Value proposition: built from the customer's view

A value proposition is the unique combination of benefit criteria that influence the purchase decision from the customer's point of view. It therefore describes a service offering and not an advertising line. This offering consists of product and service features, the customer relationship and image. Robert Kaplan and David Norton have described criteria for this that cover all aspects of a value contribution relevant to the customer. Each target customer segment receives its own value proposition, because segments expect different things.

A general promise such as high quality leaves open what it means for the customer. What task does the customer want to accomplish? Which requirements are indispensable? The customer's perspective makes the benefit more precise.

The product and service portfolio covers the breadth and depth of the offering and the features of the individual services. Time means all time spans when using the service: until a price is quoted, until an offer is made, delivery times, response times to enquiries, emergencies or complaints. Quality asks how reliably the company keeps its promise and which impairments the customer tolerates, such as downtime, lack of availability or missed deadlines. Price also includes terms and conditions.

Service refers to clearly identifiable additional services that are not charged separately, before, during and after the actual service. Relationship describes the intensity and variety of contact: contact persons, availability, frequency, familiarity and integration into the customer's organisation. Brand asks what the customer associates with the name and how strongly this influences their choice. For work within the company, these criteria are translated into specific performance parameters.

Which of the company's strengths make this benefit possible? Where does the service need different processes or competences? Strategy work links the external promise with its internal prerequisites.

The threshold benefit results from the minimum requirements of a customer segment. It differs from segment to segment and does not automatically mean a low level of service. Depending on the minimum requirements customary in the industry, it can be high. Determining it is demanding, and mistakes work in both directions.

If it is not reached, the customer becomes dissatisfied or ends the business relationship. If it is set too high due to a lack of customer knowledge, the strategic focus becomes blurred. The company then provides services in which the customer sees no added value.

Not every offering can maximise all customer expectations at the same time. Price, scope of service, time and support can create different requirements. Positioning therefore includes decisions about which services are prioritised for which customers.

For each target segment, the value proposition can be shown as a profile across the seven criteria. The threshold benefit, the current performance and the target performance are entered. This makes visible where the company fails to meet minimum expectations and where differentiation is to be created. A customer survey provides the outside view. In parallel, sales and marketing estimate the expectations themselves. The deviations between internal and external views show where previous assessments were correct and which potential or requirements were overlooked.

Which criteria are suitable for differentiation also depends on the chosen basic strategy. In product leadership, it is mainly portfolio and time. In a price-value strategy, portfolio, time, quality and price are in the foreground, and a feature is only an option if it can be delivered through standards. In customer intimacy, service and relationship are the main differentiators.

Sales, service delivery and leadership need a shared understanding. Only when positioning shapes decisions about portfolio and resources does it become recognisable in the customer experience. New feedback may make an adjustment necessary.

Different target segments receive different value propositions. This often results in different and sometimes contradictory requirements for structures and processes. A company should nevertheless be able to offer equally competitive solutions for different customer needs. This is more likely to succeed if its own core competences are already taken into account when deciding for or against a segment. In addition, the functions, people and processes that are decisive for serving the segments in a differentiated way must be named. They are specifically aligned with the new requirements.

Portfolio, time, quality, price, service, relationship and brand are the criteria of a value proposition. For each target segment, the threshold benefit is clarified first: what must be met for an offering to be considered at all? Only then does the question arise as to where a particular combination of criteria makes a difference. A company can waste resources if it offers maximum performance on every criterion even though customers see no additional benefit there.

The chosen value proposition must therefore fit the company's own value creation and the capabilities of the organisation. Sales, service delivery and leadership jointly examine whether the promise can be kept in everyday work. Feedback from target customers helps to identify which assumptions are sound and where the offering needs to be adjusted.