect positioning in the marketplace is the point where
your trade off between customers’ costs and benefits produces
maximum value for your customers. This is the point where your
competitors’ offerings are irrelevant for the customer.
The two important points for your value proposition to be
successful are:
-
Maximize Actual
Customer Value = Product and Service Benefits or Performance –
Customer Costs associated with obtaining the benefits
-
Major Product /
Service Features that drive Customer Benefits
i.
Customer service
ii.
Product
quality
iii.
Service quality
-
Major Customer
Costs for obtaining the product / service benefits
i.
Monetary Costs
1.
Product Price
2.
Service Price
ii.
Non Monetary
Costs
1.
Time
2.
Risk
3.
Energy
4.
Frustration
-
Maximize
Perceived Customer Value
-
Understand your
customer
-
Explain your
value proposition in his / her words
Note:
Pay attention to how you create your service offering by considering
the following variables in your service offering mix:
-
reliability
-
credibility
-
communication
-
understanding
-
responsiveness |
