Value Proposition – Understanding Michael Porter

Understanding Michael Porter: The Essential Guide to Competition and Strategy


Value Proposition

When I think of value, I think of am I get a product or service that is worth my money. Value proposition is more than just my original thought. Value proposition is when a business or entrepreneur asks the questions of;

Which customers are I/we going to serve?

Which needs are I/we going to meet?

What relative price will provide acceptable value for customers and acceptable profitability for the company?

Having an idea of a product or service is the first step, but the next step is who wants/needs that product or service and how much can be charged to be desirable and profitable.

The likelihood of your product or service being the first of its kind is slim, and if it was there is only a small window before someone mimics your success. Business at some point needs to consider that there will be competition and your value proposition needs to factor into that competition. What makes your product or service different from your competition? Price should never be what’s sets you apart from your competition because the price of a product or service is not a strategy. By going back to the question of which customers will you serve will help you set your product or service apart. Look at this segment of customers apart from the whole and find a way to tailor your strategy to deliver something better than your competition.

In the case of Facebook vs Myspace; Myspace launched first, went public first, and then was sold first. Yet, when we look at the pinnacle of social media, we do not see myspace anywhere near the top. A question for strategy would be how did the giant fall? Myspace had allowed their platform to be everything to everyone in the beginning, but when News Corp. (the company that bought out myspace) tried to use “professional management” to force Myspace into what they determined the future of the social media platform should be, News Corp alienated their customers. To answer the big question of how the giant fell, the answer is that they wanted to change the customers they served and forget about the needs that they were meeting. Facebook came along at the right time looking at the customers that no longer felt that their needs were being met by Myspace and tailored the platform to allow the freedom that the customers wanted. By giving customers the freedom to suggest and help steer the social media platform, Facebook reacted to the wants of their customers instead of telling their customers what they should have.   

Sources

Magretta, J. (2012). Understanding Michael Porter. Harvard Business Review Press

Hartung, A. (2011). How Facebook Beat MySpace. Forbes. Retrieved from https://www.forbes.com/sites/adamhartung/2011/01/14/why-facebook-beat-myspace/#3b29a80b147e.

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