Customer Value is Benefits minus Costs (Customer Value Proposition)

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Your offering creates value for a customer when the benefits outweigh the costs. My thoughts on Value Proposition any why it is important for business owners and sales managers.

Companies tend to create offerings based on their skills, resources and capabilities. That’s ok as long as you’re aware of your customer’s business challenges (pains, problems, needs) you’re trying to resolve with your offering.

To be successful you have to create a business value for your customers. To create real value you have to translate your offering into your customer’s business results.

 

customer value is benefits less costs:

Benefits can be:

  • Impacts and effects on users (e.g. effectiveness, efficiency)
  • Impacts and effects on non-users and 3rd parties (e.g. impact on end customers)
  • Quality
  • Other organizational, personnel or social effects and impacts

Costs can be:

  • Directs costs like licenses, services and maintenance costs
  • Indirect costs like user acceptance, changes in organization and processes, other costs of impacts
  • Risks your offering creates and mitigates

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How to find out?

You have to work out your Product-Market-Fit. Which markets (or market segments) have similar challenges (problems at the end of the day) which you can solve with your offering? Take a look at your competition as well and about their value proposition. What are the benefits for a specific market? What does the market value most?

Alternatives. Which alternatives and options do your customers have to solve their problem?

Proof. Evidence and references to substantiate your own value proposition.

 

These are very fundamental attributes of your offering. All further activities in the customer acquisition process need to be aligned with them: target group selection criteria, positioning, MarCom, pricing model, etc.

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Conclusion for Sales:

A good customer value proposition (CVP) will provide convincing reasons why a customer should buy your offering and also differentiate your solution from competitors. When you know the real value of your offering and when you’re aware of the challenges of your ideal target group you can start selling value instead of selling benefits or features.

Here’s some more ideas about Differentiators and Value propositions: Not-so-obvious Differentiators for SW Development Companies.

 

 

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