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Positioning to Enhance the Value Proposition

“What am I selling to whom, and why will they buy?” Determining the answers to this seemingly simple question will have more impact on the success of your venture than anything else. The answers will drive the essence of your unique perceived value proposition to your customers.

What is a unique perceived value proposition, and why is it important?

First, a perceived value proposition is the promise of intrinsic worth that your product, service, or offering can provide to customers as perceived by those customers. It is the statement of benefits a customer can expect when buying from you. Simply stated, it’s what they perceive they get for their money. A unique value proposition is one that is distinguished from the value propositions offered by competitors.

Value is usually created along three dimensions:

  • Performance value (superior functionality)
  • Price value (low cost)
  • Relational value (such as personalized treatment or how the customer will feel or perceive herself because of product/service purchase)

Value is also relatively perceived. For instance, one company will place more weight on low cost, whereas another will place it on reliability. For example, Cisco will charge over ten times the price as former competitor and now subsidiary Linksys will for wireless routers that have the same operating characteristics but higher perceived (and actual) reliability. For IT buyers to whom reliability and system uptime are crucial, the Cisco value is there. The home wireless networker is much more concerned about the price paid and will sacrifice some extreme reliability for a significant price reduction. Therefore, it is critical to know to whom you are selling to position your venture to provide a unique value proposition.

Positioning represents the foundation of the venture and its marketing. It is on this foundation that the unique value proposition is built and upon which the customer-oriented marketing plan is based. All of the venture’s important decisions and tactics are critically dependent on these basic elements. However, determining positioning is not easy. If other marketing decisions are made before the positioning is defined, there is a danger that resources such as money and time will be poorly used and that expected results will not be realized. The customer-oriented marketing plan must be based on the positioning of the venture, which is to say the target market(s) and the unique and differentiated value proposition offered.

Segmentation answers the first half of the question: “What am I selling to whom?” It is through segmentation that the market is divided into categories of like-minded buyers. Once the categories are determined, the target market can be determined.

Differentiation answers the second half of the question: “...and why will they buy?”

Positioning is determining how the product-offering bundle should be perceived by the target market as compared with the competition.

Every word in this positioning definition has been chosen carefully. The words determining and should imply that positioning is an active management decision, not a passive taking of what is given. The words product-offering bundle are used instead of product or service because the consumer buys a bundle of perceived attributes when they make a purchase. Everything that a venture does that affects the perception of attributes affects the positioning. Things like how the venture responds to inquiries, to the look of their stationery, to the feel of their website, can all impact the perception of the product-offering bundle. The word perceived reinforces that consumers as people only make decisions based on their perceptions as opposed to reality. The target market shows that the venture’s positioning needs to impact those people who are most likely to value the positioning the highest. Compared with the competition reinforces that the target market’s perceptions are all relative to competition.

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