Customer Value Propositions in Business Markets

“Customer value proposition” has become one of the most widely used terms in business markets in recent years. Yet our management-practice research reveals that there is no agreement as to what constitutes a customer value proposition or what makes one persuasive. Moreover, we find that most value propositions make claims of savings and benefits to the customer without backing them up.

Some managers view the customer value proposition as a form of spin their marketing departments develop for advertising and promotional copy. This shortsighted view neglects the very real contribution of value propositions to superior business performance. Properly constructed, they force companies to rigorously focus on what their offerings are really worth to their customers. 
 
We conducted management-practice research over the past two years in Europe and the United States to understand what constitutes a customer value proposition and what makes one persuasive to customers. One striking discovery is that it is exceptionally difficult to find examples of value propositions that resonate with customers. Here, drawing on the best practices of a handful of suppliers in business markets, we present a systematic approach for developing value propositions that are meaningful to target customers and that focus suppliers’ efforts on creating superior value.

Three Kinds of Value Propositions
We have classified the ways that suppliers use the term “value proposition” into three types: all benefits, favorable points of difference, and resonating focus.
Which Alternative Conveys Value to Customers?

Suppliers use the term “value proposition” three different ways. Most managers simply list all the benefits they believe that their offering might deliver to target customers. The more they can think of, the better. Some managers do recognize that the customer has an alternative, but they often make the mistake of assuming that favorable points of difference must be valuable for the customer.

Best-practice suppliers base their value proposition on the few elements that matter most to target customers, demonstrate the value of this superior performance, and communicate it in a way that conveys a sophisticated understanding of the customer’s business priorities.

Benefits :
Our research indicates that most managers, when asked to construct a customer value proposition, simply list all the benefits they believe that their offering might deliver to target customers. The more they can think of, the better. This approach requires the least knowledge about customers and competitors and, thus, the least amount of work to construct.
However, its relative simplicity has a major potential drawback: benefit assertion. Managers may claim advantages for features that actually provide no benefit to target customers.
Such was the case with a company that sold high-performance gas chromatographs to R&D laboratories in large companies, universities, and government agencies in the Benelux countries.
One feature of a particular chromatograph allowed R&D lab customers to maintain a high degree of sample integrity. Seeking growth, the company began to market the most basic model of this chromatograph to a new segment: commercial laboratories. In initial meetings with prospective customers, the firm’s salespeople touted the benefits of maintaining sample integrity.