Unique Selling Proposition (USP)

Beforeyoucanbegintosellyourproductorservicetoanyoneelse,youhavetosell
yourselfonit.Thisisespeciallyimportantwhenyourproductorserviceissimilarto
thosearoundyou.Veryfewbusinessesareoneofakind.Justlookaroundyou:How
manyclothingretailers,hardwarestores,airconditioninginstallersandelectriciansare
trulyunique?

Thekeytoeffectivesellinginthissituationiswhatadvertisingandmarketing
professionalscalla"uniquesellingproposition"(USP).Unlessyoucanpinpointwhat
makesyourbusinessuniqueinaworldofhomogeneouscompetitors,youcannottarget
yoursaleseffortssuccessfully.

PinpointingyourUSPrequiressomehardsoulsearchingandcreativity.Onewaytostart
istoanalyzehowothercompaniesusetheirUSPstotheiradvantage.Thisrequires
carefulanalysisofothercompanies'adsandmarketingmessages.Ifyouanalyzewhat
theysaytheysell,notjusttheirproductorservicecharacteristics,youcanlearnagreat
dealabouthowcompaniesdistinguishthemselvesfromcompetitors.

Forexample,CharlesRevson,founderofRevlon,alwaysusedtosayhesoldhope,not
makeup.Someairlinessellfriendlyservice,whileotherssellontimeservice.Neiman
Marcussellsluxury,whileWalMartsellsbargains.

EachoftheseisanexampleofacompanythathasfoundaUSP"peg"onwhichtohang
itsmarketingstrategy.AbusinesscanpegitsUSPonproductcharacteristics,price
structure,placementstrategy(locationanddistribution)orpromotionalstrategy.These
arewhatmarketerscallthe"fourP's"ofmarketing.Theyaremanipulatedtogivea
businessamarketpositionthatsetsitapartfromthecompetition.

Sometimesacompanyfocusesononeparticular"peg,"whichalsodrivesthestrategyin
otherareas.AclassicexampleisHanesL'Eggshosiery.Backinanerawhenhosierywas
soldprimarilyindepartmentstores,Hanesopenedanewdistributionchannelforhosiery
sales.Theidea:Sincehosierywasaconsumerstaple,whynotsellitwhereotherstaples
weresoldingrocerystores?

Thatplacementstrategythendrovethecompany'sselectionofproductpackaging(a
plasticegg)sothepantyhosedidnotseemincongruentinthesupermarket.Andbecause
theproductdidn'thavetobepressedandwrappedintissueandboxes,itcouldbepriced
lowerthanotherbrands.

Here'showtouncoveryourUSPanduseittopowerupyoursales:
 Putyourselfinyourcustomer'sshoes.Toooften,entrepreneursfallinlovewith
theirproductorserviceandforgetthatitisthecustomer'sneeds,nottheirown,that
theymustsatisfy.Stepbackfromyourdailyoperationsandcarefullyscrutinizewhat
yourcustomersreallywant.Supposeyouownapizzaparlor.Sure,customerscome
intoyourpizzaplaceforfood.Butisfoodalltheywant?Whatcouldmakethemcome
backagainandagainandignoreyourcompetition?Theanswermightbequality,
convenience,reliability,friendliness,cleanliness,courtesyorcustomerservice.
Remember,priceisnevertheonlyreasonpeoplebuy.Ifyourcompetitionis
beatingyouonpricingbecausetheyarelarger,youhavetofindanothersalesfeature
thataddressesthecustomer'sneedsandthenbuildyoursalesandpromotionalefforts
aroundthatfeature.

Knowwhatmotivatesyourcustomers'behaviorandbuying
decisions.Effectivemarketingrequiresyoutobeanamateurpsychologist.Youneed
toknowwhatdrivesandmotivatescustomers.Gobeyondthetraditionalcustomer
demographics,suchasage,gender,race,incomeandgeographiclocation,thatmost
businessescollecttoanalyzetheirsalestrends.Forourpizzashopexample,itisnot
enoughtoknowthat75percentofyourcustomersareinthe18to25agerange.You
needtolookattheirmotivesforbuyingpizzataste,peerpressure,convenienceandso
on.
Cosmeticsandliquorcompaniesaregreatexamplesofindustriesthatknowthe
valueofpsychologicallyorientedpromotion.Peoplebuytheseproductsbasedontheir
desires(forprettywomen,luxury,glamourandsoon),notontheirneeds.

Uncovertherealreasonscustomersbuyyourproductinsteadofa
competitor's.Asyourbusinessgrows,you'llbeabletoaskyourbestsourceof
information:yourcustomers.Forexample,thepizzaentrepreneurcouldaskthemwhy
theylikehispizzaoverothers,plusaskthemtoratetheimportanceofthefeatureshe
offers,suchastaste,size,ingredients,atmosphereandservice.Youwillbesurprised
howhonestpeoplearewhenyouaskhowyoucanimproveyourservice.
Ifyourbusinessisjuststartingout,youwon'thavealotofcustomerstoaskyet,so
"shop"yourcompetitioninstead.Manyretailersroutinelydropintotheircompetitors'
storestoseewhatandhowtheyareselling.Ifyou'rereallybrave,tryaskingafewofthe
customersaftertheyleavethepremiseswhattheylikeanddislikeaboutthecompetitors'
productsandservices.

