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Vincent Amanor-Boadu, Ph.D.
Department of Agricultural Economics
Kansas State University
vincent@agecon.ksu.edu |
The value proposition of the business is clear articulation of the unique characteristics of the business’ products and services, as perceived by its customers. In other words, why would your potential customers choose your products and services instead of those of the competitors? Why would customers not only choose you, but reward you for providing them with your product or service? Articulating the value proposition, therefore, requires an understanding and appreciation of the gap in the customer’s needs that is filled by the business being planned. It requires a careful assessment and analysis of what Rob Ryan, founder of Entrepreneur America, describes as “why the dogs will eat your dog food.” If you cannot identify any significant physical or intrinsic difference between your product/service and those of competitors, then you need to be able to provide your potential customers with some extrinsic reason for them to switch from current products/services. If your product/service is brand new – never seen before – then you need to convince consumers of what they have been missing in life all these years.
Consider the recorded arts industry for a moment. For years, the cassette tape provided a strong competition against the vinyl record for its convenience and portability and ended up killing it. The 8-track system failed to dethrone the cassette tape in the portability and convenience departments, dying a quick and easy death. Then came the digital compact disc and consumers wondered why they had been listening to such poor quality sounds for years. The switching power of quality that hits consumers at the right spot and time can be absolutely phenomenal.
From the food industry, we present President’s Choice®, a line of grocery products developed by the largest Canadian grocery retailer, Loblaw Companies Ltd. The brand started in the mid-1980s from the simple idea that Canadian consumers deserved better and higher quality food products than they have been getting for the money they have been paying. The only suppliers of ready-to-eat or ready-to-cook food products at that time were national brand companies, such as Nestlé and the Pillsbury Company. President’s Choice® value proposition was two-pronged: offer consumers choice in their food product selections and present consumers with superior quality and convenient food products that are priced competitively. In its choice value proposition, President’s Choice® entered the market with exotic sauces and marinades that were not only good-tasting but interesting for the palate. It brought its “Memories of . . .” line out to present consumers with the opportunity to enjoy tastes of Malaysia, India, Japan and Africa in their own backyards or kitchens.
President’s Choice® differentiated itself from the national brands through these exotic and creative product offerings as well as price. Since the late 1980s, it has expanded its product slate to address lifestyle differences among consumers by presenting an organic line of products and low or zero-fat but extremely tasty products it branded Too Good to be True™. As a result of its strong value proposition and delivery, the company has gathered a strong following of loyal consumers and expanded to nonfood grocery items. To entrench the loyalty of its customers, President’s Choice® publishes its annual Insider’s Report and solicits products ideas from its customers. By all measures, the President’s Choice® opportunity has been a successful business for Loblaw’s.
For Loblaw’s, the identified gap that its President’s Choice® brand was aiming to fill was food quality offerings to consumers. Recognizing that it was not enough to just present quality, they decided to bundle healthfulness and convenience together with taste and high quality and offered these to consumers in ways that provided with excitement. For example, President’s Choice® Wood-Fired Thin Crust Pizza cooks in 17 minutes from the freezer and is presented as and “authentic European-style izza [which] is equally delightful served on its own as an appetizer or with a salad as a main course.” This approach of presenting the consumer with a reason to choose President’s Choice® is made with each and everyone of its products.
Value propositions are critical in a business plan because they force the business owners to think about their products and services and contemplate how they will cause customer switches in the marketplace. One approach to developing a realistic value proposition is conducting focus group interviews with samples of the target customer segment. While this can be expensive, especially for a start-up company that may be already cash strapped, its value can be immense because it provides insights into how consumers want to use the product/service, allowing for unexpected changes that enhance the in-use value for your customers. It is important that once the data on consumer value perceptions about your product is collected, they must be used to modify any misconceptions that might exit about the product within the organization. Remember that if you have identified the right consumer segment, then they must be more right than you are about their perception of value. “If the dogs will not eat the dog food, it doesn’t matter how nutritious it is, you will still have dog food on the shelf.”
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