Customer Value Proposition

Small businesses and start-ups are often asked to communicate their “customer value proposition” (CVP) or their “unique selling proposition” (USP). So what’s the difference? Today I’ll look at CVP and then move on to USP in What’s Your Unique Selling Proposition?

“Customer Value Proposition” (CVP) is an internal document that serves to clarify your relationship with your customers and their concerns. It ensures that what you communicate is consistent—not just to your customers, but also to your staff and stakeholders, and needs to be defined as a part of your overall business strategy.

Your CVP should be used as a reality check in relation to all your marketing material, sales proposals and other documents, public or private. The challenge of creating your CVP will be to articulate the value of your product or service in terms of both benefits and risk mitigation.

By benefits I mean the economic value, favourable outcomes, and overall customer satisfaction that results from the customer using your product or service.

Not to be confused with market price, “economic value” is the value as perceived by the customer. If I visit a website that is selling widgets for which I am willing (and able) to pay $20, while the price they are asking is only $15 then the product has a “consumer surplus” of $5, and I should probably buy the product because I should get good value for the the price I pay.

Favourable outcomes of using products, such as “whiter teeth” or “closer shave” are classic in product advertising. But be careful when you make claims about your own products or services. Your claims must be backed up by evidence and should be tangible and unambiguous. Anything less could have an negative impact on customer satisfaction.

All other things being favourable, risk can be a show stopper. It comes down to your organisation’s reputation and being able to satisfy the customer that you will live up to your claims. If I’m concerned that the $15 widget I am about to buy isn’t what it’s claimed to be, or if I have my doubts about the company supplying it, then I just won’t buy it.

Here are some questions your need to be asking yourself in developing your value proposition:

  • For which market is your CVP being created?
  • In that market, what do prospective customers value?
  • What product or service are you offering?
  • What are the benefits the market will derive from your product or service?
  • What alternatives are available in the market?
  • Who is dissatisfied with those alternatives, and why?
  • What is your competitive advantage?
  • Is there evidence to support your claims?
  • What will be the impact on the customer if they stop using your product or service?

How to use your Customer Value Proposition

Once you have formulated your CVP, you start by reviewing all your internal documents, making sure they are in accordance. This is also a good time to review those documents in relation to your core values of your organisation.

Next, you’ll want to review all the marketing and sales literature, making sure it articulates your CVP in a way that is compelling to both existing customers and prospective ones. It should answer the question, “Why should I buy from you?”

There are other uses for your CVP. It should guide your business decisions such justifying funding for internal projects. If a proposed project doesn’t support your CVP then it is may be more difficult to justify funding it.

Investors will want to know your CVP as part of evaluating the worthiness of your organisation as an investment. Ditto for outside organisations with whom you are forging strategic alliances and joint ventures.

The CVP review process should involve all of your staff so that everyone is both familiar with your CVP, and aware of the importance of consistencyboth in your internal documents and in your representations to the public. It comes down to your staff being clear that they are really working for the customer and knowing what the customer expects from your organisation.

For Part 2, see What’s Your Unique Selling Proposition?