Onceyou'vegonethroughthisthreestepmarketintelligenceprocess,youneedtotake
thenextandhardeststep:clearingyourmindofanypreconceivedideasaboutyour
productorserviceandbeingbrutallyhonest.Whatfeaturesofyourbusinessjumpoutat
youassomethingthatsetsyouapart?Whatcanyoupromotethatwillmakecustomers
wanttopatronizeyourbusiness?Howcanyoupositionyourbusinesstohighlightyour
USP?

Don'tgetdiscouraged.Successfulbusinessownershipisnotabouthavingaunique
productorservice;it'saboutmakingyourproductstandouteveninamarketfilledwith
similaritems.

Overview[edit]

A value proposition is a statement which clearly identifies clear, measurable and demonstrable
benefits consumers get when buying a particular product or service. It should convince consumers
that this product or service is better than others on the market. This proposition can lead to a
competitive advantage when consumers pick that particular product or service over other
competitors because they receive greater value.

The phrase value proposition (VP) is credited to Michael Lanning and Edward Michaels, who first
used the term in a 1988 staff paper for the consulting firm McKinsey and co. In the paper, which was
entitled a business is a value delivery system, the authors define value proposition as a clear,
simple statement of the benefits, both tangible and intangible, that the company will provide, along
with the approximate price it will charge each customer segment for those benefits. In a modern,
clear cut definition, Labeaux defines a value proposition as a statement that clearly identifies what
benefits a customer will receive by purchasing a particular product or service from a vendor.
According to Hassan, however, there is no specific definition for Value Proposition. [3]

Creating and delivering value proposition is a significant issue that marketing planners need to
consider in planning strategies. Value propositions vary across industries and across different market
segments within an industry. Capon and Hulbert linked the success of firms in the marketplace to the
value provided to customers.[4] They introduced a principle of customer value, with customer insights
driving the companys marketing activities. Customer value should also drive investment and
production decisions, because customers perceive value on the benefits of the product or service
they receive. Consequently, as the environment changes, and the customer experience and their
desires change, the value they seek changes. As a result, companies are pressured to invest more
resources in marketing research in order to gain deep customer insights, improve value proposition.

Consumers are always looking around for the best possible deal at the best quality and how these
products or services will contribute to their success. The value proposition is the promise that the
business will give the consumer to assure best possible value. The value proposition is a creative
statement that depicts the unique selling point. Without this statement you lose an opportunity to tell
consumers why they should pick you over competitors. An important goal in a business is to
convince customers that they are getting many more benefits.[5] Coming from a customers
perspective, buyers are not only asking how this product is different to one they may already be
using, but what value this product or service may have. Customers are looking for answers that may
improve or replace products or services. Customers will never buy a product or service if they dont
feel like they are receiving the best possible deal. Therefore, the value proposition is important to
businesses and their success.[6]
The value proposition is to differentiate the brand from competitors. To understand and get an idea
about the value proposition it is important to analyse the business through themarketing mix:
identifying what the product or service is, the price of the product or service, where this will be sold,
and how this product or service will be promoted. Identifying these key questions helps clarify and
make the value proposition more obvious. Another strategy that has been used to help process
learning and growth of a business is the balanced scorecard. This concept was developed by Robert
Kaplan and David Norton in 1990, to help communicate value proposition in a way that businesses
can understand. The maps create a visual representation of the businesses objectives and goals so
it becomes more approachable.[7] Through these theories the proposition becomes more obvious and
displays to consumers why this product or service is so special to the market. Once businesses
determine what makes this item or service so exceptional compared to competitors, it can begin to
guide a business more clearly. This can lead to marketing concepts and ideas. The value proposition
helps the business understand what their primary focus and goals are within the business and help
to understand the consumers needs.

When creating a value proposition its important to think about these key questions: What is the
product or service? Who is the target market? What value does the product or service provide? How
is this different from competitors? Many businesses that can answer these will have a relatively
strong value proposition as they know how their product or service differentiates from competitors.
But its more than just understanding and recognising what makes them different; its about creating
a statement that engages customers to purchase goods or service. There are many benefits that the
value proposition can have on a business. These benefits include a strong differentiation between
the company and its competitors, increase in quantity, better operations efficiency and increase in
revenue. By also creating a more personal and honest relationship with consumers through the
value proposition also gives them another reason to choose you. These benefits will help the
business grow and succeed in the market.

Value proposition builder model[edit]

Value proposition development is an organizational approach to building in value to the customer

experience. It is simply that by building a value proposition you will provideprofitable and
superior customer value.[8] The Value Proposition Builder Model states six stages to the analysis:

1. Market: Analysing and identifying the market segments, or specific clients, or target
individuals within those clients for whom the solution has the potential to deliver value and
profitably.

