Value proposition (or value prop) is a phrase I use often, but has little meaning to many. The words are ambiguous enough that the phrase does not have intuitive meaning and I find I struggle explaining to people effectively.
Perhaps because it’s really a straightforward concept and the words are long. But, value proposition is simply the reasons you decide to buy something. You and I could buy the exact same product, but for very different reasons, or value propositions.
I thought it might be helpful to use an example to illustrate the point. I signed up for Blockbuster Online this week. The value proposition is why I signed up.
I’m a very late adopter to the online DVD rental value prop. Before now, it didn’t seem to be worth the money to me. I could easily go to Blockbuster and pick up a movie when I wanted to. But, finally, through the convincing of some of my friends I signed up. Here’s why. Here’s the value proposition Blockbuster provides me.
1) It solves a problem of having a summer of boring TV programming ahead of me.
2) It allows me catch up on some good TV series that I’ve missed out on, on my own time.
3) It allows me to put things in my queue when I think of them. I could never remember them when I went to Blockbuster. This is the same value prop that my library offers me for books.
4) It’s low risk. I can cancel anytime. We’ll see if I cancel once the fall programming starts up.
5) Relative to Netflix, it gives me an additional perk. It allows me to go and exchange a DVD in the store for no additional cash out of pocket.
6) It removes the incremental decision-making that takes place when I go into Blockbuster to select a movie. In other words, I may have wanted to see a movie, but not that much.
When I go into the store and I’m faced with all the choices I evaluate whether the marginal movie is worth by $3 for a limited time rental relative to the other choices and then I forgo it. Now, once it’s in my queue, it will be sent to me. I don’t have to overcome the decision any longer. And, when I get it, I can watch it on my own time. I can hold onto for weeks and finally watch it, rather than having to watch it in the next 1 – 3 days.
Time will tell if I continue with this. So far, I like it.