Concept of Value Proposition Essay

The construct of value proposition is frequently used in marketing literature [ Anderson et Al. 2006. Clarke III 2001 ] . Value proposition is understood in this paper as a composing of values delivered to clients by a company in order to fulfill their demands.

Valuess are delivered to clients through merchandises or services. other instruments of selling or in other ways ( e. g. by corporate credibleness ) . They can be otherwise categorized.

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Probably the simplest classification of values includes functional and symbolic values. In the traditional economic system a really common regulation of value proposition preparation is uniting the monetary value degree with the values for client. Harmonizing to this regulation. companies offering inferior values charge clients lower monetary values than companies offering superior values. Hence. there can be several schemes of value proposition distinguished ( e. g. inferior value – low monetary values.

superior value – high monetary values ) . The application possibilities of this regulation on the Internet are constrained.The regulation explains good the schemes of companies taking portion in a pecuniary value exchange. such as online shops.

Among them there are companies selling a merchandise with inferior client service and bear downing low monetary value and other companies that enrich the same merchandise in great client service and anticipate higher monetary values for it. Mentioning values to monetary value degree may non ever be used on the Internet for several grounds. In the on-line environment many companies offer superior client values for free. To these companies belong newspapers printing content or companies offering communications services on the Internet. such as electronic mail or instant messaging suppliers.Furthermore. harmonizing to Kim on the Internet the scheme of offering superior values and bear downing high monetary values is seldom adopted [ 2004 ] .

In traditional economic system this scheme is most frequently used when selling high quality. well-branded merchandises to flush clients. Author distinguished five following schemes of value proposition on the Internet: scheme of efficiency. free values. complete client solutions. alone values and value co-creation.

It is deserving adverting. that these schemes have been formulated harmonizing to different standards and may be merged.Scheme of EfficiencyEfficiency scheme consists in offering values to clients. which are to take down their transactional. interaction and other costs and in this manner allow nest eggs of clip and money. The illustrations of companies following this scheme are on-line auctions. Due to provide collection they offer broad scope of merchandises. which leads to take downing client transactional costs within offer hunt and analyses.

Furthermore. these companies lessening besides client costs by decrease of information dissymmetry. This phenomenon occurs when one of the dealing parties has greater cognition than the other party and is able to take advantage of it.Normally.

this is the marketer who has greater cognition. which is the best seen on the second-hand market. On-line auctions cut down the information dissymmetry utilizing the seller’s rating performed by purchasers. It is deserving adverting that on-line auctions besides deliver cognition on purchasers. which allows cut downing the hazard and the transactional costs of Sellerss.

Research of Garciano and Kaplan showed that transactional costs of purchasing or selling a used auto with the usage of Internet is twice every bit low as without it [ Zott. Amid. 2001 ] .

Many Internet companies apply the efficiency scheme while offering values related to communications. These solutions such as e-mail services. instant communicators. societal networking web sites besides cut down the transactional costs of a client.Scheme of Free ValuesFree value scheme is based on offering values to clients. for which they are non charged.

This scheme has been popular since the early old ages of commercial usage of Internet. As a effect many companies. among which newspapers.

charge clients outside Internet. while offering these values for free online. which in bend leads to jobs with bring forthing income. Strategy of free values can be a portion of a broader concern scheme presuming the gross coevals. This can be performed double: grosss can be generated by another group of clients or the company can bear down clients for premium values.

The first construct assumes that the company is moving on a multisided market and demands at least two distinguishable groups of clients to bring forth gross [ Evans. 2003 ] . Internet portals have two distinguishable groups of clients. The first one are concluding users who take advantage of values offered by the portal for free such as intelligence. electronic mail or hunt engine.The other group of clients are advertizers. who provide the portal with grosss.

for which they can expose advertizement. In this instance the free value scheme is used in order to construct client base. on which company will offer paid services for the other group of clients ( advertizers ) . The other method of offering free values is based on acquisition of clients. who take advantage of free values and are besides offered premium values. for which they have to pay. This scheme is frequently called freemium.

which is the complex of free and premium. This scheme may look to be really attractive. nevertheless its biggest challenge is the necessity of offering so cherished values. for which clients – who already receive free values – will be willing to pay.Scheme of Complete Customer SolutionsScheme of complete client solutions relies on offering a wide range of values from certain classs [ * ] . Internet engineerings enable showing a high figure of merchandises in online shops.

which consequences from low technological restraints. As a effect online shops frequently shape their offer harmonizing to the long tail regulation. which assumes offering both best-sellers. every bit good as niche merchandises. Furthermore. many companies offer values based on the economic systems of range. This construct consists in offering merchandises from different classs.

