Value Proposition Dial
What types of attributes can add value to a customer proposition? Ron Meyer presents an insightful tool to kickstart your thinking: Value Proposition Dial.
A value proposition is the full package of benefits that a firm promises to potential customers if they purchase its products and/or services. It is the set of valuable attributes that a firm vows to deliver to buyers, in the hope that this will sway them to select the firm’s offering.
What is valuable is determined by the potential customer. On a hot day, cold ice cream is valued, but so is its availability at the beach, its trusted brand, and the possibility to pay by credit card. It is the set of attributes together that make a value proposition compelling.
The Value Proposition Dial gives insight into the seven categories of attributes that can be combined to create an attractive value proposition. Its key message is that a value proposition is more than the characteristics of the core product/service. Surrounding these core attributes are the envelope attributes – six sets of possible characteristics providing valuable ‘wrapping’ around the ‘gift’ inside. In each of the seven categories a few examples have been given, but there is no limit to the possible attributes per category. This “dial” is one of the three dials that together form the business system (see model 32, Strategic Alignment Model).
The seven categories of possible attributes are the following:
1. Core Product/Service Attributes.
The core product or service is at the heart of the offering to customers. Most product-driven companies will focus on technical attributes such as quality, size, color, features, and functionality, but from a customer perspective attributes such as design, style, smell, convenience, and assortment can add huge value to the mix.
2. Supplemental Products Attributes.
A laptop might be made more attractive if it comes with pre-loaded software; dentistry services more appealing if the waiting room is pleasant; and chocolates more desirable if beautifully packaged. These are all examples of tangible products added on to the core product/service, each with its own specific attributes.
3. Supplemental Service Attributes.
In the same vain, complex machinery is more valuable if installation is included, car rental more attractive if insurance can be tacked on, and electronics more alluring if repair is available at no extra cost. These are all examples of services added on to the core product/service, each with its own appreciated attributes.
4. Distribution Attributes.
The way that a product/service is made accessible to customers can also bring additional value. Being able to order online, make reservations, get home delivery, and/or have a product immediately available are all distribution attributes that can be highly appreciated and represent reasons to select a particular offering.
5. Informational Attributes.
Sometimes information is the core product, but often information is added an extra benefit. An instruction manual or video can be offered, along with technical documentation, a database of fonts and icons can be included and access to a library of frequently asked questions can be provided, all sweetening the offering.
6. Reputational Attributes.
The way a product/service is perceived, judged, and trusted by the potential buyer, and its more general renown among other stakeholders, can also be of great value. Been known as a luxury brand, having great reviews and an image of trustworthiness, and being certified as meeting quality standards, all increase desirability.
7. Payment Attributes.
Likewise, what, and how, to pay for a product/service can make it more alluring. A low price, a volume discount, paying in instalments, only paying for premium features, receiving bonus points, and buying through an auction are just a few examples of how getting people to part from their money can be made a selling point.
Almost all value propositions will have attributes in all seven categories. The challenge is to find distinctive and appreciated attributes in each and to align them into a desirable whole.
• Value is in the eye of the beholder. Product-driven companies believe that great products are valuable and will almost sell themselves. Customer-driven companies realize that what is valuable is determined by the potential buyer, who will look for a package of attributes, often extending beyond the technical characteristics of the core product/service.
• Value propositions are more than products. A value proposition is the package of attributes promised by a firm to a potential buyer that is intended to be seen as more valuable than offerings by rival firms. The package is broader than the product at its center.
• Value propositions have core and envelope attributes. Every value proposition consists of a core product/service, with a range of attributes making it attractive to buyers. Around this core is an envelope of six types of additional attributes – supplemental products, supplemental services, distribution, informational, reputational, and payment attributes.
• Value propositions need to be compelling. To get potential customers to select their value proposition, the package needs to consist of a set of desirable attributes, usually drawn from all seven categories. These attributes should be mutually reinforcing and fit closely with the wants of the customer to create a high level of value.
• Value propositions need to be distinctive. The package also needs to be more highly valued than what competitors are offering. Broadening the value proposition to encompass various attributes from all seven categories often creates various layers of distinctiveness.
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Value Proposition Dial is part 38 of a series of management models by prof. dr. Ron Meyer
. Ron is managing director of the Center for Strategy & Leadership and publishes regularly on Center for Strategy & Leadership