Establishing a value proposition will generate more business and customer loyalty for firms small and large

Once upon a time, top performing companies maintained competitive advantage through market share and positioning, economies of scale, or a broad product line. Today, success depends on a company’s ability to deliver outstanding value to the customer in a consistent manner.

In the marketing sphere we call that the value proposition.

The value proposition is a comprehensive company-wide plan to increase the seller’s understanding of what value means to the customer and to adjust the seller’s capabilities to better meet that definition. The methodology requires that all aspects of the seller’s operation, from R&D and manufacturing to customer service and distribution, focus on fulfilling those customer requirements at an acceptable profit.

The following four principles that make up the value proposition are the tools a company needs to build value-creating capabilities.

  • Market Orientation
  • Customer orientation
  • Competitor focus
  • Cross-Functional team

Market Orientation

A market-oriented company systematically commits its entire culture to the ongoing creation of value to the customer.

Customer Orientation

To create a business-to-business customer orientation, the seller needs to understand the customer’s entire business, both currently and over time. The seller must be aware of not only the customer’s present market but also potential future markets. With this in-depth understanding, the seller can produce value by helping the customer increase its market effectiveness and/or operating efficiency.

Competitor Focus

Providing outstanding value also means that the seller must identify the competitors’ short-term weaknesses and strengths as well as their long-term capabilities and strategies.

For example, employees of one economy hotel chain in the Midwest hit the road for six months to stay in competitors’ hotels and collect information on their facilities and services. From their research, they concluded that offering free wi-fi, complimentary continental breakfast and even day care would provide a competitive advantage that would more than pay for the costs of the added services. Their hunch proved correct when the chain’s occupancy rates rose 10 percent over the national average.

Competitor focus requires that the seller undertake a continuous analysis and evaluation of its current and future rivals, which can come from any direction. After all, today’s customer or supplier can become tomorrow’s competitor.

A Cross-Functional Team

Having a cross-functional team recognizes that all employees, no matter what their individual efforts, can create value for the customer and help maintain a distinct competitive advantage for their company.

The coordination of personnel and other resources throughout the company (not just the marketing department) is a key component of creating value for customers. One reason why Japanese companies are so successful is that their managers are trained to understand that competitive intelligence is part of everyone’s job.

As an example closer to home, a small risk management company in Ohio used the team concept to review all aspects of its open operations with an eye toward increasing efficiency and customer satisfaction. They discovered that regular meetings between sales and support staff increased response time to client concerns and reduced processing errors. The results were new training procedures, a better understanding of the firm’s target customers, greater employee involvement, stronger customer relations and, most important, the development of new clients.

 

What Is Your Value Proposition Profile?

Companies adopting a value proposition can choose one of three roles in establishing relationships with customers.

  • Channel captains
  • Brand builders
  • Systems integrators

Channel captains are conduits for a group of products or services to reach specific customer segments. They have the ability to meet their customers’ needs efficiently through highly developed production and/or distribution systems. Channel captains often dominate their fields and include some of the most prominent names in American business, such as Walmart and CNN.

Brand builders achieve customer preference through a consistent and superior brand image. These companies have mastered brand marketing, advertising and promotion, but their highly favorable images often follow from efforts such as innovative product development and successful interfacing with customers. Hallmark, McDonald’s and Nike are among many successful companies of this type.

Systems integrators offer unique, one-to-one fits for each customer. They work closely and intimately with their clients, demonstrating the ability to listen to and learn from them. They also tend to be dynamic problem solvers. Charles Schwab, global engineering and construction firm Bechtel Corp. and media giant Viacom are among the biggest companies in this category.

Don’t let the size of those major corporate examples deter you from forming a value proposition of your own. Instead, strive to develop this common trait: the desire to make the customer the core of your business orientation. Doing so will help firms of all sizes formulate a sound, sustainable plan to offer the customer maximum value.

In return, the customer’s business and continuing loyalty are all but guaranteed.

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