the years, Ive found that if executive teams do not
have a clear understanding of their companys value
proposition, it makes it very difficult for them to develop
a coherent strategic direction. Thats because the essence
of most business growth strategies IS your value proposition.
The Link to Strategy - Harley-Davidson
Gets it Right
A clearly stated value proposition defines your companys targeted customer
base. It answers the question "Who is the customer?" Since strategy
is about choice, a company must choose the market segment or segments to which
that value proposition will be the most attractive and
target them. Your customers will then be those
who value and
buy into your value proposition. Without a clearly defined target customer,
any "strategic direction" is foggy at best and damaging to your business
at worst! Your
focus should be on the benefits does a customer receive?” Joanne Bischmann,
VP of Marketing for Harley-Davidson summarizes
their value proposition this way... "Harley-Davidson stands for independence,
freedom, individuality, expressing one’s self, adventure on the open
road, and experiencing life to its fullest. This is what people are buying
when they buy a Harley."
Clears the Fog
Customers buy from you based on your perceived "value
that set of attributes including
products, price points, service levels, etc. that makes
your firm unique. Wal-mart's value proposition is clear...
they are the leader in low prices and huge selection. Michael
Treacy and Fred Wiersema, in their 1995 book, "The
Discipline of Market Leaders", categorized these buying
motives into three different types of value propositions.
These are product leadership, customer intimacy, and operational
excellence. For the most part, successful companies choose
one and concentrate on it, strategically maintaining acceptable
levels of performance in the other two.
What does this mean? The Southwest Example
Companies choosing a product leadership value
proposition typically offer unique one-of-a-kind
products and services, state-of-the-art features,
or innovative solutions. Customers purchase from
these companies because of their unique capabilities.
Often, they cant get it anywhere else. These
companies dont strategically stress low price
or world-class service. Microsoft, Intel, and Harley-Davidson
are examples of product leadership strategy companies.
Firms adopting a customer intimacy value proposition
will choose to focus on the quality of their relationships
with customers and offer "complete
solutions" as their value proposition. They dont try to have the
lowest price or the most innovative products. Customers that value intimate
vendor relationships will tend to buy from them. Examples here are The Home
Depot, Nordstrom Stores, and IBM. Companies that base their strategy on personalized
service will maintain acceptable levels of product innovation or operational
excellence, because they cant focus on all three at once. Nobody can.
30 years ago, Rollin King and Herb Kelleher got together
and decided to start a different kind of airline. They
began with one simple value proposition: "If you
get your passengers to their destinations when they
want to get there, on time, at the lowest possible
fares, and make darn sure they have a good time doing
it, people will fly your airline."
Organizations that choose an operational excellence
value proposition opt to excel at attributes
such as price, quality, on-time delivery, selection,
that their competitors cant match. As expected, they tend not to be big
product innovators or strategically offer dizzyingly high levels of customer
service. Thats OK, because they execute extraordinarily well. Examples
of operational excellence firms are Charles Schwab, Hertz, FedEx, Wal-Mart
and Southwest Airlines.
Business Growth Strategy: More Value Propositions... Hertz is clear with
their value proposition: Michael Senackerib, Chief Marketing Officer of Hertz
Corporation relates... "Our goal at Hertz is to provide customers with
a value proposition that exceeds their expectations. to help them maximize
their budgets, especially during these trying economic times". For
Charles Schwab, it is delivering industryleading knowledge and integrity at
a fair price." For FedEx, it's the famous "When your package absolutely,
positively has to get there overnight" Choosing
a statement will define what your structure, core competencies, business process,
and culture will look like, and provides the customer profile upon which you
can build a well-constructed business strategy!