MarketingFramework / modelModelIntermediate

Customer value proposition

How can customer value proposition support strategic choice or positioning?

IntermediateStrategicTeam4 min read

Contents

Create a compelling purchase motive.

Every company makes an offer: a product, a service or a combination of both. In a competitive market, a sales-oriented business may focus so intensely on immediate targets that it discounts heavily, overstates benefits or pushes products customers do not need. A marketing-oriented business takes a longer view. It studies the market, designs an offer around real needs and communicates the benefits customers value rather than merely listing features.

A customer value proposition, or CVP, expresses that logic as a clear promise: the relevant outcome a specific customer can expect, why it matters and why this offer is a better choice than the alternatives. A strong CVP gives the customer a compelling reason to buy, supports the price and differentiates the offer. The process below develops that promise from evidence rather than internal opinion.

When to use it

To create a compelling purchase motive.
To apply the model in the business situations described here.

Origins

Rosser Reeves of Ted Bates & Company developed the unique selling proposition, or USP, to focus advertising on one benefit competitors could not credibly claim. He formally presented the idea in Reality in Advertising in 1961. Customer-value thinking later moved the emphasis from difference alone to the outcomes customers actually value. Ray Kordupleski helped establish customer value management, and later work by authors such as Al Ries, Jack Trout, James Anderson and James Narus sharpened the connection among customer need, differentiation and evidence.

The battle for your mind.

Positioning asks how the offer should occupy a distinct and valuable place in the customer’s mind. A CVP turns that strategic position into a concrete promise that product design, sales, service and communication must all be able to deliver.

What it is

Step 1: agree the segments to be targeted with the CVP

Start with the customer segments the business intends to serve. A directional policy matrix compares each segment’s attractiveness with the strength of the company’s current proposition. In the example, segment 4 is unattractive and the company’s position is weak, but its large size means managers should test whether the offer can be improved before withdrawing. Segments 2 and 3 may become more profitable or strategically attractive after a targeted change. Segment 1 remains a priority despite its smaller revenue.

Step 2: consider personas to be targeted

List the people in the customer’s decision-making unit and assess each person’s influence on supplier choice. The purpose is to identify whose needs and judgement the proposition must address.

Step 3: build a portrait of the key decision maker

Create a concrete portrait of the principal decision maker. Give the person a name, role and relevant demographic and organisational context. A proposition written for somebody specific is usually sharper than one written for an abstract market.

Segment 4

X ?

Segment 3

0 2. 5

Competitive position

Use the position of each segment to decide whether to invest, improve, maintain or withdraw. Circle size indicates the commercial weight of the segment; position indicates attractiveness and competitive strength.

Step 4: establish the behaviours of the key decision maker

Describe how the decision maker behaves in the role. Useful prompts include:

How many suppliers are used for this product?

How loyal is the customer, and what triggers switching?

How often and through which channels does the customer want supplier contact?

How tightly does the customer control suppliers?

How accessible is the decision maker when a meeting is requested?

Complete the portrait in the decision maker’s voice:

I work at ………… where my job is ………….. I am …….. years old and have been at the company ……… years. I have a wife, three kids and a dog. What keeps me awake at night is ………………

In five years time I hope to have achieved ……………… at my company.

The company where I work values ………… above all else. When I look for a supplier, I look for one that is …………

I guess what my colleagues say about me when I am not in the room is …………………………

Step 5: establish the needs of the key decision maker

Move from behaviour to the outcomes the person values:

What are this person’s primary needs?

Which important needs remain unmet or only partly fulfilled?

Which “nice to have” outcomes would improve the experience without driving the decision?

Step 6: compare your company against the competition

List the customer’s needs and unmet needs, then compare how well the company and its alternatives satisfy each one. A CVP must be relevant to the customer and meaningfully distinct from the competition.

Step 7: needs that resonate and are differentiated

Plot the top five customer needs against the company’s relative performance. The strongest candidates are highly important to the customer and areas where the business has a defensible advantage.

