What’s it: A unique selling proposition shows you a set of product benefits and solutions to satisfy customer needs and differentiate it from competitors’ products. That is the main reason consumers buy a product, even though the price may be higher than other products. And, for companies, it is the first consideration in new product development.
Unique selling propositions may be tangible. You can see it from the physical appearance of the product, such as features and design. Or it is intangibles like performance and reliability, and durability. And, in general, companies build value propositions through a combination of the marketing mix.
On the other hand, the customer’s perceived value determines whether the selling proposition succeeds or fails. If the company sells a product better than its competitors, they will buy it. They see the value of the product as equal to or higher than the price. Conversely, if it’s worse, they buy a better alternative product.
Why is a unique selling proposition important
Companies satisfy customer needs through their products. To do so, companies must ensure they are profitable. The product’s core objective is to meet consumer needs. However, because companies have to compete with each other, they must create unique products.
A product is successful when it offers something special. It satisfies customers with a series of critical attributes, which also differ from competitors’ products. That way, consumers will not find the same and better benefits in alternative products.
Creating a unique selling proposition is an effective way to divert business away from its competitors. That is the reason why consumers should buy products from a company instead of alternative products. If successful, the company secures loyalty and sales so the money will keep flowing in. Long story short, the ultimate goal of designing a value proposition is to win a sustainable competitive advantage.
Here are a variety of reasons why a unique selling proposition is important to companies:
- Make products appear attractive to customers. It creates consumer preference if they like it. Lower prices, for example, attract most consumers to buy.
- Allows the company to set a higher price. Offering a unique product is an alternative to a low price strategy. It is one way to create customer loyalty and high switching costs. In this case, the company develops uniqueness in the non-price dimension.
- Generate positive publicity from customers. Say, a unique selling proposition matches or exceeds customer expectations. In this case, they will continue to buy and be willing to recommend the product to others through social media or word of mouth.
- Increased market share and cost savings. Positive publicity results in more and more potential purchases, increasing the company’s market share. Besides, companies can save on promotional costs.
How to develop a unique selling proposition
Creating a value proposition involves several steps.
First, companies map and identify consumer needs and wants. Companies segment the market and identify customer characteristics.
Second, companies list potential solutions to offer to the market. They think of ways to meet and satisfy the needs of target consumers. That may be through an eco-friendly product, a low price, or a unique feature.
Third, companies select the right solutions which have the highest chance of success. They make sure it differs from competitors, so consumers are willing to buy.
Also, they must consider internal resources and capabilities. Some possible solutions are impossible because they exceed the company’s existing resources. For example, mass products may be unsuitable for small enterprises due to their limited scale of operations. They find it difficult to achieve lower prices than their larger, more established competitors. So, when small companies design a value proposition through low prices, they will find it difficult to win in the market.
Fourth, companies build the perception and promise to consumers through a series of appropriate promotions. A product must not only have an edge. So it is strong enough to attract customers and be different from competitors. But companies must also campaign for these advantages to consumers. The promotional campaign should strikingly highlight a unique selling proposition. Thus, consumers will be tempted to buy and increase product sales. No matter how superior a product is, they won’t buy it if the customer doesn’t know it. The advertising campaign must form a positive perception of value in the eyes of the customer.
Examples of the unique selling proposition
Companies have many ways to develop unique selling propositions. Companies may offer the lowest price or highest quality to satisfy customers while differentiating their products in the market. And, in general, they do it in several different forms, such as:
- Product quality
- Convenience and customer service
Low prices are one of the main attractiveness for consumers, especially those who are budget conscious. Walmart has achieved success as the world’s leading retailer through its Everyday Low Price strategy. It’s not just a sales pitch slogan in the peak sales seasons, but the company offers it all year round.
Price is an attractive dimension to use. To satisfy their needs, consumers compare their perceived value for the product with its price. If the price is higher than the perceived value, they are dissatisfied and tend to avoid the product. Conversely, if the price is lower, they will buy and be satisfied.
In this case, the company makes products free from defects and flaws. Quality is about physical features and non-physical elements such as performance, durability, and reliability.
Premium products like the iPhone rely on quality to attract customers. Apple has a reputation as a company with innovative and cutting-edge products. The company develops in-depth research and development (R&D). The company then patents the product or process to avoid piracy by competitors.
Starbucks also relies on quality as one of their value propositions. The company buys coffee beans from around the world, selects them carefully, and ensures they come from the world’s best sources. The company also relies on the quality of service and atmosphere design for their outlets.
Increasing environmental awareness encourages more people to buy products from environmentally friendly companies. They often buy not for reasons of price but who the producers are. They are eager to pay a premium price if the product matches their values.
Some companies then adopt ethics in designing their products. Tesla is an example. Companies are pioneering environmentally-friendly electric vehicles through a number of their innovations.
The importance of social and environmental impacts also encourages Unilever, a producer of consumer goods, to adopt ethical practices. The company started the Unilever Sustainable Living Plan in 2010 and worked to reduce waste in the supply chain. The company also targets zero net deforestation for four commodities: soybeans, palm oil, paper and pulp, and beef.
Convenience and customer service
Saving time and convenience is one of the ways to create effective differentiation. eCommerce is a good example. Online shopping is a convenient method for most consumers. They can buy products anywhere and anytime without having to visit a retail store. They can also save costs, such as transportation costs to retail stores. Some of the later online stores also offered free shipping. These are some of the reasons why e-commerce is gaining popularity and beating traditional retailers.
Domino’s Pizza offers free shipping and a 30-minute delivery guarantee. It also makes customers love it because the product arrives when they need it.
Furthermore, some companies, such as kitchen furnishings, rely on customer service as a differentiation. They may offer a free service for installing a product in a customer’s home. They may also provide other after-sales services to create higher satisfaction for customers.