How a customer perceives the value of your product or service can be described as your value proposition. A value proposition goes beyond just a description of the product or service. A value proposition encompasses the true usefulness or specific benefits the product or service provides.
More than seven decades ago a small aircraft company started in Wichita to do what others said couldn't be done: build a monoplane with a full cantilever wing. A full cantilever wing is a single wing airplane without supporting struts or braces. When the Cessna All Purpose took off on August 13, 1927, the aviation world was forever changed. In fact, Clyde Cessna's cantilever design has been the standard ever since. The company has successfully continued operations through all these years embracing innovation, ingenuity, and initiative.
The Cessna 172 is the single most popular airplane ever built. More than 30,000 of these planes have flown since their introduction in 1956. More pilots have learned to fly in a 172 than any other aircraft. Even though the Cessna 172 has evolved substantially over the years, pilots can transition easily from an early 172 to the newest model. Pilots who learned to fly in an old 172 can hop in any of Cessna's newer models and feel comfortable at the controls immediately. Cessna has kept the design simple and very similar to every earlier model.
Every pilot considering the purchase of a single engine airplane is familiar with Cessna's unique value proposition. Cessna 172s have the best safety record; are economical and the easiest to fly and maintain; and offer the ease of transition from old to new models. Cessna competes against other airplane manufacturers that build faster, sleeker, and cheaper aircraft but no competitor can match Cessna's unique value proposition.
A unique value proposition will allow your customers to immediately identify why they should do business with you and arm them with a message to tell other potential customers.
My wife, JoyAnn, and I have leased our car for several years. The value proposition for leasing a car says your monthly payment is less on a leased automobile and you don't have to mess around with selling the vehicle after the lease is over. Another way of expressing the value proposition is that you are only paying for that part of the automobile's life that you are using. Rather than paying $400 a month to build equity and ultimately own a car, we prefer to pay $300 a month and walk away from the car every three years.
Leasing is a good arrangement for us, but an even better arrangement would be to lease from a pool of automobiles. For example, a car or leasing company could offer a choice of automobiles. The pool of lease cars could include convertibles, sedans, and SUVs. Instead of $300 a month perhaps the pool arrangement would cost $450 a month. Every six months participants could turn in their leased car for another car that is in the pool. Leasees could enjoy variety and plan what car they would be using to coincide with vacations or other special times.
I don't know of a company that offers this type of lease but I have mentioned the idea to several friends who are currently leasing their cars. Every one of them expressed an interest in participating. They all felt the value proposition was compelling enough that they would be eager to increase their lease payment by 50 to 100 percent.
The creative possibilities in developing a value proposition are endless. Value propositions are built around what customers value, and this value makes price a secondary consideration.
Many times your customer will place a very high value on only one specific aspect of your product, so that little else matters. There is a dry cleaning business that picks up and delivers to the building where I work. I asked a friend in my building if he used this dry cleaners and, if so, why? He told me he did, and it was because of the convenience of bringing his laundry to work. I asked him if he would be interested in another dry cleaner that charged much less. He told me, "No." How about a cleaner that did a better job? "Not interested," he said. What about faster turn around time I asked? "I don't want to change dry cleaners," he snapped back. This guy was loyal. He continues to use the same dry cleaner every week. He is loyal for one reason: location. His whole value proposition in dealing with this dry cleaner is based solely on the convenience of being able to bring his laundry to work.
A quick look around a convenience store will demonstrate that prices tend to be much higher than at a nearby supermarket. But the name says it all: people shop there because it is convenient. The customer might pay as much as 50 percent more, but it is worth it to the customer to not have to stand in line or search through long aisles for their purchase. The value to the customer is convenience. Customer value is based on convenience, price, image, prestige, largeness, smallness, and every other descriptive word known to man. The key to creating lasting loyalty is the identification of what is of value to each of your customers.
Usually the customer will tell you, but sometimes it can be tricky to determine value. The following two stories illustrate how direct and how elusive determining customer value can be.
The first story illustrates how customers will tell you exactly what they want if you give them a chance. My wife graduated from Purdue and shared this campus legend.
Purdue University is located in West Lafayette, Indiana, in the northwestern part of the state. The main street in West Lafayette that leads to the campus is State Street. The main campus entrance off of State Street leads to an open meadow with a school building on each end. There is a sidewalk leading from one building to the other building through the middle of the meadow. This sidewalk is called "Hello Walk" because students are encouraged to say, "Hello" as they pass each other.
Over the years, additional buildings have been built around the meadow, which is known as Memorial Meadow because John Purdue is now buried there. As new buildings were built, new sidewalks were not immediately added. The new buildings were completed and landscaping was put in place, but there were no sidewalk leading to the buildings. During the new buildings' first year of operation students would find their way in the most convenient manner. Depending on where they were coming from, students would cross the lawn in what appeared a totally random fashion.
After a year of students tracking across the lawn, the campus construction people knew exactly where to build sidewalks. The student paths became student sidewalks. The placement of the sidewalks was exactly right because the students demonstrated where they wanted them. All the discussion groups in the world could not produce better results than letting the students vote with their feet. If you are patient and listen carefully, your customers will tell you exactly what they want.
This second story demonstrates how elusive customers can be in helping you determine what they want.
Several years ago in a large office building in a downtown metropolis, the tenants were angry. They were complaining to the building managers that something had to be done about the wait for the elevators. The building managers were sensitive to the complaints and hired an engineering firm to see what could be done. The engineers explored the possibility of changing the motors on the elevators to make them go faster. This idea didn't work because the entire elevator system would have to be changed, not just the motors. Another idea was to deem some elevators "express elevators," which would only stop at higher floors. A great deal of money was spent on engineering studies, but nothing seemed doable or affordable. Even the possibility of hanging new elevators on the outside of the building was explored.
A solution was finally found that was affordable, ended all the complaints, cost $25,000, and didn't require major modification to the building. Can you guess what the answer was?
Mirrors. Mirrors! Mirrors? A different engineering firm was hired to assess the problem. They came back with a solution in three days and said the solution would cost $25,000. The building managers were delighted with the price but suspicious of the solution. The firm dedared the problem was that tenants were complaining about having to wait for an elevator. Every building has tenants who complain about the elevators. The elevators could travel 100 miles per hour and tenants would still complain. The real problem was the tenants' complaints. If you can stop the complaints, isn't that a good sign the solution has been found? The firm lined the lobby walls with mirrors—$25,000 worth of mirrors. Wherever a tenant looked they could see themselves or someone else. People are fascinated with themselves and others. The complaints stopped. The problem wasn't the speed of the elevators, it was boredom. Once the tenants had something to watch, they were happy.
The key was accurately defining what the customers (tenants) wanted. The customers didn't really know the solution, but they did know the problem: They didn't enjoy waiting for an elevator. Sometimes your customer will not be able to accurately define what they want. It's your job to keep asking questions until you can determine what is of value to your customer. It is also important to keep asking questions because in many situations the customer has several values they need satisfied.
The customer's perception of value is the only value that matters. This perception is influenced and affected by every facet of how you deal with customers and how they deal with you.