Question

Read Anderson, Narus, & van Rossum, (2006). In a 2-3 page assignment response, please include a high-level and general review of the concepts and content in the article.

Answer 1

Examples of consumer value propositions that resonate with customers are exceptionally difficult to find. When properly constructed, value propositions force suppliers to focus on what their offerings are really worth. Once companies become disciplined about understanding their customers, they can make smarter choices about where to allocate scarce resources. The authors illuminate the pitfalls of current approaches, then present a systematic method for developing value propositions that are meaningful to target customers and that focus suppliers' efforts on creating superior value. When managers construct a customer value proposition, they often simply list all the benefits their offering might deliver. But the relative simplicity of this all-benefits approach may have a major drawback: benefit assertion. In other words, managers may claim advantages for features their customers don't care about in the least. Other suppliers try to answer the question, Why should our firm purchase your offering instead of your competitor's? But without a detailed understanding of the customer's requirements and preferences, suppliers can end up stressing points of difference that deliver relatively little value to the target customer. The pitfall with this approach is value presumption: assuming that any favorable points of difference must be valuable for the customer. Drawing on the best practices of a handful of suppliers in business markets, the authors advocate a resonating focus approach. Suppliers can provide simple, yet powerfully captivating, consumer value propositions by making their offerings superior on the few elements that matter most to target customers, demonstrating and documenting the value of this superior performance, and communicating it in a way that conveys a sophisticated understanding of the customer's business priorities.

It clearly highlights the importance of differentiating your offering with the competition, while focusing on those benefits relevant to the customer. The authors go on to discuss the different kinds of value propositions that have been put into practice and suggest ways of developing a relevant value proposition.

Customer managers are increasingly under pressure to keep costs down and don’t have the luxury of simply believing suppliers’ assertions. Sales forces should create a justifier in line with customer needs and they should help customers understand – and make them believe in – the customer value proposition. Suppliers that are not able to offer this often revert to price concessions, which are expensive and might not even help the supplier to make the cut. A management-practice research was conducted to understand what constitutes a customer value proposition and what makes it persuasive to customers. This article describes a systematic approach for developing value propositions that are meaningful to target customers and that focus suppliers’ efforts on creating superior value.

Many suppliers offer dazzling value propositions but do not actually have the people, processes, tools and experience necessary to back up their claims. This has led many customers to dismiss value propositions as marketing puffery. Suppliers must be able to demonstrate and document customer value propositions in order to persuade customers.

A way to do this is by using a value word equation, which expresses in words and mathematical operators how to assess differences in performance between an offering and the next best alternative. The data needed for the value word equation to provide value estimates is collected from the customer’s business operations through collaboration between the supplier and customer managers or even from outside sources.

Demonstrate Customer Value in advance
In advance, prospective customers must be able to see the cost savings or added value they can expect from choosing a supplier’s offering over the next best alternative

Document Customer Value
Only demonstrating value to potential customers is no longer sufficient to be a best-practice player. Suppliers must also document cost savings and incremental profits in companies that have purchased their offerings. The use of value documenters makes it possible to refine customer value models and to create value case histories.

Superior Business Performance
Properly constructed and delivered customer value propositions make a significant contribution to business strategy and performance. Some businesses have already made these value propositions a fundamental part of their business strategy. For example at Sonoco, a global packaging supplier, each value proposition should be distinctive, measurable and sustainable.