Write a concise headline that cuts through competing claims and communicates the principal customer outcome. Use the needs worksheet and elevator-pitch template to turn the evidence into plain language.

Primary needs: 1.________________ _____________ _____________ _____________ _____________ 2.________________ _____________ _____________ _____________ _____________ 3.________________ _____________ _____________ _____________ _____________ 4.________________ _____________ _____________ _____________ _____________ 5.________________ _____________ _____________ _____________ _____________ Unmet needs: 1.________________ _____________ _____________ _____________ _____________ 2.________________ _____________ _____________ _____________ _____________ 3.________________ _____________ _____________ _____________ _____________ 4.________________ _____________ _____________ _____________ _____________ 5.________________ _____________ _____________ _____________ _____________

‘Nice-to-have’ needs: 1.________________ _____________ _____________ _____________ _____________ 2.________________ _____________ _____________ _____________ _____________ 3.________________ _____________ _____________ _____________ _____________ 4.________________ _____________ _____________ _____________ _____________ 5.________________ _____________ _____________ _____________ _____________

Think twice before

including needs that fall in these squares in the CVP. If they are strategically necessary, improve the competitive advantage before making them central to the promise. Competitive advantage (5 is best)

CVP we need to

focus on needs that combine importance with credible superiority.

1 2 3 4 5

Improve competitive advantage 5. The shaded area identifies important needs on which the offer can win. 4. These are leading candidates for the CVP. Important need 3 (5 is most important) 2.

Use the completed reasoning to build the elevator pitch:

Step 9: pass the CVP through the 3D test

Challenge the proposition before launch. If it scores less than 8 out of 10 on any of the 3Ds—desirable, distinctive and defensible—rework the claim or the offer.

Profit … which means you will benefit by xxx….. Call to action …let me suggest the next step is xxx.

Desirable (does it meet what

people genuinely want and value?)

Distinctive (in what meaningful way does it stand out from competing companies’

CVPs?)

The distinction should matter to the target customer, not merely to the supplier.

Defensible (what ‘proof points’

show that the organisation can deliver what it promises?)

Step 10: launch, monitor and adjust the CVP

Align the organisation around one consistent proposition, then translate it into the website, sales materials, product experience and service behaviour. Assign owners and deadlines for each implementation task. Measure response, delivery and customer outcomes, and revise the CVP as needs and alternatives change.

Developments of the model

Early CVPs often became long inventories of benefits, weakening the central reason to choose. Favourable-points-of-difference propositions improved focus by comparing the offer with competitors, but still risked emphasising differences customers did not value. A resonating-focus proposition solves both problems: it selects the small number of benefits that matter most to the target customer and that the supplier can deliver distinctively and credibly.

How to use it

James Anderson, James Narus and Wouter van Rossum described the practical value of evidence in their 2006 Harvard Business Review article, “Customer Value Propositions in Business Markets.” A speciality-resin manufacturer created a higher-cost product that met stricter environmental standards. Its sales team doubted that environmental performance alone would justify the premium, and customer research confirmed the concern: painting contractors cared most about rapid coverage, fast drying and durability.

The manufacturer redesigned the product around faster drying so contractors could apply two coats during a single eight-hour shift. The launch proposition led with productivity and treated environmental compliance as supporting value. Customers accepted the improved resin at a 40 per cent premium because the economic benefit was concrete and credible.

Some things to think about

Keep a vivid, evidence-based persona in mind while writing the customer value proposition.

Focus on one or two benefits that matter most. A laundry list dilutes the meaning and memorability of every claim.

Top practical tip

Write for a specific decision maker in a specific segment, then test the words with real customers. A proposition becomes useful only when the target audience understands it, values it and believes the proof.

Top pitfall

Do not confuse difference with value. An offer may differ from competitors in many ways, but a CVP should feature only the distinctions that materially improve the target customer’s outcome and can be defended in delivery.

Customer value proposition

When to use it