Choosing the organizational value proposition

Organizations that try to please everyone ultimately please only a few and disappoint many more. In contrast, organizations that narrow and focus their target markets, catering specifically to them, stand a much better chance of becoming a market leader and achieving strategic objectives.

Though it might sound strange, there can actually be several market leaders in the same industry. The key is to segment and granulize the markets and focus on just those segments where you can excel. Companies that do not define their markets narrowly enough are the ones that are trying to please too many, thereby limiting their potential success.

One of the keys to this is to focus on value; what do (or will) customers really (not traditionally) value? Marketing teams must work hard and be creative in order to obtain this information, but once they have it they are armed to outdo the competitors and lead the field. As a starting point, we can view value propositions from three angles:

1. Operational excellence: these are organizations that are the best at keeping costs down and can therefore sell profitably at the lowest price (e.g. Walmart);

2. Product and/or service leadership: these companies charge a premium for their products and services and people are willing to pay it because they value the special features involved (e.g. Apple); and,

3. Customer intimacy (also known as customer solutions): these companies tend to focus on selling more than just a single product or service to customers; they also offer associated peripherals and take care of many of the tedious details that customers find value in being able to avoid (e.g. Ritz-Carleton).

It is important to note that choosing one value proposition does not mean abandoning the other two; instead, it is important to compete at some threshold level in all areas. The key is to provide breakthrough value with the chosen value proposition. Image is critical, so finding the ideal blend of all these ideas is what makes an organization a market leader. The key is to keep current customers coming back, get customers to switch from a competitor to you, and to be the recognized name that new market entrants will know.

Understanding and gaining consensus on one’s value proposition is fundamental to a sound strategy. It needs to be an integral part of the strategic planning process. Of note, choice of value proposition is the second step in the strategy mapping process. Getting it right, and gaining consensus on it, is a critical early step. Whether or not an organization uses strategy maps, it’s strategic planning should place early emphasis on this critical step. With a great value proposition and a sharpened market focus, strategy execution and achievement of strategic objectives (including alignment) become much more likely.

This short video quickly walks you through all of the steps involved in building a strategy map.

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