A travel bureau taking advantage of economic systems of range would besides offer insurance. auto leases etc. An frequently quoted illustration of complete client solution is Amazon. com. The company offers broad scope of merchandises ( long tail ) including niche merchandises. and at the same clip offers merchandises from other classs such as family electronics ( economic systems of range ) . The scheme of complete client solutions describes good besides the scheme of Google.

The company delivers different sets of values ( merchandises ) leting hunt. exchange and direction of information in the online environment.Scheme of Unique ValuesThe following of formulated is the scheme of alone values. A company follows this scheme.

if it offers scarce values on the market. This state of affairs is really attractive. as it allows bear downing high monetary values and therefore taking advantage of high border. The greatest disadvantage of this scheme are troubles in making scarce values and so prolonging the scarceness in long term. The acceptance of alone values scheme may ensue from inventions. privileged entree to resources or runing in a niche. Inventions in value offerings may take to state of affairs in which a company offers alone values to client.

Examples of companies following this scheme are Skype and Google with its hunt engine. A company may offer unique values which result from a privileged entree to resources.This scheme is adopted by media companies. such as newspapers.

Television or wireless Stationss. that offer on-line content unavailable on other web sites. Singularity of values offered may besides ensue from operating in a niche. in which consumer demands are different and should be satisfied with different composing of values. Acting in a niche is frequently combined with a low competition force per unit area and a higher degree of border. A illustration for this scheme may be an on-line shop offering places in big sizes.

The scheme of alone values is attractive as it allows to burthen client with higher fiscal and non-financial costs.It means that a company may bear down higher monetary values or enforce higher transactional costs on them ( such as easy runing web site ) . In an opposite instance. when a company offers common values. which are besides offered by a legion figure of rivals.

decrease of pecuniary and non-monetary client costs may be a method of increasing values for a client. This is easy to detect in the sector of on-line shops offering family equipment. books. music or websites leting hotel reserve or air hose ticket purchase.

In these industries. companies frequently compete on the Internet with low monetary values. which may take to impairment of their border.Scheme of Value Co-CreationThe scheme of value co-creation assumes that clients actively participate in determining the value proposition. which will be delivered to themselves or to other clients. Harmonizing to Prahalad and Ramaswany. this is the value co-creation with clients that is the kernel of competition in modern economic system [ 2004 ] . The range of the scheme is wide.

It includes the state of affairs. in which a client co-creates composing of values with a company for himself. The clients may besides make values orientated non at themselves. but at other clients. In both instances.

the procedure of value co-creation must be developed on the footing of common committedness [ Dobiegala-Korona. 2009 ] . In the first instance. customer’s activity can be described as mass customization. Harmonizing to Kleeman and Voss mass customization refers to „isolated activity of single clients ( .

. ) . non to the corporate activity of many individuals” [ 2008 ] .Within the mass customization the value exchange can be described as one-to-one and the engagement of other clients is non required. The illustrations of execution of mass customization are legion.

Consumers may construct their ain computing machine. alter the equipment of a auto or design apparels. Value co-creation orientated at other clients assumes that a client actively participates in activities aimed at making values for other clients. The range of these activities is besides wide. They include making and printing content on the Internet. interaction and communicating with other clients in societal networking web sites or package development in the Open Source motion. Normally a legion figure of clients ( users ) create values for other more legion group of clients – receivers.

The value exchange can be described as all-to-all. as opposed to the former one-to-one.DecisionCompeting on the Internet requires an acceptance to the new environment. The manner in which companies shape their values propositions is besides a topic of alteration.

Writer proposed in this paper five schemes of client value proposition. The proposed schemes are an alternate to the traditional attack uniting values for client with monetary value degree. Porter’s competitory schemes comply with the traditional attack to value proposition. Harmonizing to his decision a company should move either as a monetary value leader and offer low value for low monetary values. or as a discriminator and offer differentiated values for higher monetary values. New attack to value proposition on the Internet requires so new ways of accomplishing competitory advantage.

A research uniting the proposed schemes with new attack to competitory advantage may be a continuance of this paper.


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