2. Analyse and define the value experience that clients get from the organization from its
current activities. You need to define good, bad and neutral experiences, The effectiveness
of the value proposition depends on gathering real customer prospect or employee
feedback.

3. Define the offerings mix capable of leveraging the value experience with the defined target
market group.

4. Assess the benefits of the offerings in the context of the value experience you are able to
deliver to the market group. There is a cost component of benefits here which includes price
and customer risks, enabling the calculation of value where Value = Benefits minus Cost.
 5. Alternatives and differentiation is the next aspect to analyse, what alternative options does
the market have to the product or service?

6. ... and back it all up with relevant proof, to ensure there is substantiate value proposition in
place.[9]

Neil Rackham believes that a value proposition statement should consist of four main parts:
capability, impact, proof, and cost [that is, the price a customer is expected to pay]. [10]

Organizations do not directly communicate the outputs of the value proposition creation process
(i.e., the value proposition statement and template) to external audiences; [11]value proposition
statements are internal documents, used by organizations as a blueprint to ensure that all the
messages they communicate, inside and outside the organization, are consistent. Some of the ways
that organizations use value propositions include in marketing communications material or in sales
proposals.[12]

A convenient model to state the customer's reason to buy a service or product in a succinct relative
value and differentiation summary for a target group is offered by Winer and Moore. [13]

For (target customer) who (need statement), the (product/brand name) is a (product
category) that (key benefit statement/compelling reason to buy). Unlike (primary competitor
alternatives), (product/brand name) (primary differentiation statement).[14]

Geoffrey Moore's positioning statement framework identifies the added value and product
purpose in filling a market gap better than alternatives. It provides a quick summary with
analogies to other existing solutions which, creates an image that focuses on user benefits over
features or specific implementation methods.[15]

Value-focused enterprise model[edit]

Creating a value-focused enterprise (VFE) requires a fundamental rethink of the way things are
organized and managed. This is at the heart of the business strategy and implementation. These
customers demand, and are willing to pay for, a sales effort that creates new value and provides
additional benefits outside of the product.[16] Using this model, you are able to plan the business on
the basis of value to be delivered.

1. Value-centered strategic intent: Where do you intend the organization to be in the

foreseeable future and what principles will guide the journey?

2. Value proposition: What is the Value Propositions (market, Value experience, Offerings,
Benefits, Alternatives and Differentation and Proof) and how is it congruent with the
Strategic Intent?

3. Value-focused operating model: What are the How factors (organization, process and so on)
for the operationalization of the Value Proposition to achieve the strategic Intent?

4. Value-creation-based management and execution: How will you execute and manage all of
this to ensure maximum Value Delivery.[17]
The value cycle[edit]

Osterwalder and Pigneur state that the value proposition must be studied through its entire value life
cycle.[18] Value elements can be created in each of the five stages of the value life cycle. These
stages are: value creation, value appropriation, value consumption, value renewal and value
transfer:

1. Value Creation: The traditional view of the value creation process doesnt allow customers to
take part in feeling the value. Marketing and research and development are mainly
responsible for adding value at this stage based on historic data and observation. However,
in modern times, the customers of several companies are included in this stage.

2. Value appropriation: value can be created in this stage by developing, improving and
facilitating customers buying experience. This can be done in two steps, firstly improving
how transactions are made, and secondly, considering the fulfillment of customers.

3. Value Consumption: This is core to the value proposition. At this stage customers see and
feel the value through the actual use of the product or the service. At this stage value can be
created through a bundle of benefits that are linked to the product or service. It can be
improved through observation and resulting feedback.

4. Value renewal: This stage is when value expires. The value can be created from this through
adding more benefits and features to the product or service when it is renewed.

5. Value Transfer: The final stage of the value life cycle is the stage when customers can no
longer gain value. Value abundance can occur at this stage, when customers need to pay
for disposing certain used goods, e.g. TVs/computers.

Value status[edit]

Perceived value and willingness to pay are correlated. Customers are willing to pay in several
circumstances, a few examples being; when they are faced with different offers, when they are in a
partnership with the supplier, when the need to buy is urgent, when there arent any substitutes, and
when there is a high positive relationship between the value perceived and the price. Companies
must choose the best pricing strategy to deliver value for both the customer and corporate
perception. Capon & Hulbert introduced some factors that a firm must consider before making
pricing decisions.[19] Some of these factors include:

1. Perceived substitutes: differentiation on offers and prices compared to competitors.

2. Unique value: customers weigh the benefits and features of the product and perceive these
benefits as a unique value provided solely by the organization.

3. Price/Quality: firms should consider that customers will seek to have a positive price/quality
relationship for a product to make a purchase decision.

Zeithaml studied three consumer defined values: Low price, Quality and value for money, and
Features.[20] The study concluded that perceived value is the customers overall assessment of the
utility of a product based on perceptions of what is received and what is given. Some Customers
may see value in cheap prices, and other may see value in volume obtained.