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What is a 'Value Proposition'

Value proposition refers to a business or marketing statement that a company uses to summarize why a consumer should buy a product or use a service. This statement convinces a potential consumer that one particular product or service will add more value or better solve a problem than other similar offerings will. Companies use this statement to target customers who will benefit most from using the company's products, and this helps maintain an economic moat.

BREAKING DOWN 'Value Proposition'

A value proposition is a promise by a company to a customer or market segment. It is an easy-to-understand reason why a customer should purchase a product or service from that specific business. A value proposition should be a clear statement that explains how a product solves a pain point, communicates the specifics of its added benefit and states the reason why it's better than similar products on the market. The ideal value proposition is concise and appeals to a customer's strongest decision-making drivers.

Creating a Successful Value Proposition

A company's value proposition communicates the number one reason why a product or service is best suited for a customer segment. Therefore, it should always be displayed prominently on a company's website and in other consumer touch points. It also must be intuitive, so that a customer can read or hear the value proposition and understand the delivered value without further explanation.

A successful value proposition has a bold headline that communicates the delivered benefit to the consumer. The headline should be a single memorable sentence, phrase or even a tagline. A sub-headline is often displayed below the main headline, expanding on the explanation of delivered value and providing a specific example of why the product or service is superior to others the consumer may be considering. The sub-heading can be a short paragraph between two and three sentences, with bullet points below the sub-heading to list the key features or benefits of the product. This allows consumers to scan the value proposition quickly and pick up on the product features. Added visuals increase the ease of communication between business and consumer.

Value propositions can follow different formats, as long as they are unique to the company and to the consumers it is servicing. However, all effective value propositions are easy to understand and demonstrate specific results from a customer using a product or service. They differentiate a product or service from any competition, avoid overused marketing buzzwords, and communicate value within five seconds.

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