Value proposition

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In marketing, a company’s value proposition is the full mix of benefits or economic value which it promises to deliver to the current and future customers (i.e., a market segment) who will buy their products and/or services.^[1][2] It is part of a company's overall marketing strategy which differentiates its brand and fully positions it in the market. A value proposition can apply to an entire organization, parts thereof, customer accounts, or products and services.

Creating a value proposition is a part of the overall business strategy of a company. Kaplan and Norton note:

Strategy is based on a differentiated customer value proposition. Satisfying customers is the source of sustainable value creation.^[3]

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. It is also a positioning of value, where Value = Benefits − Cost (cost includes economic risk).^[4]

A value proposition can be set out as a business or marketing statement (called a "positioning statement") which summarizes why a consumer should buy a product or use a service.^[1] A compellingly worded positioning statement has the potential to convince a prospective consumer that a particular product or service which the company offers will add more value or better solve a problem (i.e. the "pain-point") for them than other similar offerings will, thus turning them into a paying client. The positioning statement usually contains references to which sector the company is operating in, what products or services they are selling, who are its target clients and which points differentiate it from other brands and make its product or service a superior choice for those clients.^[1] It is usually communicated to the customers via the company's website and other advertising and marketing materials.

Conversely, a customer's value proposition is the perceived subjective value, satisfaction or usefulness of a product or service (based on its differentiating features and its personal and social values for the customer) delivered to and experienced by the customer when they acquire it. It is the net positive subjective difference between the total benefits they obtain from it and the sum of monetary cost and non-monetary sacrifices (relative benefits offered by other alternative competitive products) which they have to give up in return.^[5][6] However, often there is a discrepancy between what the company thinks about its value proposition and what the clients think it is.^[2]

A company's value propositions can evolve, whereby values can add up over time. For example, Apple's value proposition contains a mix of three values. Originally, in the 1980s, it communicated that its products are creative, elegant and "cool" and thus different from the status quo ("Think different"). Then in the first two decades of the 21st century, it communicated its second value of providing the customers with a reliable, smooth, hassle-free user experience within its ecosystem ("Tech that works"). In the 2020s, Apple's latest differentiating value has been the protection of its client's privacy ("Your data is safe with us").^[7]