I’m not aware of one retailer that does his/her business without customers. Indeed, retailers that have plenty of loyal customers enjoy a competitive advantage and are doing well. So, how do they do it? Retailers with a clear and effective value proposition at least know who their customers are, what they want and need and why are they coming back. Above all, retail customers can also be found online…
With the advent of the internet and subsequent social media networks, the way that retail customers interact with retailers, products, and patrons has changed. In fact, in today’s tech savvy society, shoppers have access to brands 24/7, from websites to mobile apps to storefronts. Therefore Bricks and Clicks retailers (retailers that use both the physical and online retail channels) need to develop a value proposition for their store and online customers.
What is a value proposition?
A value proposition is an entire set of experiences, including value for money that an organization brings to customers 1. Importantly, customers may perceive this set or combination of experiences to be “superior, equal or inferior to alternatives”.
The customer value proposition can also be explained by this equation: value = benefits less (-) costs. The equation suggests that customer value comprises positive consequences (benefits) and negative consequences (costs). When customers perceive greater benefits than sacrifices, customer value is created 2. Perceived benefits and costs for retail customers are shown in the Table below.
|Customer perceived benefits||Customer perceived costs|
|Transactional – lower prices, lower interest rates;||Monetary – maintenance costs, running costs, disposal costs;|
|Relational – product quality, service support, delivery, personal interaction||Learning costs – time and money needed to learn how to use a product;|
|Functional – finding the right products, convenient shopping hours.||Logistics costs – delivery costs, time to deliver.|
How do customers perceive value?
Customers perceive value on the benefits of the product or service they receive. Consequently, as the environment changes, and the customer experience and their needs change, the value they seek also changes. Before the advent of the internet, retailers that had the most knowledgeable sales persons were valued by customers, especially when they shopped for specialty products. However, nowadays, in the digital era, customers can not only get comprehensive product information online, but they also can read product reviews and compare prices.
Retailers need therefore to communicate their value proposition also in the online channel, through their websites and in social media networks.
The value proposition for online customers
Retail customers are rapidly engaging in the online channel. Indeed, there are, according to Dr Dave Chaffey, Smart Insights, 27 Apr, 2017, 2.8 billion active social media users. With these billions of social media users, retailers are no longer in control of customer relationships. Instead, customers and their highly influential virtual networks are now driving the conversation, which can trump a retailer’s marketing, sales and service efforts with their unprecedented immediacy and reach 3.
Kumar and Reinartz 4, 2016 said the following about how customers perceive value online:
For many online services (e.g., Google Maps, Facebook), customers are not expected to pay in monetary terms. The core benefit is free of monetary charge from the end user’s perspective. The monetization comes mainly from advertising revenues, with ads targeted at narrow segments or personal individual profiles. However, in the context of digitization, a new cost related aspect has been emerging.
“Customers now have to understand the value of the personal information that they will give up in this exchange. Thus, customers pay in terms of less privacy instead of monetary outlays. In fact, some customers value privacy of personal information privacy so much that they would be willing to pay to preserve privacy – this then creates a market for privacy” concluded Kumar and Reinartz 4.
What if you don’t have a value proposition yet?
The purpose of retailers is to create value for their customers. Therefore a value proposition equates to a positioning statement because it defines “who is the target customer?” as well as “why should the customer buy it?” and “what are we selling?” 2. According to Rintamäki, Kuusela and Mitronen, 2007, a value proposition should:
- Increase the benefits and/or decrease the sacrifices that the customer perceives as relevant;
- Build on competencies and resources that the company is able to utilize more effectively than its competitors;
- Be recognizably different (unique) from competition; and
- Result in competitive advantage.
GetToGrow mentioned the following advantages of a value proposition
- Gives direction. A value proposition gives you direction by defining your ideal target audience right up-front, and then identifying and understanding a core need that you look to satisfy with your planned solution.
- Creates focus. A robust value proposition gives you and your team focus by identifying the fundamental initiatives, activities and aspects of your business that will have the greatest impact on meeting your defined target audience’s needs.
- Breeds confidence. Confidence comes from knowing that you’re making a difference to the people that you’re serving, that you’re doing so in a way that’s meaningful to them, and that your actions are aligned to delivering an overall remarkable experience.
- Improves customer understanding and engagement. By grounding your solution in an understanding of your audience and their specific need, you can engage with them in a much more compelling and effective manner.
- Provides clarity of messaging. The value proposition frames not only how you’re creating value for your audience by addressing a core need, but critically why your solution is better than what they are currently doing or using, or versus whatever else is potentially out there that could do so.
- Increases effectiveness of marketing. By truly understanding your desired customers and their core need that you’re solving for, you’re able to focus on the channels and vehicles that are most relevant, and will effectively communicate the benefits and advantages of your solution.
Retailers that know and understand their customer’s needs, want and wishes the best can communicate a superior value proposition to them. By using ‘big data’ or your internal sources of customer data, your firm’s value proposition can be customized and personalized. However, care should be taken not to infringe on the individual’s privacy.
A Marketing Plan helps you to communicate the right content to the right audience.
Further reading: Implementing Social Customer Relationship Management in Retail
Video: Value Propositions and Positioning
1 Hassan, A. 2012. The value proposition concept in marketing: How customers perceive the value delivered by firms–A study of customer perspectives on supermarkets in Southampton in the United Kingdom, International journal of marketing studies, 4(3):68.
2 Rintamäki, T., Kuusela, H. and Mitronen, L. 2007. Identifying competitive customer value propositions in retailing, Managing Service Quality: An International Journal, 17(6):621-634.
3 Heller Baird, C. and Parasnis, G. 2011. From social media to social customer relationship management, Strategy & Leadership, 39(5):30-37.
4 Kumar, V. and Reinartz, W. 2016. Creating enduring customer value, Journal of Marketing, 80(6):36-68.