The Role of the Value Proposition in Marketing

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  • 0:01 Ultimate Goal of Marketing
  • 0:52 Importance of Value…
  • 1:27 An Economic Moat
  • 2:29 Cost Vs. Quality Vs. Ease
  • 3:36 Example
  • 4:27 Lesson Summary
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Lesson Transcript
Instructor: Kevin Newton

Kevin has edited encyclopedias, taught history, and has an MA in Islamic law/finance. He has since founded his own financial advice firm, Newton Analytical.

A central strategy for marketers is value proposition, by which companies try to demonstrate why consumers should purchase their goods. This lesson shows how it works, as well as some real-life examples.

The Ultimate Goal of Marketing

Let's step back for a second and think about what the real purpose of marketing is. Is it to create masterful campaigns to win awards? Or, is it to increase the ego of the owners of a company with respect to the competition? Of course, both of these reasons are nonsense. The ultimate goal of marketing is to convince target consumers that your good or service is the best fit for them.

However, what does this idea of best fit even mean? Could best fit mean different things to different people? Could it mean different things to the same person at different times? In short, yes! Through the idea of value proposition, marketers demonstrate why their good or service is the best for consumers at a given moment. In this lesson, we'll see this idea in action and learn how it helps to insulate a business from the competition.

The Importance of Value Proposition

Simply put, value proposition is the reason that marketers give customers to buy their products. Very few people just throw money away for no good reason, and those that do that generally don't have money for long enough to remain loyal customers. Instead, you've got to prove to your customers why you are a good value. That means being able to convince them to purchase your goods and, moreover, to avoid your competitors' goods. The reason for this is pretty simple - if they buy your goods, you make money. However, it's not just short-term money that is affected by value proposition.

An Economic Moat

Imagine a castle with high walls and a big moat. Crocodiles in the moat are optional. Now imagine that castle as your business. It's big and imposing but is vulnerable to outside attack. In fact, the only thing keeping the opposing army away from your walls is that moat. But what is that moat? In this case, an economic moat is the barrier between a company and its competition that comes from having a long-term comparative advantage. So what does that mean? Let's look at an example.

There are only a handful of really successful soft drink manufacturers. You can find them everywhere, from grocery stores in suburbia to gas stations in the middle of nowhere. You'd have to have a pretty spectacular product to be able to convince even one restaurant to stop serving their chosen brand in favor of one that you own. That advantage is an economic moat. As you can see, it's a pretty useful thing to have, and the best way to make that moat wider is to constantly be working on the value proposition of your goods.

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