The Value Proposition

The value proposition consists of the final two steps in the customer-driven marketing strategy. For steps one and two, please visit my page labelled “Market Segmentation and Market Targeting“. For a summarized overview of the customer-driven marketing strategy, please visit the page labelled “Marketing and Company Strategy“.

As you can see in figure 1.A, the value proposition is the second and final half of the customer-driven marketing strategy. During the customer selection process, a company’s marketing department will segment the general public into marketable groups that have common needs. Once distinctive market segments have been identified, marketers must determine how broad or narrow their targeting strategy is going to be. These initial two stages, segmentation and targeting, are simply the research behind the value proposition, which is where the customer value is truly created.

According to Principles of Marketing, by Kotler & Armstrong (2012), the value proposition is “the full mix of benefits on which a brand is differentiated and positioned” (p.214). The purpose of the value proposition is to convince consumers to choose one brand over another based on unique points of difference. During the differentiation stage, marketers determine the key differences between their product or service and those of the competitors. During the positioning stage, marketers develop advertising campaigns to portray their product as having either unique features, benefits, or pricing. Differentiation and positioning combined will form a value proposition unique to the individual company; this proposition will likely be successful in the market if and only if it follows of the 5 winning value proposition strategies featured in figure 3.A, and listed below.

Figure 3.A

Image Source: (Kotler & Armstrong, 2012)

• The more-for-more strategy offers high benefit at an equally high, or higher, price. Products and services of this variety are advertised to consumer who have extra spending money and want the highest quality available. These brands are generally either considered to be of top quality (Grey Goose, Aston Martin, Cutco), or are associated with a powerful and valuable image (Porsche, Apple, Hollister).
• The more-for-the-same strategy is for companies that have the unique capability of offering a popular product for much cheaper than normal. These kinds of value proposition are sometimes accompanied by a breakthrough technology that changes the market environment permanently. In other cases, a large company with well established economies of scale can sell a product for less than competitors and still turn a profit.
• The more-for-less strategy is the most appealing, and the most difficult to attain. Achieving a difficult strategy such as this one almost always requires the use of a new technology or method of production that significantly lowers operating costs.
• The same-for-less strategy does not involve creating higher consumer value, but instead focuses on lowering prices. Though this strategy can be difficult to implement, it is incredibly attractive to consumers who seek low prices but not low quality.
• The less-for-much-less strategy entails selling low quality products at record-low prices. A perfect example of this kind of strategy is American pizza chain, Little Caesar’s. The Chicago-based company positions itself as offering the cheapest and most conveniently available pizzas on the market. While Little Caesar’s pizza may be of decidedly lower quality than rival pizza chains, the brand is unbeaten in low prices and quick service.

 Resources

Kotler, P. & Armstrong, G. (2012). Principles of Marketing. Upper Saddle River, NJ: Pearson Education, Inc.