Understanding customer value proposition

 

CUSTOMER VALUE PROPOSITION

 

Definition

A Customer Value Proposition (CVP) consists of the sum total of benefits which a vendor promises a customer will receive in return for the customers’ associated payment or other value transfer.

Customer Value Management was started by Ray Kordupleski in the 1980s and discussed in his book Mastering Customer Value Management. A 012 is a business or marketing statement that describes why a customer should buy a product or use a service. It is specifically targeted towards potential customers rather than other constituent groups such as employees, partners and suppliers. Similar to the unique selling proposition, it is a clearly defined statement that is designed to convince customers that one particular product or service will add more value or better solve a problem than others in his competitive set.

customer value proposition

Why Customer Value Proposition is Important

A good Customer Value Proposition will provide convincing reasons why a customer should buy a product and also differentiate your product from competitors. Gaining a customer’s attention and approval will help build sales faster and more profitably, as well as work to increase master share.

Understanding customer needs is more important because it helps promote the product. A brand is the perception of a product or service that is designed to stay in the minds of targeted customers.

Creating a Strong CVP

A strong CVP is a clear, concise and compelling articulation of how the factors that are important to the customers’ are satisfied by the company. A deep knowledge of the potential/current customer base is invaluable in coming up with a strong CVP which reflects the tangible results that customers can reasonably expect from using the firm’s products or services. Strong Value Propositions are also expressed from the customer’s perspective and talk about the experiences and benefits that they xviii have when using the product.

Competitive Advantage

A product with a successful CVP is directly linked to the products’ actual and sustained performance versus competition. The two main attributes that allow customers to differentiate among products are price and quality Finding the coned balance between those two attributes usually leads to a successful product. If a company is able to produce the same quality product at its direct competition but sell it for less, this provides a price value to the consumers. Similarly, if a company is able to produce a superior quality product for the same or a slightly higher but acceptable price, the value to the consumer is added through the quality of the product.

Note: A product must offer value through price and /or quality in order for it to be successful

 

Target Audiences

  1. End Users: The initial and ongoing satisfaction of the end users is the goal of every business. Customer satisfaction is achieved when superior customer value is delivered. Establishing a lasting business relationship will lead to future sales. Price and quality are the most important factors in a consumer purchase.
  1. Manufacturer/Distributor: When the sales target is not the end user, but a manufacturer or distributor of a product, the most important factor is conveying superiority of one product over another There may be other factors besides price and quality that would affect a customer’s decision and communicating those as well is essential.

 

 

Types of CVP

  1. All Benefits: Most Managers when asked to construct a Customer Value Proposition, simply list all the benefits they believe that their offering might deliver to their target customers. ‘The more they can think of; the better This approach requires the least knowledge about the customers and the competitors, and thus results in a weaker marketplace effort.
  1. Favourable Point of Reference: The second type of value proposition explicitly recognizes that the customer has alternatives and focuses on how to differentiate one product or service from another, knowing that an element of an offering is a point of difference relative to the next best alternative. It does not, however, covey the value of this difference to target customers. A product or service may have special points of difference, complicating the customers’ requirements and preferences, arid what it is worth to fulfil them; suppliers may stress points of difference that deliver relatively little value to the target customers.
  1. Resonating Pocus: The favourable points of difference value proposition is preferable to an all benefits proposition for companies crafting a customer value proposition. The resonating focus value proposition should be the gold standard. This approach acknowledges that managers who make purchase decisions have major, ever increasing levels of responsibility and often are pressed for time. They want to do business with suppliers that fully grasp critical issues in their business and deliver a CVI’ that’ s simple yet powerfully captivating. Suppliers can provide a customer value proposition on the few attributes that are most important and to target customers in demonstrating and documenting the value of this superior performance, and communicating it in a way that conveys a sophisticated understanding of the customers’ business priorities.

Brainstorming Session

  1. What is Customer Value Proposition?
  2. Discuss the different types of CVP that we have.
  3. Why do you think CXV is important in an organization?

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