What is a value proposition and why is it important?

By Indeed Editorial Team

Updated 9 September 2022

Published 3 January 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

A value proposition, or value proposal, is the component of a business that turns leads into customers, and it's what makes a company unique. People who work in marketing or sales convince customers to buy a product or service. A value proposal makes their product or service better than the competition and more appealing to customers. For individuals who seek a career in sales or marketing, understanding what a value proposition is and how to identify or create one for the company is key.

In this article, we discuss what a value proposition is and how a business can leverage it to improve sales.

What is a value proposition?

Even though businesses frequently use the term value proposition, many people aren't sure what it means. It's often referred to as a selling proposition or USP by mistake. A value proposition, or value proposal, calls attention to the benefits a customer can gain from making a purchase, not the specific features of a product or service. This is a small but important distinction. A good value proposal conveys why someone might choose to buy from one business and not from their competitors.

What are the elements of a great offer?

A strong value offer is unique and adds interest to the potential customer. It's clear, concise and difficult for another business to replicate. In the consumer marketplace, it provides a competitive advantage for the company and gives the customer a reason to stay loyal. Products or services that appear better in price, quality and overall value are more likely to sell.

Why value is important

Using a value proposal allows users to feel confident about what the brand is offering. Returning customers may remember why they keep choosing it and new customers can feel a purpose behind what the brand offers. It also helps other businesses find meaning in the solution and may be more willing to partner with them if they're a leader in their field.

It's vital that the entire marketing strategy of a business should revolve around its value proposal. If it doesn't, then someone else might take advantage of the space left open. The name itself isn't enough anymore; all marketing needs to reinforce what makes it special if people are going to trust it.

Example: Imagine that the product is lipstick. Research what holds value to consumers buying lipstick and find out which qualities the product has that competitors don't. A good value proposition could be: Our lipstick lasts three times longer than average brands, which means you can buy three times as many for your money! This statement is a direct cost comparison to other products out there and also highlights a key benefit of the product, its lasting power.

How to determine what makes something valuable

People who are thinking about transitioning into marketing and sales can learn to establish the value of products and services for the best chances of success. The steps below can help:

1. Research the industry

Before establishing a final value proposal, marketers want to understand the benefits of the product or service. Market research can determine if it solves a problem for the consumer or enriches their lives. When consumers choose how to spend their money, it's easy to forget the details of a specific product or service compared to another one that seems similar. During the early stages of this process, it's useful to compare the specific characteristics (e.g. quality, innovation) to other similar products from other brands. The research process also can identify what trends drive customer loyalty.

Related: Research skills: definition and examples

2. Identify the unique features

After the research stage, marketers use the data to identify what adds unique value to their business compared to other businesses in the same industry. The data might show purchasing trends in the industry, demographic information of the consumers or both. This information can be useful to outline the value proposition and categorise the unique characteristics of the product or service for a specific audience.

3. Experiment with options

It also may be worthwhile to experiment with marketing unique features and characteristics of a product or service. When a business identifies gaps in its value delivery system, it creates opportunities to highlight the product or service in a new way. Remember though, marketers still tend not to stray too far from why people would buy it. Although it might feel challenging at the beginning, determining the value proposal may aid the marketing strategy, sales pitch, and focus to fall into place.

4. Gather the data

You may automate the data that you measure during the campaign or you may collect it in person. It also may be quantitative or qualitative. These offer insights to offer customer satisfaction. There is always an opportunity for improvement.

5. Measure the results of the campaign

One way to measure a value proposal is to ask customers directly through surveys, A/B tests or feedback about whether the nominated amount seems reasonable enough to pay. The results may show that the value proposition isn't strong enough to convince buyers or they may uncover additional strengths in the offer. If people appear unwilling to pay for the product or service, there are many alternative ways to deliver value. Returning to the research stage to discover another angle on the product or service can help a brand find what makes customers excited to purchase.

Related: Analytical skills: definitions and examples

6. Look for new trends

With market trends constantly changing, it's important to stay current with consumer concerns and to ensure that any product or service's value still aligns with consumer demands. For marketers, entrepreneurs and those in sales, assessing the brand's current state regularly can help to see if it's fulfilling its customers' needs.

The company can then use that feedback to create an even better value delivery system. If it's that the product or service does not solve any needs for the customers, then more time may be necessary for the product development or research phase to see how the business can offer more value to more people.

Related: Problem-solving skills: definitions and examples

7. Adjust the strategy

The most important thing to remember is that value is dynamic and relative. It's considered dynamic because it can change over time or demographic. It's relative because individual consumers prioritise value according to their own personal ideas of what has meaning and worth to them. Companies can change their value proposals depending on changing circumstances. If customers don't see value in the current offering, there may be other ways to make their lives easier. The most common way that businesses change their value proposal is to add an additional product or service that they offer.

Example: If a company is selling natural beauty products to local salons, they could begin by offering a discount on salon services on top of product sales. If a business' marketing strategy could benefit from expanding the value proposals, these additions tie back to the company's initial reason for existing.

Ways to communicate the message

A new value proposal becomes the baseline of all points of communication the brand has with its audience. This includes communications via social media posts, emails, advertising and blog posts. This is a critical step in convincing customers to understand the value and to buy the product or service. Effective marketing may use several methods:

  • Determine the scope: Define the target customer through market research.

  • Conduct tests: You use A/B tests to see which value proposal resonates best with the target audience.

  • Be consistent: Use the message consistently through every touchpoint of the customer's brand experience.

  • Stand out: You can protect and mark the distinguishing specifications, features and benefits of the product or service to avoid being copied by a rival.

Related: Business development skills: definition and examples

How value proposals benefit companies

Having an organised business strategy that includes a value statement is great for the company and the customers for several reasons:

  • People may feel more satisfied when they know about the products and services they using.

  • People may feel more confident when they know that they're spending their money wisely.

  • People can develop trust and loyalty to a brand.

  • Companies can receive excellent reviews about their products and services.

  • Companies can learn about what new innovations might interest their consumer market.

  • The community can spread the word about the best products and services on the market.

Disclaimer: The model shown is for illustration purposes only, and may require additional formatting to meet accepted standards.

Related:

  • What is a customer value proposition? (Key characteristics)

  • How to improve a branding strategy in 13 easy steps

  • What is an employee value proposition? Definition and tips

  • What is a brand proposition? (With tips and examples)

  • How to write a positioning statement (plus examples)


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