What Is a Customer Value Proposition?

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We all know a proposition equates to some form of offer — a suggestion to grab a bite to eat somewhere, a spoken idea to join forces or a proposal to swap something or make a formal exchange.

So, a customer value proposition refers to a brand’s offer.

As such, it encompasses everything a brand promises to deliver to a customer from tangible elements like a physical product to intangible benefits and services.

On the surface, most customer value propositions appear to be about a physical item.

However, there is much more at play here — most of which we can’t touch.

In the case of a luxury shoe brand, customers may centre their conscious thoughts on the actual item and its packaging when weighing up whether to make a purchase.

But buyers are often calculating and considering other benefits to make their final decision. Social status, superior service and emotional benefits like boosted confidence are all prominent factors that sway buying decisions.

And importantly, they increase the value of the proposition.

Adding “hidden” elements like these allows brands to charge an inflated price for a pair of shoes that are a relatively similar quality to a pair at a lower price point.

Yet customer value propositions exist — and work for — every type of brand, not just those in the luxury sector.

The same goes for an Uber ride that’s safer than a traditional taxi or an iPhone launch that’s more exciting than any other technology drop.

These benefits are emotional, not physical.

Collectively, these elements — both tangible and intangible — allow a customer to make a purchasing decision.

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How to Work out Customer Value Proposition

Without realising, we all use a simple calculation in our minds to deduce whether we’re set on buying an item.

This calculation is based on whether the value proposition is equal to or greater than the monetary value put on the item. In other words, customers don’t want to be left with a minus number as a result of this equation:

Customer Value Proposition (CVP) = Benefits (B) / Costs (C)

We’ve already talked a lot about the type of benefits involved in customer value. But what about the costs?

Just as benefits can be both tangible and intangible, so can costs.

When we think of cost, we usually think about the price tag. However, customers — increasingly so in modern times — think of costs as broader than this, considering things like page load time when shopping online, associated delivery costs, the environmental impact of a purchase and the time it takes to check out.

As marketers, you’ll need to dig deeper into why your target audience could be making an unfavourable decision.

Sometimes it’s not the case that products are deemed too expensive.

Plus, you’ll learn that costs are calculated differently depending on the person — making the customer value proposition impossible to generalise.

For example, digital bank Monzo has seen rapid success since its launch in 2015. The bank offers users a more interactive version of online banking that allows account holders to split their money into pots, pay fewer transaction fees when travelling and get paid a day early.

Most of Monzo’s customers are millennials.

For these buyers, Monzo offers a worthwhile customer value proposition. Millennials love to have full control over their purchases and make it a priority to travel. For them, Monzo didn’t pose much risk in terms of cost versus other banks that don’t have these features.

For other generations, though, the lack of local branches, the personal data collected as a result and the associated fees are a complete turn off, proving your value proposition won’t impress everyone.

Why Value Is Different to Different Customers

As a marketer, customer value is important as it allows you to refine your target audience.

Not every customer will think the same and come out with the same answer to the customer value proposition equation.

Customer value is subjective and is worked out in the minds of consumers based on their perceptions.

To figure out which customers you should be targeting and how to make your proposition as appealing as possible to this segment, you’ll need to look at the costs involved.

Ask yourself the following questions about your brand’s costs:

  • Is the price point achievable for your target audience?
  • If selling online, does your website provide a positive user experience?
  • Is your product expensive to deliver?
  • Is your product or service easy to find?
  • How quick can your product be delivered?
  • Does your brand have a negative reputation that could put customers off?
  • Is your product environmental?

Don’t forget to assess your costs just as much as you would your benefits. Although marketing can often feel centred on highlighting the good to customers, it should also be about removing the bad.

Do your customers perceive you as a wasteful brand? Build a campaign around your sustainable efforts.

Are people refraining from buying from you because of your brand’s reputation? Work on an awareness campaign to improve your Net Promoter Score.

Customer Value Proposition Isn’t Just about Buying

A common myth when it comes to the customer value proposition is this concept only exists concerning a sale.

It doesn’t.

Customer value is considered anytime you look to make an exchange, whether that’s an exchange involving money or information.

Here are some scenarios where customer value matters — even though you’re not making a sale:

  • Gaining personal details — In marketing, we usually gain customer details as a result of informational exchange. We might offer a free consultation on a website form or ask for an email address to enable the download of an ebook. In this customer value proposition, the consultation and ebook are what gives the proposition value. In exchange for the expertise, customers will need to share their details as a cost.
  • Getting followed on social media — Perhaps a more contemporary example is gaining subscribers on social media. In exchange for this, brands offer entertaining and valuable content. Sometimes brands may also make this a requirement of a competition, thus offering a further prize incentive to make friends on Facebook (or any other social platform).
  • Building your mailing list — The same informational exchange happens when you ask customers to sign up to your mailing list. The most basic form of value here is, of course, the newsletter itself. Yet some brands — namely eCommerce — might increase this value proposition by offering a sign-up code or continual “secret” discounts.

Ultimately, a customer value proposition is why you shouldn’t shy away from your customer’s objections but face them.

Mention your customer’s concerns in your marketing. Write articles about them and inject truth into your advertising campaigns. Create benefits based on them that, on the whole, make your proposition more attractive.

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