Guide

What is a value proposition?

Learn the purpose and function of a value proposition, and get tips on how to write one.

A person looking at a computer with a bar graph and money.

What is a value proposition?

A value proposition is a short statement that communicates the unique value or benefits of your product or service to your customers. It is the main reason they should buy your product or use your service. A good value proposition helps you stand out among your competitors and captures your target audience’s attention.

Your value proposition is the foundation of your marketing strategy, both internally and externally. It can help rally your employees around a unifying principle, and it drives the messaging you use in your advertising.

What a value proposition isn’t

A value proposition is just one tool among many marketing instruments, such as a mission statement, slogan or tagline. It may have some points in common with a mission statement – but where a mission statement explains the reason your company exists, the value proposition is product- or service-oriented. It also differs from a slogan or tagline, which embodies a specific aspect of the business.

For example, suppose you own a landscaping business.

  • Your mission statement might read: 'To improve the environment by designing and maintaining beautiful landscapes.'
  • Your tagline might read 'Your native plant experts.'
  • Your value proposition might read: 'To use native plants to create a natural look.'

What is the function of a value proposition?

A value proposition presents the specific benefits your product or service brings to your customer.

Your business might use different value proposition statements depending on the target audience. You may also word each one slightly differently depending on the channel you’re using – you could express the proposition differently on social media than you would when selling directly. Sometimes your value proposition changes as your product and the competitive landscape change – for example, you may add features to your product as new competitors enter the market.

What makes a good value proposition?

A good value statement:

  • is simple, clear, direct, and short
  • addresses a specific customer need
  • highlights your unique offerings – what differentiates your product or service from your competitors
  • conveys the benefits of your product or service
  • reinforces your brand identity and aligns with the overall brand strategy

Craft your own value proposition

Here are practical steps to create a value proposition that will convey the unique value of your business.

Identify your target audience

First, decide who your target audience is. Then talk to or survey customers to understand the real problem they hope you can solve. Make sure you understand what is most important to them.

Clarify your unique selling points

Clarify what differentiates your product or service from competitors, such as a feature, price point, or quality. To be sure you fully understand your unique value, ask customers why they buy from you, and ask your sales staff for input – they’re close to your customers and may have good insights.

Include the benefits to the customer, not features

A value proposition is customer-centric, so it explains what customer problem your service or product solves. It also explains how your product or service solves the problem and improves the customer’s life. Quantifying the benefits can result in increased sales and loyal customers.

Value proposition templates

Once you’ve done your research and analysis, you’re ready to draft your message. You can approach writing the message in several ways. One way is to use a formula or a template. Here are several template examples:

  • 'We help[X] do [Y] by doing [Z].'
  • 'For [target customer] who [needs or wants X], our [product/service] is [category of industry] that [benefits].'
  • The Harvard Business School method, which recommends that it should answer several questions: 'What is my brand offering?', 'What job does the customer hire my brand to do?', 'What companies and products compete with my brand to do this job for the customer?' and 'What sets my brand apart from competitors?'

Keep it simple, use language your customers might use, and don’t be afraid to convey emotion. Ensure the proposition aligns with your overall brand identity and market positioning in your business plan.

If you’re still working on that, check out the guide How to write a business plan and grab a free business plan template.

Test and refine

As with all aspects of your marketing, you’ll want to test the effectiveness of your value proposition and refine it when necessary. One way to test is to share it with customers or internal colleagues. Run it past your mentor if you have one. Use their feedback to improve the message. You’ll also regularly revisit and update the proposition as your market changes.

Communicate your value proposition

Now you’ve crafted a dynamite value proposition, you’ll need to be sure everyone knows it. Communicate it directly to customers and train your staff to share it.

Your value proposition should appear:

  • on your website’s home page and product pages
  • in brochures
  • in all your marketing campaigns
  • on all marketing or advertising materials

You’ll also include the proposition in your internal documents, like your business plan, and in any documents you present to potential funding sources.

Although you might change the wording slightly depending on your audience, keep the central message consistent across all your channels. A consistent message reinforces your brand and shows that you are a focused and trustworthy company.

Disclaimer

Xero does not provide accounting, tax, business or legal advice. This guide has been provided for information purposes only. You should consult your own professional advisors for advice directly relating to your business or before taking action in relation to any of the content provided.

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