Customer Value Proposition & Unique Selling Proposition

Formulating Customer Value Proposition

  • The Customer Value Proposition (CVP) is the most important part of your business model.
  • The focus should always be on the value generated for the customer and how this value is then captured by the business in the form of profit.
  • For CVP to be effective, it needs three qualities:
    1. It must offer better value than the competition.
    2. It must be measurable in monetary terms.
    3. It must be sustainable.
  • Businesses start and survive because they successfully answer three questions for customers:
    • What’s in it for me?
    • Why should I believe you?
    • Why should I care?

Jobs, Pain Points, and Needs

  • Overt benefit is the one big benefit for your customer. Not just the list of benefits – just the big one.
  • The marketplace is too cluttered and customers don’t have time or want to figure out what’s cool about your product or service.
  • Real reason provides evidence to the customer that you will do as you promise.
  • Dramatic difference is the uniqueness of your product or service in relation to other available options.
    • IKEA solved the problem of good quality, new, stylish, low price.
    • FEDEX transporting a letter or package overnight effortless compared to regular mailing and parcel delivery.

Four Problems Experienced by Customers

  • Lack of Time
  • Lack of Money
  • Lack of Skills
  • Lack of Access

Three Types of Value Propositions

  • All-benefits (focus is on the product)
  • Points-of-difference (focus is on the competition)
  • Resonating-focus (focus is on the customer)

Types of Customer Segments

  • Diet Coke and Coke Zero are examples. Both have similar ingredients but are aimed at different target markets.
    • Coke Zero for Men
    • Diet Coke for Women

Customer Segments

  • Mass Market is a large group of customers with very similar needs and problems.
  • Niche Market is a small market segment that consists of customers with specific needs and requirements.
  • Segmented Market is a market divided into groups according to customers different needs and problems.
  • Diversified Market
  • Multisided Markets

Unique Selling Proposition

  • USP is the unique feature of a brand which is motivating to the consumers.
  • USP is an approach to developing the advertising message that concentrates on the uniquely differentiating characteristic of the product that is both important to the customer and a unique strength of the advertised products when compared to competing products.
  • USP is the factor or consideration presented by a seller as the reason that one product or service is different from and better than that of the competition.

Examples of USPs

  • M&Ms: “The milk chocolate melts in your mouth, not in your hand.”
  • DeBeers: "A diamond is forever."
  • Starbucks: "Expect more than coffee."

Summary

  • The CVP outlines exactly how the firm will generate value, how it will generate it in excess of its competition, and how it will continue to do so in the future.
  • As the true measure of any business is creating value, the true measure of a business model is its customer value proposition.
  • Businesses tend to have different CVPs for each customer segment. This is to ensure they are meeting the needs of the customers within each segment.
  • Examples of different customer segments targeted by different types of businesses include mass market, niche market, segmented market, diversified market, and multisided markets. Types of CVPs include all-benefits, points of difference, and resonating focus.
  • USP is an approach to developing the advertising message that concentrates on the uniquely differentiating characteristic of the product that is both important to the customer and a unique strength of the advertised products when compared to competing products.