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Value Proposition

A Value Proposition is a quantified analysis of the benefits and costs incurred by a customer when that customer accepts the companies offering.

Costs and benefits can either be perceived and/or actual. The perceived costs and benefits are greatly influenced by the credibility of the company and the believability of the offering. It helps when customers have experience with the product or service. See illustration below.

Value Propositions are typically expressed in terms of "Payback Period". For example, you family spends $10,- on firewood every month. I offer you a fuel efficient woodstove that saves you 50% on firewood usage every month. The woodstove only costs you $90,-. I will propose that when you acquire my woodstove it will pay for itself in 18 months. You will probably not believe me and come up with all kinds of arguments why my claim is not true, but if I can prove to you my calculations are correct, you might be convinced.

The trick with selling a Value Proposition is that you talk about making money (saving money), not about spending money and that you can substantiate your claim by research reports, endorsements, testimonials, user reviews, test-drives etc.

Compare your value proposition with the following scenarios:

  • Customers use what the are using now
  • Customers stop using what they are using now
  • Customers switch to available alternatives
  • Customers buy into your proposition

Benefits can be based on:

  • relieving anxieties (fear, worries and sorrow)
    • fear of burglary -> buy home security
    • fear of poverty after retirement -> buy pension 
    • fear of high health costs -> buy health insurance
  • relieving pain (costs)
    • high health costs -> invest in healthy living and safe food
    • high energy costs -> invest in insulation and energy efficient machines
    • low crop yields -> invest in irrigation, fertilizer and better seeds
  • creating gain (benefits)
    • low paying job -> invest in education
    • house to small -> buy bigger house
    • bored at night -> buy TV

Costs can be based on:

  • Price $
    • What does the product or service cost to buy
    • What does the product or service cost to operate and maintain
    • What does the training and education cost to be able to make full use of the product or service
    • How and when do I pay for the product or service
  • Acquisition
    • Hoe much time does it take to find and acquire product or service
    • How much time and money does it take to have the goods or service delivered
    • How much taxes and levies do I pay
  • Time and Learning Curve
    • How much time does it take to learn how to use product or service
    • How much time does it take to operate and maintain product or service
    • How much time is wasted on downtime and maintenance 
  • Privacy
    • How much personal information will you provide on acquisition of product or service
    • How much tracking information will you provide by using product or service
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