What is a value proposition and why should you care?
The increasingly competition and technological advances requires more from companies every day. Success no longer depends on a product alone, but on the perception of the value proposition for the consumer. So, what is the value proposition and why does it matter?
So what else do we need here?
What is a value proposition?
Value proposition is the set of benefits that customers can expect from your products and services. It consists of items that create value for a customer segment. It should generate the perception that an offer is valuable enough to deserve engagement. The result of this engagement is a payment: money, information or referrals.
The reader only fills a form to download an ebook because there is a perception on the content being valuable to him. He trades his data for the download.
The increasingly importance of value proposition
Globalization and technological development have opened the market for new companies. Where once there were few competitors, today there are many alternatives. It has never been so important to have a differential. Actually more than that:
The difference must be perceived by consumers, otherwise there is no difference. tweet
We need to develop the value proposition from the point of view of your target audience. This is part of what Steve Blank calls Customer Development Model. The aim is to be more assertive to accelerate your business model.
Without perception of value there is no value proposition
I usually take an antiallergic for my rhinitis and thank the laboratories for the drug. Before people would probably die from complications related to rhinitis. An example: tonsil necrosis because of an infection, resulting in death. When this drug was released, perhaps, the perception of value was high. Maybe one could actually consider give a kidney for 5 pills of this medicine. Today, however, we have many different laboratories to manufacture. We have competition, which takes the price down.
The perception of value changes over time and the evolution of society. tweet
Recently, I bought a generic drug. I paid $17 while the original brand costs $53. Same formula and substance. For me there was no difference. I took them according to the medical advice. A few days later I was still sick. The doctor said that some generic brands has not been well enforced. I had to buy the $53 pills. After two days with the original medicine, I noticed an improvement in my allergic condition.
Notice how my perception of value has changed. Any doubts about which I will buy the next time?
The value of the Uber
Uber has a value proposition for passengers and a value proposition for drivers. The Uber value proposition needs a differential in relation to taxis. Maybe offer more comfort and good service at an affordable cost. More freedom with lower costs for drivers. Appeals to both, but who pays is the passenger.
It is interesting to analyze how it must offer value for drivers, which in addition to not pay, in fact they receive money. With no drivers the value proposition for the user would be compromised. They need enough drivers to comply with their value proposition for users.
Also: After consolidating its first value proposition, they need to emerged with new proposals. There are now the UberX, the UberPool and UberBlack. It is market segmentation, targeting the perception of value.
The value of water filters
Electrolux sells water filters that cost about R$745 here in Brazil. Every six months it is necessary to change the water filter cartridge: About R$80. In three years, the cost is R$1,225, equivalent to R$34 per month.
Brastemp, a competitor, offers water filters subscription. You pay a monthly fee ranging from R$69 to R$99 per month. They install the filter, exchange the refill, clean it and, if necessary, exchange the whole device. You don’t have to worry about anything.
Brastemp solution is more expensive, but has attracted many people and companies. Electrolux is cheaper. The features and use of the filters are identical. The value proposition is very different. As a result the customer’s perception also changes.
You need to rethink your business models from new value propositions’ perspective. tweet
There are specific techniques to help you create a value proposition.
Have you ever thought about the value proposition of your company? What is the perception of value that customers have of this proposition? Leave your comments and questions.