Customer Value Proposition (CVP) has become
one of the most widely used terms in business in recent years. A CVP is the value perceived by customers in the product mix that
your business is offering, in light of competitive options. Most
businesses will conduct marketing research to identify benefits and cost savings to customers to induce purchases. Such research
focuses on understanding customer needs by asking potential buyers what they want with respect to goods and services.
Product enhancement and new product introductions are
often based on a process of continuously “productizing” the needs and wants explicated by customers via research studies. These are
in essence market-based innovations driven by addressing
the desires explicated by the customer. However, in the pre-automobile
era if you asked customers about what they wanted in transportation vehicles;
they would have said they would like to have faster horses. And we know how
automobiles made their debut and made horses obsolete as transportation
vehicles. Thus, technology-based innovations often come in
and transform the mindsets of customers in how they assess perceived value.
Simply stated, the primary difference between market-based innovations and
technology-based innovations is that the former is driven by explicit needs and
the latter is driven by both explicit and implicit needs of the customers.
Thus, the customer-centric view should be expanded to include both explicit
needs (expressed by the customer) and the implicit needs (elicited by a deeper
and unobtrusive observations of customer behaviors).
Shadowing the customer and evaluating daily behaviors can help understand the implicit needs of consumers and businesses. For example, in a research project at Hill-Rom company, a hospital beds manufacturer based in Batesville, Indiana, hospital nurses were observed as to how they spend their 8-hour work shifts. And, that analysis led to electronically adding vital signs data entries at the bedside instead of taking notes and then typing in the data at the nursing stations. Addressing the implicit needs of customers also gives businesses a pioneering advantage because these initiatives are more difficult to imitate than product modifications based solely on explicit needs.
I contend that customer value propositions that are properly
constructed and delivered make a significant contribution to business
strategy and overall performance. To ensure market leadership, I recommend that a
firm continuously adds new features to their product/service
offerings based on newly uncovered implicit needs of customers. Apple’s
market dominance is easy to understand when viewed in this way. That is what
sustainable competitive advantage is all about. Thus, customer value propositions must be viewed as a dynamic concept that enables a firm to
self-cannibalize its own product lines and keep up its lead in the
market. It should be noted that customer intimacy is a prerequisite to product
excellence, and it is the responsibility of senior management not just marketing management, to ensure that their customer value
propositions reflect both the explicit and implicit needs of the customer.
* Ravi Chinta, Ph.D., is a Professor of Management at Nova Southeastern University. He can be reached at: rchinta@nova.edu
See "The Value of a Value Proposition" (Post 11) for additional insights on the CVP.
