Introduction
The creators of the Balanced Scorecard, Robert Norton and David Kaplan, view the customer value proposition ("CVP") as the "heart of strategy". They very succinctly stated that: "Strategy is based on a differentiated customer value proposition. Satisfying [your] customers is the source of sustainable value creation."
A customer value proposition is an offering that helps customers do an important job more effectively, conveniently, or affordably than the alternatives. In addition to being "the heart of strategy" it is one of the 4 key components of a business model (which include: 1) customer value proposition, 2) revenue/profit formula, 3) resources and 4) processes such as manufacturing). In my opinion, successful customer value propositions have certain common characteristics, are inextricably linked to the offer(s) and need to be supported by the people, processes and technology geared towards delivering on the CVP in a manner that conveys an intimate understanding of the customer's requirements.
Successful businesses that exist in a competitive industry environment know all too well about the need to gain and maintain sustainable points of differentiation in the form of a superior customer value proposition. They also understand the nature of customer value proposition - that it is not a single undertaking as customer's experiences, preferences wants and needs, fluctuate, evolve and change over time. Furthermore, developing and maintaining a superior CVP is a "C" level activity, not to be pushed off to marketing and/or sales as an exercise in positioning. The traditional marketing exercise for developing a customer value proposition was to consider the following "tweaks" (i.e. improving, transforming or reinventing the CVP) to the generic product or service:
• Raising benefits.
• Reducing costs.
• Raising benefits while lowering costs.
• Raising benefits by more than the increase in costs.
• Lowering benefits by less than the reduction in costs.
While this is a start in the right direction, it is a bit too simplistic, geared narrowly towards an offer and is missing a few essential elements.
The 7 Essential Elements of a Customer Value Proposition
A truly effective customer value proposition has the following 7 essential elements:
1. The CVP is Created by Conducting a Thorough Needs Analysis - starting with a complete understanding of the customer, determining what their needs, preferences and requirements of an improved solution would be (that meets or exceeds these needs and/or preferences). Again, determining how these identified needs are currently being satisfied, and applying the litmus test to an improved product or service in the areas of: effectiveness, affordability and convenience (per the definition of CVP above). Ultimately, the CVP creators must determine the elements that deliver (and will continue to deliver) the greatest value (or "bang for the buck") amongst the alternatives that a customer has access to. A complete customer profile analysis can assist a busi
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