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Value Proposition

Updated on March 21, 2024
Reviewed byDheeraj Vaidya, CFA, FRM

Value Proposition Meaning

Value proposition refers to a compelling statement that an organization or entity makes to promote itself amongst its customer base and build a brand name. It is a marketing strategy commonly adopted by commercial entities to add value for users, subscribers, and potential customers.

Value Proposition

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A value proposition dominates a customer’s decision-making ability and willingness to buy a product or service while purchasing. It also allows firms and entities that provide public goods and services to remain significant in a competitive market. Thus, firms aim to attract customers and loyalty through durability, functionality, technology, and product design.

Key Takeaways

  • A value proposition is a statement, design, template, or visual representation to tap market segments of consumers, employees, investors, and other stakeholders. 
  • A firm or business adopts a proposition as a marketing strategy to enhance its market share and brand image and provide valuable information to its consumers. 
  • A value proposition like an advertisement speaks to its target audience and provides information on a company’s values, vision, purpose, and products.
  • It should not be confused with slogans or taglines, as a proposition also includes subheadings, additional pointers, and information that appeals to relevant stakeholders. 

Value Proposition Explained

Value Proposition marketing allows firms and businesses to describe their products and services in a customer-friendly manner. It targets consumers and potential customers. Thus, a value proposition statement is short and crisp, which appeals to the customer in the first go. Then, it covers important details about the company and its product. These include its stand-out factor from competitors or the research and development they have put in. 

A proposition contains not only textual explanation but also visual representation to make it more convincing for the customers. It may persuade them to make a purchase. Visual representation for marketing purposes is a great medium to appeal to customer curiosity.

Companies may use platforms for visual advertisements like their websites, apps, and other social media handles. They accompany these visuals with bold and captivating taglines, catchphrases, or slogans.

A customer value proposition is a pitch for customers that convince a customer to purchase a particular brand. It focuses on the value added for the customer, such as proposing how a product can become a handy solution or more user-friendly.  

For example, sales software may be specific from company to company, depending on their sales needs. However, companies making sales softwares ensure through research and surveys to include features that facilitate smooth data management for users.

Thus, fundamental ingredients for value proposition are comprehensive market research, strategy development for a target audience, identifying the problem faced by a particular customer segment, providing a range of products or features for different customer requirements, etc. Simultaneously a customer value proposition aims to knit customer loyalty, greater market share, and drive higher sales and market engagement. This act helps a company to get an edge over competitors.

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Employee Value Proposition

Proceeding with the value proposition marketing, companies or other organizations may also use such propositions for employee retention or to attract talented individuals and professionals to work for them. In the case of employee value proposition, the company aims to enhance its human resources, which drives its moto, ethics, business strategy, and competitiveness in the market.

Thus an employee value proposition defines the benefits and perks that an organization offers to its employees in exchange for their skill sets, experiences, and work ethics they bring to the table.

In return, a potential candidate or passive job seeker will also have certain interests and ambitious expectations from their employer. These may be financial provisions, added work benefits, self-growth opportunities, job security, etc. In addition, a company’s brand name and rapport in the market can be another notable factor for potential candidates, which makes them proud to be associated with the company.

An example could be a company’s enthusiastic pitch while publishing job vacancies. It may mention attractive perks and information such as work life at the company, opportunities for personality development, associate business partners, and added workplace facilities alongside the company’s mission and vision.

Functions

At this instant, let us look at some important functions of a value proposition:

Functions of Value Proposition

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#1 – Marketing Gig

A value proposition statement helps an entity retain and achieve a better market presence and appeals to customers, potential employees, investors, etc. It also tells prospective stakeholders why they should do business with one company over others.

#2 – Competitive Advantage

This factor may also become a driving force for an entity to continuously improve its propositions by enhancing its product quality, range, and technology, leading to higher market penetration.

#3 – Attracts Stakeholder

A proposition is a feasible way for a company that is planning to expand itself by getting greater investment, building a new product range, or aiming to provide ancillary services for their core product. In this sense, stakeholders will include customers, investors, board members, and passive job candidates looking for the right opportunities.

#4 – Convinces Stakeholders

It depends on how well a company has marketed its value proposition. A company always will aim to take an upward trajectory in sales, investment, customer and employee retention, and enhance its research development. Thus, having a relevant proposition for all such stakeholders is practical and helpful. 

#5 – Employee Retention

A proposition may be most significant here as the workforce or human resources remain an organization’s or business’s backbone. An employee having a positive image of a company works like an ambassador for the brand and the company. Additionally, to uphold the vision and mission, a well-thought-out employee value proposition assists a company in hiring the best talent in the market.

Example

Let us look at a value proposition example to understand the concept better:

Apple is a brand name that almost everyone wants to associate themselves with. From customers to investors to techno giants and candidates in the job market. Nowadays, every advertising agency, artist, and a tech-savvy person wants Apple products. However, apart from Apple’s technology and software, other factors also significantly contribute to its success story.

Firstly, through a value proposition, Apple spoke to the audience specifically looking for what they had to offer and not to a monotonously working population of bankers or law firms. Furthermore, it focused on the creative segment of the workforce by putting forth propositions like ‘Think different’ as a pitch against ‘Think’ used by IBM. Thus, as the proposition appealed to its target audience, Apple soon became an alternative for Microsoft and Intel in terms of laptops.

Secondly, when Apple launched a signature line of products like the iPhone and iPod, which were high-end products in terms of technology, uniqueness, and pricing, it got to the masses. An excessive pricing tag on their products played with consumer psychology and curiosity, pushing them to explore what the brand had to offer at that price. Soon it all led to Apple becoming a status symbol.  

Mike Markkula, the investor and advisor for Apple in 1977, developed a 3-point marketing strategy that still builds Apple’s marketing propositions – empathy, focus, and impute. Thus, making Apple a reliable consumer technology brand with stronger market share and customer loyalty over the decades.

Frequently Asked Questions (FAQs)

What should a value proposition include? 

It includes a company’s vision, values, products, quality standards, and technology which helps it in marketing itself. A company uses it to build an edge over competitors in the market and adds value to its customer base. 

How many value propositions should a company have?

A company can have one or more propositions. It may be different for various product lines. However, a few basic objectives of writing such a proposition are:
– Customer retention.
– Building a brand name.
– Providing customer-friendly information.
– Visual representation.
– Increasing market share.
– Gaining an edge over competitors.

How does the business earn revenue from the value propositions? 

A business earns revenue by reaching out to more customers through such propositions. It should be consumer-centric, easy to understand, and appealing to the customer to set the company apart from its competitors. Consequently, it leads to higher sales, market penetration, and revenue growth for a business. 

What is a good value proposition statement? 

A good proposition should mention how a product aims to solve consumer problems or enhance their experience like no other brand will, thus, turning the potential customers into paying customers.

This article has been a guide to Value Proposition and its meaning. Here, we explain its functions, along with the employee value proposition and an example. You can learn more from the following articles –

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