# How to Create a Compelling Value Proposition, with Examples

## What Is a Value Proposition?

A value proposition is a marketing statement that summarizes why consumers should choose a particular product or service, highlighting the specific benefits it delivers. It clearly explains how a product fulfills a need and why it stands out from competitors. Originating with a 1988 McKinsey & Co. research paper, a value proposition is described as "a clear, simple statement of the benefits, both tangible and intangible." This concise message is essential for attracting customers and maintaining a firm's competitive advantage.

### Key Takeaways

*    A value proposition is a clear and concise statement that communicates why a consumer should choose a company's product or service over competitors' offerings, highlighting both tangible and intangible benefits.
*   Effective value propositions should be prominently displayed and composed of a strong headline, with a brief subheadline that expands on the key benefits and differentiators of the product or service.
*   A well-crafted value proposition not only aims to attract potential customers by addressing their needs but also differentiates a company from its competition, helping to maintain its competitive edge.
*   Companies often utilize market research to ensure that their value propositions resonate effectively with target audiences, enhancing communication through clear, to-the-point messaging and visuals.
*   If a value proposition fails to convincingly convey the unique benefits of a product or service, it may lead to diminished consumer interest, decreased profitability, and eventual loss of market share.

![Value Proposition](https://www.investopedia.com/thmb/sl1wv_cwiwVr4Ifh86aOKZ2LOJc=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/value-proposition_sourcefile-66bcfe6012a543ad9ef96783798ab11b.png)

*— Investopedia / NoNo Flores*

## How Value Propositions Drive Business Success

A value proposition stands as a promise by a company to a customer or [market segment](https://www.investopedia.com/terms/m/market-segment.asp). The proposition is an easy-to-understand reason why a customer should buy a product or service from that particular business. A value proposition should clearly explain how a product fills a need, communicate the specifics of its added benefit, and state the reason why it's better than similar products on the market. The ideal value proposition is to-the-point and appeals to a customer's strongest decision-making drivers.

Companies use this statement to target customers who will benefit most from using the company's products, and this helps maintain a company's [economic moat](https://www.investopedia.com/ask/answers/05/economicmoat.asp). An economic moat is a competitive advantage. The moat analogy—coined by super-investor [Warren Buffett](https://www.investopedia.com/articles/01/071801.asp) of Berkshire Hathaway—states that the wider the moat, the bigger and more resilient the firm is to competition.

> **Important**
>
> A strong value proposition shows what a brand offers that competitors don't, and how it meets a unique customer need.

## Building Blocks of a Powerful Value Proposition

A company's value proposition communicates the number one reason why a product or service is best suited for a customer segment. Therefore, it should always be displayed prominently on a company's website and in other consumer touch points. It also must be intuitive, so that a customer can read or hear the [value proposition](https://www.investopedia.com/articles/investing/111014/basics-value-chain-analysis.asp) and understand the delivered value without needing further explanation.

Successful value propositions typically follow a specific structure. A successful value proposition typically has a strong, clear headline that communicates the delivered benefit to the consumer. The headline should be a single memorable sentence, phrase, or even a tagline. It frequently incorporates catchy slogans that become part of [successful advertising campaigns](https://www.investopedia.com/financial-edge/1111/8-of-the-most-successful-ad-campaigns-of-all-time.aspx).

Often a subheadline will be provided underneath the main headline, expanding on the explanation of the delivered value and giving a specific example of why the product or service is superior to others the consumer has in mind. The subheading can be a short paragraph and is typically between two and three sentences long. The subheading is a way to highlight the key features or benefits of the products and often benefits from the inclusion of bullet points or another means of highlighting standout details.

This structure lets consumers quickly scan and understand product features. Added visuals increase the ease of communication between business and consumer. In order to craft a strong value proposition, companies will often conduct [market research](https://www.investopedia.com/terms/m/market-research.asp) to determine which messages resonate the best with their customers.

## Crafting Unique and Effective Value Propositions

Value propositions can follow different formats as long as they are unique to the company and to the consumers the company services. All [effective value propositions](https://www.investopedia.com/ask/answers/032715/what-are-elements-effective-value-proposition.asp) are easy to understand and demonstrate specific results for a customer using a product or service. They differentiate a product or service from any competition, avoid overused marketing [buzzwords](https://www.investopedia.com/terms/b/buzzword-bingo.asp), and communicate value within a short amount of time.

For a value proposition to effectively turn a prospect into a paying customer, it should clearly identify who the customers are, what their main problems are, and how the company's product or service is the ideal solution to help them solve their problem.

## Frequently Asked Questions

## What Is the Purpose of a Value Proposition?

A value proposition is meant to convince stakeholders, investors, or customers that a company or its products or services are worthwhile. If the value proposition is weak or unconvincing it may be difficult to attract investment and consumer demand.

## What Is an Employee Value Proposition?

An employee value proposition (EVP) applies to the job market. Here, a company that is hiring will try to frame itself as a good place to work, offering not only monetary compensation but also a range of benefits, perks, and a productive environment. In return, the job candidate will need to convince the hiring company that they have the appropriate skills, experience, demeanor, and ambition to succeed.

## What Happens if a Value Proposition Fails?

If a company cannot convince others that it has value or that its products or services or valuable, it will lose profitability and access to capital and may ultimately go out of business.

> **Article Sources**
>
> 1.  Lanning, Michael J., and Edward G. Michaels. "A business is a value delivery system." _McKinsey staff paper_ No. 41. July, 1988.
>     
> 2.  CNBC Warren Buffett Archive. "[Morning Session - 1995 Meeting](https://buffett.cnbc.com/video/1995/05/01/morning-session---1995-berkshire-hathaway-annual-meeting.html)."
>     
> 3.  Alexander Osterwalder et al. _"_Value proposition design: How to create products and services customers want. Vol. 2." John Wiley & Sons, 2015.