In the text, Principles of Marketing (15th Edition), value proposition is defined by Philip Kotler and Gary Armstrong (2012), as “the set of benefits or values [that a brand] promises to deliver to consumers to satisfy their needs” (p. 6). As a preface, below is an illustration that I created that will introduce the manner in which a company determines the value proposition that best fits their brand:
As you can see, there are five possible value propositions that a brand may select from. The first possible value proposition is the more-for-more proposition. A brand that selects this proposition will be able to justify a higher price by providing customers with a higher level of benefits in their brand or product. When I think of this proposition possibility, the first brand that comes to mind is The North Face. For those of you who are not familiar with the company, The North Face is an outdoor gear and apparel store that is known for their high-quality, and most of the time, high-priced products. The North Face uses high quality materials to make its jackets, that are made to withstand escalated outdoor conditions, and can therefor charge a higher price to cover the costs of making their products; the standard Denali Jacket made by The North Face sells at a retail price of $179 according to the company’s website.
The next proposition possibility is the more-for-the-same option, which offers consumers more benefits but charges them the same price. The more-for-the-same proposition is often used to boost a company’s position above that of their competitor. Customers are drawn to the company that provides the lower price and still offers the same product because they do not have to sacrifice the high quality they desire for a higher price. iProjector, a proposed built-in projection feature for Apple devices that was created by my marketing group, demonstrates this value proposition. As explained in our Market Analysis, the built-in projection feature would not increase or decrease the price of the Apple devices, but would still manage to present the consumers with a valuable benefit that allows them to more easily share information.
The last proposition to provide more benefit to the consumer is the more-for-less proposition. This proposition is the most enticing for consumers, but hardest to achieve for companies because it does not promote sustainability. The ability to produce a product that provides the customer with more benefits but at a lower price sometimes leaves the company with a loss as the low prices cannot cover high costs. But with this proposition it is important to remember that benefits are not always tangible goods like high-end materials, but can also be defined by high levels of service. A high level of customer service and accommodation is valued by customers and is therefor categorized as a benefit to the customer, but does not cost the company extra as long as they hire the right people. Because this proposition is often defined as the “winning value proposition” (215), I have adopted this proposition into my own baking company, Sweet Erwyn’s Baked Goods (mentioned in my About tab). I pride myself in using the best and highest quality ingredients in my baked goods but I still believe that I offer lower prices than my competition. The added services of delivery and not requiring a deposit on my baked goods offers intangible products to my customers that do not incur high costs for me and allow me to still offer the “less prices” factor of this proposition.
The next value proposition is the the-same-for-less proposition, which offers the same quality of products but at a lower price than most of its competitors. I recently completed a presentation on the Walmart corporation in my Business 305, Principles of Management, class and identified how they are a prime example of a company that has adopted this proposition and remained successful. Although my project focused on the management aspect of the company, the famous “Always low prices. Always.” slogan was thrown at my group members and I throughout the whole research process. Personally, I have gone into Walmart stores and bought the same product that I usually buy from their competitors, but for much lower prices. Regardless of the fact that they are offering the same products as other stores, Walmart’s ability to charge lower prices makes them a market leader and the number one retailer in the world.
Last, but not least, is the less-for-much-less value proposition. Although this proposition offers the customers less benefits in their products, they are also incurring less costs and can therefor charge the customer lower prices. Lower prices will attract customers regardless of the product being sold. The best example of this proposition is reflected in the success of the iconic dollar stores. Stores such as the 99 Cent store and Dollar Tree are stores that sell an assortment of products all for equal to or less than one dollar. Due to the extremely low prices, the quality of the goods sold are usually low. As a college student on a budget, I have been to these stores, or their similar competitors on multiple occasions and can say that I have first hand experience with the quality, or lack there of, of the products sold. Another example of companies that have adopted this proposition are second-hand clothing stores. Most second-hand clothing stores operate on donations or the buying back of products from consumers. These stores then sell the clothing at extremely low prices, which they are able to do because they do not incur high costs when they are gathering the products they are selling. In exchange for the low prices, customers purchase clothing that is used and considered lower quality than clothing that is bought “off the rack.” The people who are unable to spend large sums of money for high quality and those who value low prices over quality help the less-for-much-less proposition companies stay alive.
In conclusion, the value proposition that a company chooses to adopt not only effects their customer base, but also their image and successfulness as well. The value that a customer associates with a company is based on the quality of the products they sell an the quality of the services offered, in combination with the price. Every customer is different and must chose which value proposition best fits their objective as a company; every customer is different and must chose which value proposition fits their lifestyle, budget, and personal preferences.