Your value proposition is the most important thing you can say about your brand, product or service, it’s a critical foundation stone of everything your brand does.
It’s the unique combination of benefits and values that a company offers to its customers in exchange for their choice and loyalty. Value propositions give your customers tangible benefits, reasons to believe, and reasons to buy. Without them, you’re shooting in the dark.
A value proposition is influenced by many factors, including market conditions and customer behaviour – which, in case you hadn’t noticed, is in flux right now.
The unavoidable effect of inflation is that the prices of goods and services will go up, and companies tend to increase their prices to maintain profitability. Add to that the ongoing global shipping costs and rising fuel prices, and higher prices are inevitable.
What many brands haven’t yet considered this? Changing your pricing due to inflation may have invalidated your value proposition, inadvertently shifting your position within your audience’s minds.
Suddenly, you’re asking customers to pay more for what is essentially the same product or service. Customers could easily perceive the higher prices as unjustified or unaffordable and switch to other brands or products.
The impact of this shift in perception is everywhere. Customers are reconsidering how far their dollar can go, with products and services that were once ‘must haves’ downgraded to ‘nice to haves’. Streaming services, meal kit boxes, luxury shoes, cleaning services… the list is endless.
So: we’ve got fluidity as customers buy cheaper, relative to products priced higher. All of a sudden, value propositions that might have worked a year ago may suddenly be out of touch or out of date, because they’re no longer aimed at valid audiences.
It’s even more complex locally, as we have a unique set of challenges to navigate in Australia. We’re a tiny market, which means we have even less room for error. In most of our industries, we have big gaps between category leaders and market innovators.
The COVID-19 pandemic was an interesting testing ground for what can happen, as it not only introduced innovation but also showed the brutality of failure as customers disappeared.
There are countless instances of brands that launched with the perfect proposition at the perfect time in market (Milkrun and Voly being great examples) but then failed to find relevance as the world started to open up – only to have the big-scale operators like Woolworths copy their idea with the likes of Metro60.
How do you workshop your proposition if your customer’s interpretation of value has changed? When ‘is it worth it?’ is the first question they ask? You have to reconsider your customer and the world they operate in.
When things cost more, people make different choices. Is your customer even still there, in fact? What can you do to remain relevant in these conditions?
It’s all well and good to focus on profitability, but it won’t amount to anything if you simply end up price-shocking your customers towards leaving. To make higher prices work, brands must think about their audience and adjust their value proposition in line with their product and pricing strategies. Everything is in balance, and one doesn’t work without the other.
If you discover in your analysis that certain segments of customers are suddenly no longer in the market, then look at what steps you can take with your products and services to find the ones who are or attract them back.
Reassess your product, distribution and ranging strategies. In this new market context, how you range your products has become critically important. Big companies – think Unilever or health insurance – have perfected the art of using multiple brands to fit different products into different buying behaviours.
It’s also time to go back to the basics of marketing, focusing on ensuring you’re balancing out the four Ps: product, price, place, and promotion. Explain what your brand stands for and why people should buy it, ensuring that your value proposition justifies your pricing.
Macroeconomics and fluctuating pricing are here to stay, and your value proposition – and in turn, your entire marketing strategy – must adapt to fit.
The key is to ensure your offer adapts to meet changing customer behaviour. It’s not enough to change your prices on profit line alone: your value proposition must change along with it.
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