Value Proposition

Kaplan and Norton say "Strategy is based on a differentiated customer value proposition. Satisfying customers is the source of sustainable value creation."
Value Proposition


A value proposition is a promise of value to be delivered and a belief from the customer that value will be experienced. A value proposition can apply to an entire organization, or parts thereof, or customer accounts, or products or services.Creating a value proposition is a part of business strategy.

Developing a value proposition is based on a review and analysis of the benefits, costs and value that an organization can deliver to its customers, prospective customers, and other constituent groups within and outside the organization.
It is also a positioning of value, where Value = Benefits - Cost (cost includes economic risk).

One model, the Value Proposition Builder for creating a value proposition states six stages to the analysis:

Market: for which market is the value proposition being created?
Value experience or customer experience: what does the market value most? The effectiveness of the value proposition depends on gathering real customer, prospect or employee feedback.
Offering: which products or services are being offered?
Benefits: what are the benefits the market will derive from the product or service?
Alternatives and differentiation: what alternative options does the market have to the product or service?
Proof: what evidence is there to substantiate your value proposition?