CUSTOMER VALUE PROPOSITIONS IN BUSINESS MARKETING
We are here today to talk to you about one of the most widely used terms in business markets today that is also one of the most looked over. A customer value proposition, or CVP, involves the sum of total benefits which a vendor promises that a customer will receive in exchange for their business.
It sounds simple enough, but you’d be surprised to learn that many companies are unable to show what makes their product stand out and how it can benefit their target customer. Instead, many businesses end up making claims about all of their wonderful benefits and savings without the ability to back them up.
This shortsighted view neglects how CVPs can lead to superior business performance. When done well, CVPs can force companies to rigorously focus on what they can offer their customers. Once a company is disciplined in this mindset, they can make savvy choices about where to allocate their resources in developing new offerings.
There are three types of value propositions:
- All Benefits
- Favorable Points of Difference
- Resonating focus
Each has their strengths and weaknesses, but we at OK Global believe resonating focus is superior to the rest. But before we get ahead of ourselves, let’s look at the pros and cons for All Benefits and Favorable Points of Difference.
The All Benefits technique is used when a manager lists all of the benefits of their product that they can deliver to target customers. However, this doesn’t keep their competitors—or even their target customers—in mind. Using this technique puts you at risk of naming off advantages that provide no benefit to your target customer. Instead, you could be listing off ways to solve problems that your target customer doesn’t even have. Also, without pointing out what makes your product different from a competitor’s, a customer won’t know what makes you unique and will not be inclined to choose your product over someone else’s.
The second type of CVP is known as the Favorable Points of Difference. Here, it’s recognized that the customer has alternative options. Managers will list what makes their product different from their competitors, which is good, but they still don’t have their target customer in mind. Without a detailed understanding of the customer’s problem, you could find yourself stressing differences that deliver little value to them. Also, they don’t provide the customer with a point of parity. Points of parity are elements that are considered mandatory for a brand to be considered legitimate competition in their specified category. Without them, your target customer has no reason to choose you over the next best alternative.
This brings us to our third, and my personal favorite, technique: resonating focus. Resonating focus includes a point of parity and two or three points of difference. Resonating focus makes you think about what’s most important for your business to keep in mind about what you’re offering.
Knowing how your market offering delivers superior value to customers requires some customer value research. Yes, this can be time-consuming, and managers are often pressed for time, but results are truly worth it.
- Researching your target customers
- Identifying their problems, and
- Understanding of how you can help them better than the next best alternative
You have a competitive advantage in your field.
I’m not going to sugarcoat it. Customer value research requires time, effort, creativity, and persistence. However, thinking through a resonating focus lens will discipline your company to research its customers’ business, and substantially increase the chances of them choosing you over any of your competitors.