Have you ever wondered how an organization decides which products and services to develop, price, promote, and sell?
Organizations typically develop plans and strategies that outline how they want to go about this process. Such a plan must take into account a company’s current internal conditions, such as its resources, capabilities, technology, and so forth. The plan must also take into account conditions in the external environment, such as the economy, competitors, and government regulations that could affect what the firm wants to do. Organizations must also offer value to customers and graduates must provide value to their employers. As such, the value proposition becomes the basis for developing strategies. Given its importance for both organizations and students, we begin with the value proposition and then discuss the strategic planning process.
Just as your personal plans—such as what you plan to major in or where you want to find a job—are likely to change, organizations also have contingency plans. Individuals and organizations both must develop long-term (longer than a year) strategic plans, match their strengths and resources to available opportunities, and adjust their plans to changing circumstances as necessary.
The Value Proposition
Individual buyers and organizational buyers both evaluate products and services to see if they provide desired benefits. For example, when you’re exploring your vacation options, you want to know the benefits of each destination and the value you will get by going to each place. Before you (or a firm) can develop a strategy or create a strategic plan, you first have to develop a value proposition. A value proposition is a thirty-second “elevator speech” stating the specific benefits a product or service offering provides a buyer. It shows why the product or service is superior to competing offers. The value proposition answers the questions, “Why should I buy from you or why should I hire you?” As such, the value proposition becomes a critical component in shaping strategy.
Firms typically segment markets and then identify different target markets, or groups of customers, they want to reach when they are developing their value propositions. Companies sometimes develop different value propositions for different target markets just as individuals may develop a different value proposition for different employers. The value proposition tells each group of customers (or potential employers) why they should buy a product or service, vacation to a particular destination, donate to an organization, hire you, and so forth.
Once the benefits of a product or service are clear, the firm must develop strategies that support the value proposition. The value proposition serves as a guide for this process. In the case of our sales consulting firm, the strategies it develops must help clients improve their sales by 30–50 percent. Likewise, if a company’s value proposition states that the firm is the largest retailer in the region with the most stores and best product selection, opening stores or increasing the firm’s inventory might be a key part of the company’s strategy.
Individuals and students should also develop their own personal value propositions. Tell companies why they should hire you or why a graduate school should accept you. Show the value you bring to the situation. A value proposition will help you in different situations. Think about how your internship experience and/or study abroad experience may help a future employer. For example, you should explain to the employer the benefits and value of going abroad. Perhaps your study abroad experience helped you understand customers that buy from Company X and your customer service experience during your internship increased your ability to generate sales, which improved your employer’s profit margin. Thus you may be able to quickly contribute to Company X, something that they might very much value.