Value Proposition vs. Differentiation vs. Competitive Advantage
I've often heard value proposition, differentiation and competitive advantage used simultaneously, but I believe that they are three distinct strategies with distinct stakeholders.
- Value proposition is customer focused.
- Differentiation is competition or market focused.
- Competitive advantage is internal capabilities focused.
What are your thoughts? How/why do you see these as mutually exclusive, or the same?
The three are distinct and it seems odd to me that someone would use them interchangeably. The simple way to think of value proposition is to think of it like a reputation, it follows you around and it represents what you're known for. A company, or brand, value proposition is what it (company/brand) delivers to its customers on a daily basis, be it value, quality, stellar customer service, etc. Product/brand differentiation is what makes it distinct, and ideally defensible, relative to its competitors and why the product/brand's consumers would be willing not only to purchase it, but also pay a premium for it. Lastly, competitive advantage is a key strength that you possess and leverage best against your competitors (e.g. from the world of retail; Nordstrom is known for stellar customer service, whereas Wal-Mart is known for having the lowest prices on a daily basis).
They are all different. The value prop is what the product/service will do for the customer. If there are different personas like the buyer, user, influencer, then the value prop might be different. Figuring out the value prop is hard but I have devised a method of understanding what a customer "does" makes it far easier.
Differentiation is how your product is different and can standout in the prospective customer's mind. Its the core of product positioning.
Competitive advantage is both internal and external. Is is something your product/service/company does that the competition is weak at doing.
They are indeed very different, and actually I would say value proposition and differentiation are two possible levers/enablers to build competitive advantage.
To paraphrase what others have already point out, value offering is the perceived value consumers and customers have for your brands/products/services. It’s a combination of equity, price, quality, efficiency, delivery on time in full, benefits- etc.
Differentiation is about how different all of the above is compared to what else is available in market- so indeed it has an external frame of reference.
Competitive advantage is for me mainly external- it is a measure of your strengths vs. similar industries based on your portfolio but also infrastructure and capabilities- ie go to market, Organisation design, skills in key functional areas, value chain, etc.
It gives you in essence your right to succeed in a given industry/category/market.