Over the next few months I’m going to write a series of blogs on the importance of having clarity around your firms Customer Value Proposition. If you can achieve this clarity you’ll undoubtedly win more business from existing customers and new business from your prospects.
So what’s a customer value proposition? In very simple terms its why somebody is going to buy from me rather than any of my competitors”
It’s why I spent nearly £3.00 on a bottle of Kernel beer from the brewery in London rather than 75p on a bottle of Stella from my local supermarket. It’s why I chose Hiscox for my professional indemnity insurance rather than any number of competitors. It’s why I chose Mark who works in another part of the UK to re-design my website rather than cheaper options locally.
“What’s my winning customer value proposition?” is a question that keeps Marketers awake at night, from the Marketing Director of a large global corporation to your friend starting a new garden maintenance business.
It’s the essence of why firms grow and decline. Why Tesco’s share price is falling versus Aldi and Ocado. Why sales of petrol hungry SUV cars grew during the recession. Why the Kings Cross area in London is now one of the hottest areas to buy an apartment.
Determining, communicating and consistently delivering a differentiated customer value proposition is I believe the most important dimension of business strategy.
It’s vital to know how each element of your customer value proposition (for example in the case of a B2B firm: Account management, Service delivery, Pricing, Fault management, Reporting and Analysis) is helping win new customers and new business from existing customers.
Without clarity, firms will allocate budgets and resources to improving the wrong elements of their customer value proposition. They will overspend on elements that don’t need it and underspend on others which are important to customers and where their competitors are strong. If the cycle continues earnings and shareholder value will fall.
A bit of background.
I studied for an MBA in the mid 90’s at Warwick Business School. My Marketing professor was Peter Doyle*. He sadly passed away some years ago but anybody who studied Marketing at Warwick will remember his lectures with great affection. He coined the phrase “value-based marketing” to demonstrate Marketing’s role in maximising long term shareholder return. The importance of how Marketing decisions impacted the financial strength of a company was always discussed and debated more in lectures than products, branding, advertising, and communications.
Core to “value-based marketing” is clearly understanding (1) what existing and prospective customers in a market want and (2) what your competitors offer, so you can offer a value proposition that satisfies the needs of target customers more effectively than competitors. Differential advantage is created by offering customers perceived superior value.
Peter highlighted that a differential advantage or winning customer value propositions must meet the following criteria if they are to create value for shareholders.
CUSTOMER BENEFIT – the difference must be seen by customers as of value to them in improving their performance or experience. Differential advantages must be found on the elements that customers want.
UNIQUE – customers must perceive the benefits to be different from those offered by other competitors.
PROFITABLE – the company must be able to produce the product or service with a price, costs and volume structure that makes it profitable to produce.
SUSTAINABLE – The advantage must be difficult for competitors to copy. There should be some barriers to entry to prevent the differential being rapidly eroded.
Over the next few weeks I’ll use some personal experiences to describe the importance of having a winning customer value proposition and how it can be determined, communicated and consistently delivered.
I would value any comments and experiences you have. Please feel free to comment, send an email or give me a call.
Angus Mitchell is the founder of Athenic Consulting Limited based in Hertfordshire near London. Established in 2009, Athenic Consulting design and deliver winning marketing and sales solutions. They offer consultancy and interim marketing services to clients including Sky, Google and Sepomo mobile payments. Prior to establishing Athenic Consulting, Angus worked in marketing roles in the UK and Europe for brands including O2, BT, Ericsson, Genie mobile and Infinito.it. He also founded a specialist Italian wine company, Dodici.
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*I thoroughly recommend Peter Doyle’s book “Value-Based Marketing”. It’s available from Amazon, all good book stores and is on Kindle. Philip Kotler described it as “a book destined to spark a revolution”