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What Is A Value Proposition? Lessons From Ikea

What is a value proposition featured image
A value proposition is key to crafting strong marketing messages. Image credit: Sharon McCutcheon

A value proposition is a marketing statement for a business. A company uses this statement to illustrate the reasons a potential target group should purchase a product or subscribe to a service. So straightforward…but vital for your business!

The purpose of a value proposition is to persuade a customer or a group of customers that one specific product or service will add more value than other products in that niche.

Companies use this statement to target customers who will benefit most from using the company’s products, and this helps maintain economic stability for the business.

A Value Proposition is essential for a business to engage and connect with customers in a meaningful way. The Value Proposition is central to the overall business paradigm. It acts as an anchor for all decision-making, operations, and customer engagement.

IKEA’s Value Proposition

IKEA is one of the most successful businesses in the world. IKEA employs more than 100,000 individuals in more than 50 countries worldwide. It ranks among Forbes Top 50 of the World’s Most Valuable Brands.

Ikea’s growth largely stems from its forward thinking strategy and the construction of a well-organised global network, from production to distribution.

Ikea’s value proposition also plays a key role in its success.

Ikea’s business plan is “to offer a wide range of well-designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them.

This strategy gives the company a competitive advantage and a clear vision of what it wants to achieve, guided by strong values. Here are a few of Ikea’s strong points that have pivoted the company into the forefront of the world market.

  • Pricing,
  • Sales outlets,
  • Personal visits,
  • Sustainability,
  • Staff.

Marketing is essentially delivering value to the customer in the most efficient and effective way possible so they will want to take action.

Ikea Value Proposition ad example
Ikea's value proposition is all about making quality furniture accessible. Image credit: Ikea

To communicate value, you need everyone who works on your marketing campaigns to have a clear understanding of your value proposition. This applies not just for your company as a whole, but for every action you desire a customer to take.

From a consumer’s perspective, Ikea’s value proposition is clear and easily summarised. They offer cheap, durable and fashionable furniture at a low price. This comes with the novelty of self-assembly, due to Ikea’s flatpack format.

In other words, people flock to Ikea because they have a clear understanding of what’s on offer. When customers have a clear picture of the value you can offer, they can make an informed decision of whether this is for them or not.

The Four Elements of a Value Proposition

So what makes a great value proposition?

Obviously clarity is one thing, but there’s no sense in having a clear value proposition if it doesn’t appeal to anyone. This requires a great deal of soul searching about what makes your business uniquely attractive.

Typically, this revolves around a handful of variables, including:

  • Price,
  • Quality,
  • Features,
  • Service,
  • Values.

For example, your value proposition might simply be that you offer the best product at the lowest price. Alternatively, you might offer features that no one else is able to.

What is a value proposition infographic
Your value proposition is at the intersection of your brand, product, and customer experience. Image credit: Miro.medium.com

Let’s take a look in a little more detail at how to create a value proposition.

1. Primary Value Proposition

Your company needs a primary value proposition, which is the answer to the question: “Why should people buy from you rather than your competitors?

What is it that you offer that no one else can?

This is easier to answer with an established business. That is, you already have a track record of offering great products and services to customers. Therefore, you know what they like.

If you’re launching a new business, you’ll have to research existing companies to find a gap in the market.

2. Prospect-Level Value Proposition

This indicates the prospects you are targeting with your marketing.

For each prospect, you should answer this question: “Why should this targeted customer buy from you rather than any of your competitors?

If you work with a small number of high value clients, it’s easy to tailor your value proposition to each of these, as you have a clear understanding of their needs and pain points. If you cast a wider net, you’ll need to come up with ideal customer personas instead.

3. Product-Level Value Proposition

Now that you’ve identified your target market, you need to define the products and/or services you intend to sell them.

Each product requires its own value proposition, which you can craft by answering this question: “Why should X buy this product rather than any other product?

Let’s consider the Ikea value proposition again. The overarching USP is getting quality products at a fair price. However, what this means for a sofa will be quite different to what it means for a wooden spoon.

4. Process-Level Value Proposition

Once you’ve identified a target market for each product you’re trying to sell, you have to craft a value proposition for each specific product. For specifically, you should have a picture of the purchasing journey for each of your products.

What information do customers need at different stages of the buying process?

To return to our example with Ikea’s value propositions, customers don’t need much convincing to buy a wooden spoon. Really, you can place it in a prominent position in the store, and customers who need one will pretty much just pop it in the trolley.

For something more expensive like a bed, a sofa or even a kitchen, consumers need more information. The selling process might therefore include content marketing, traditional advertising or customer testimonials to push the value proposition.

What is a value proposition - customer journey infographic
It's important to match your value proposition to your ideal customer personas. Image credit: SmushCDN

Benefits of a Value Proposition

Here are the benefits of discovering, articulating and realising your unique value proposition

Providing Direction

Whether you are just starting your business, or you have an established company, you need to be clear about your value proposition. Otherwise, you may develop a product or service that fulfils your own desires but not those of your target market.

A Value Proposition gives direction by first identifying a target audience, and then defining a need that you can quench with your strategic solution.

Creating Focus

The value proposition directs your marketing efforts toward activities that will engender the best outcome.

By understanding your targeted customers and the need that you’re attempting to solve, you’re able to concentrate on the most relevant activities and this will enable you to clearly
communicate the benefits and advantages of your solution.

The Value Proposition provides a framework for the strategy you are using to generate value for your audience as well as an explanation as to why your solution is better than that of others.

Provides a clear message. Especially as a start-up without any brand recognition, you’re going to have to create a very clear picture as to why you’re worth people’s time.

Providing a Clear Message

Especially as a start-up without any brand recognition, you’re going to have to paint a very clear picture as to why you’re worth people’s time. If people don’t know what you offer, it’ll be difficult to make a lasting impression on them.

Increases Marketing Effectiveness

A Value Proposition is essential for a business to engage and connect with customers in a meaningful way. The Value Proposition is central to the overall business paradigm. It acts as an anchor for all decision-making, operations, and customer engagement.

Remember, a value proposition is essential for a business to engage and connect with customers in a meaningful way.

The value proposition is central to the overall business paradigm. It acts as an anchor for all decision-making, operations, and customer engagement.

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