consumer buying behavior research

A value proposition is an implicit, and sometimes explicit, promise made by the provider of a product, tangible or intangible, to a customer or customers. This is a promise that goes beyond the physical characteristics of the product and involves all forms of utility that can be enjoyed by the customer, manifested in such areas as emotional, status, and self-actualization benefits to be obtained from consumption.

Overview

The standard definition of marketing involves finding out what people want and giving it to them while making a profit (it has been updated in recent years, but this remains the heart of it). The value proposition arises from understanding what a customer really wants from a product and then demonstrating how it might be obtained. This is evident from television advertising, which rarely focuses on the technical details of a product but rather the emotional or lifestyle benefits to be obtained—frozen food provides a happy united family for the mother; a car provides young people with the freedom to roam. In consumer goods, the value proposition rarely involves a subtle presentation. It can be different for specialty goods when people are willing to invest time and energy in obtaining exactly the right technical product.

When it comes to organizational buying, the value proposition can be quite a complex undertaking and involves a number of different features. This is because products or contracts might be complex in themselves and because organizational buyers must follow a specific protocol in determining suppliers, which is aimed at protecting the interest of the organization rather than appealing to an individual. The value proposition in such cases might cover the ability to integrate operations over a number of different sites, the creation of a long-term relationship that will reduce transaction costs, or the possibility of entering new markets.

From the perspective of business strategy, irrespective of the type of market involved, the crucial issue is learning to understand the meaning of value and how to create it. Four main types of value propositions exist, each solving a different common concern: low cost, superior product, ease of use, and expert service. The perception of value varies from case to case, and it is necessary either to have a deep understanding of the market or conduct worthwhile marketing research to understand how it is manifested in different cases. In business-to-business or business-to-government cases, the understanding often comes from stable relationships that give time for each side to learn the nature of the other, which creates high entry barriers for any other company wishing to enter that market. Such relationships often lack transparency to outsiders.

Value propositions are used to direct the design process and to revamp existing products or services in response to the market. Other business concerns including pricing, overhead, and performance metrics hinge on the type of value proposition the company adopts.

Over time, the value proposition concept has been recognized as a useful one in management studies generally and so it has been applied in a range of areas, such as human resources, IT outsourcing, and conflict management as a means of making any offer or suggestion more attractive. The concept has been broadened in a perhaps useful way, although at the cost of having much of its original meaning filleted from it. This is quite common with concepts of this sort and ends with them being so widely used that it has little if any real meaning left.

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