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Value Proposition – Understanding Different Drivers Of Value Proposition

Value Proposition

At the heart of every business is value delivery. Beyond the physical products or services that your business sells, what is it that you really sell? Or what specifically are your customers buying? What is your value proposition?

Let us assume I have a headache and go to the pharmacy to buy a drug, say Paracetamol made by Emzor or May & Baker. What I actually buy in the end is relief, not so much the drug itself. Or say you sold computers. One of your customers buys a computer from you for their business, to increase productivity. Another customer buys one from you but uses it only to watch movies. So to this second customer the device has mostly only an entertainment value. A third customer could buy a computer simply because everyone else owns one. In this case, the computer has a social status value to him.

It is important to look at value derived from the stand point of the customer. Trying to get the person who bought the computer for entertainment value to upgrade their Microsoft Office Suite or to install AutoCAD is an effort in futility.

Start Your Business in 30 Days Even If You Don't Have An Idea
Start Your Business in 30 Days Even If You Don’t Have An Idea

Understanding your value proposition as the owner of the business is one thing, getting your staff to see the essence of your value proposition requires continuous communication. A clear understanding on the part of your staff allows them see the role they play in the larger scheme of things. You want to be sure everyone is on the same page in terms of why and how you deliver value to the customers.

Value Proposition Drivers

There are key factors that drive value in a business. Understanding them helps you sustain the delivery process and quickly calls your attention whenever there is a threat to your value delivery process.

Platform

Your capacity to deliver value sometimes is based on the platform you own or control. Platforms either connect buyers and sellers or act as a single source value delivery system. So take Amazon.com as an example. Can they deliver the same value without their platform or if they were a retail outlet? If more than 80% of your business comes in from a particular channel/source, then that is your platform and is the main driver of value in your business.

Technology

Technology as a driver of value is not limited to technology companies only. Fact is that you could be a technology company but technology isn’t what drives value for you. Should your capacity to deliver value be solely dependent on technology then that is your value driver. Take UBER for example. They are a cab service company, but their ability to deliver service is dependent on the customer having access to an app which runs on a smartphone(technology). The driver is also notified via the same channel (technology) and you are billed electronically (technology). So, though UBER is a cab service company, the entire value delivery system is technology driven.

Distribution

Coca-Cola is a classic example of a company that drives value through distribution. Go into any remote African village without electricity and running water and chances are you will find someone selling Coca-Cola. While Coca-Cola may be playing at a global level, there are loads of smaller players who use distribution to drive value. If you live in Lagos and commute during rush hours, they are some products you buy only in traffic. Outside traffic, these products lose their appeal or simply fail to be of any value to you.

Policy

Many times government policies can significantly increase or decrease the value your business delivers. Take System Specs Ltd., for example. They act as a revenue collection platform for the federal government. With the enforcement of the TSA, System Specs value delivery capacity suddenly increases overnight. A local furniture making business that rides on the policy of banned imported furniture would be badly impacted if such a ban were lifted.

Brand

Some value drives are based on brand perception. Over time, customers have become endeared to these brands and will use the product or service as long as it comes from the brand. Apple, Gucci, Harley Davidson, Rolls Royce, and GTBank (arguably) are organisations that have their brand names as the value drivers.

Price

An ability to constantly deliver a certain price extreme, usually low prices, could be the biggest driver of value for your business. Southwest airlines in the US, Ryan Air and Easy Jet in Europe are examples in the aviation business. Walmart and Shoprite also do this in the grocery business. Giving discounts or running promotions should not be confused with having a low price strategy.

Patent

Having a patent that protects your intellectual property rights could be your biggest driver of value. While this is not so popular in our country today partly due to our disregard for intellectual property rights and also a bureaucratic judicial system, patents are large value drivers for businesses outside this country.

Go from idea to starting your business in 30 days
Go from idea to starting your business in 30 days

The seven listed categories above have not exhausted the list of value proposition drivers for businesses. Other factors may exert influence based on the peculiarity of the business in question. The idea is being observant to the factors that drive value for your business and being sensitive and observant to changes.

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Photo Credit: Equity Edge

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