Every business is set up to achieve two major things throughout its
existence and these are i. To make profit and ii. To grow. When these two major
things are met then the organization is on its way to success.
Value proposition is all about a promise of value to be delivered
and a belief from the customer of value that will be experienced. A value
proposition can apply to an entire organization, or parts thereof, or customer
accounts or products or services. Creating a value proposition is a part of
business strategy. Kaplan and Norton say about Strategy, that it is based on a
differentiated customer value proposition. And satisfying customers is the
source of sustainable value creation.
Developing a value proposition is based on a review and analysis of
the benefits, costs and value that an organization can deliver to its
customers, prospective customers, and other constituent groups within and
outside the organization. Value proposition is also a positioning of value,
where Value = Benefits – Cost (cost includes risk).
In a Value proposition, a model called the Value proposition builder
for creating a value propostition states six stages to the analysis and these
are;
1.
Market -
For which market is the value proposition being created
2.
Value experience or Customer experience
– What does the market value most? The effectiveness of the value proposition
depends on gathering real customer, prospect or employees feedback.
3.
Offering – Which products or services
are being offered?
4.
Benefits – What are the benefits the
market will derive from the product or service?
5.
Alternatives and differentiation – What
alternative options does the market have to the product or service?
6.
Proof – What evidence is there to
substantiate your value proposition?
According to Neil Rackham, a value proposition statement should
consist of four main parts: capability, impact, proof and cost.
Organizations do not directly communicate the outputs of the value
proposition creation process (i.e., the value proposition statement and
template) to external audiences; value proposition statements are internal
documents, inside and outside the organization.
Every innovation process starts with a Value proposition to sort out
the necessary things that an organization may be facing and what an
organization can do to address this. For an innovation to be effective and
address the key issues that an organization is facing, it must be the rudiments
of
·
Needs – This is the need that
has to be met. The consumer must have a particular need to be met and likewise
the organization.
·
Approach – How do you intend to
approach and meet the need that has been identified?
·
Benefits – The benefit that is
offered is at what cost.
·
Competition – The competition
that the idea beats or improves on
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