eCommerce Insiders

How to Develop a Value Proposition in eCommerce

If there is one term equally overused and meaningless as “Content is King”, it most certainly is “Offer Value”.

Regardless of an industry, profession, type of business you are in or hundreds of other factors, “offer value” seems to be the ultimate response to almost any sales or marketing difficulty your business may be facing.

The problem? It’s meaningless advice.

Value is something over which an online retailer can only control indirectly.  Value is sought & perceived by your customers.  Based on the value proposition they differentiate one store from another and one particular offering from what might at the onset seem like an identical one.

Customers base their buying decisions on the value they perceive.

But, you know all that already. You also know that value is the center of your online store.

What often remains a problem is how you could develop a unique value proposition that will tick all the boxes and ensure a constant growth of your eCommerce store.

And this is what I want to talk about in this post. How you, an eCommerce store owner can develop a unique value proposition to differentiate your store from the others.

Before we get to that though, let’s quickly discuss what the value proposition really is.

Defining Value Proposition

The book “Creating and Delivering Your Value Proposition” gives what I personally consider the most effective formula for understanding the value proposition:

Value = Benefits – Costs

where costs equal not only to money a buyer has to pay for the product but also:

  • the risk of buying
  • time commitment to complete the purchase and await order delivery
  • convenience
  • anything else that might bear some form of risk or inconvenience

In other words, for a potential buyer, value could be calculated as:

The Value I Perceive = What I Gain minus What I Risk

It is clear from this formula that the biggest challenge you as an online retailer face then is to find a way to increase gains and reduce risks for your potential customers.

Why Develop a Value Proposition?

Is it not good enough to simply rely on the product you sell to provide the value? Surely if you bring enough targeted buyers to your site, interested in a particular product, you are bound to sell a few.

Unfortunately, this is a wrong way of thinking that has deemed many online stores to fail.

One of the greatest threats to an online store’s existence is similarity.  You don’t want to become a commodity. With the abundance of online retail stores offering the same product, differentiation is your key tool in attracting buyers and convincing them to buy from you.

Furthermore, even if you sell your own original products, in today’s era of fast creation, competition can quickly launch a me-too product or offering, often at a lower price, greatly threatening your business’ existence.

A strong value proposition thus becomes one of the most powerful weapons you can employ to defend but also help expand your online business.

How to Reduce the Risks of Purchase

Risk of purchase (and subsequently, value proposition) usually relates to one of those 5 categories. These they are the first elements you should look at when developing your unique value proposition:

  • Speed of Service
  • Convenience and Security
  • Information
  • Support
  • Price

You might look into using the speed of service and delivery of goods as your unique value proposition (in fact, a certain gigantic online store does that, doesn’t it?).

It could also be the security of doing business with you, or the ability to gain a greater insight into a product through on-site or chat-enabled information, or fantastic customer service and support.

A clever returns policy, pre and post sale support might also work in reducing the risks and increasing the gains.

Price is another way for you to create value, however, this one is obviously the trickiest one to develop. Fighting for the lowest price can seriously eat into your margins and limit customer profitability.

On the other hand, clever bundles and deals might also work at limiting per-item costs while increasing your gains.

For customers, value is a result of simple math: what I gain minus what I risk by buying. By targeting some of the most common risks and fears in your business, you can quickly create a unique value proposition that will enable more customers to buy from you.

Pawel Grabowski

Pawel Grabowski is a copywriter helping SaaS and software companies utilize great copy to boost their growth.

Find out more about Pawel at smashingcopy.com and connect with him on Linkedin.

3 thoughts on “How to Develop a Value Proposition in eCommerce

  1. Jose Palomino

    This is an interesting take. As I generally work with business owners that directly offering their product/services, it’s interesting to see “value prop creation” from the point of view of a store owner — and not just any store, but an e-commerce store. You make a valid point that without a clear value prop, the customer could easily go elsewhere since they might see every e-commerce website as the same.

    Some stores that I believe have capitalized on their value prop: Amazon (offering speedy delivery and excellent customer service) and Zappos (offering virtually every shoe you could possibly want and the easiest return policy I’ve ever seen). Both of these stores limit the risk for ME, the customer — just as you said.

    But it’s important that store owners also look at this as an opportunity to differentiate themselves. It’s not just about lowering the risk — it’s about standing apart from the competitor. Zappos has the best return policy, which makes perfect sense for an online shoe store since you can’t try them on before you buy. Who else has differentiated themselves in this way in the shoe market? So that’s something else e-commerce store owners could ask themselves: If I lower the risk for my customers in this way, will it differentiate my business? Who else is doing the same thing, and what else can I do to stand apart (or, in other words, to “offer value”)?

    Great article — thanks for the insights into the e-commerce world!

    Reply
  2. Pawel GrabowskiPawel Grabowski

    Dear Jose, thank you very much for your comment and nice words on my post. I greatly appreciate that.

    And, I couldn’t agree more with what you say about value and differentiation.

    Differentiation is one of the keys to success in business. This is in fact the idea behind this post as well. In my view, when it comes to online retail, the best and most effective areas where a business could differentiate itself from competition are those closely relating to risks or costs perceived by a buyer. This is also exactly what the big brands, Amazon, Zappos and many others have done. These are the very areas that will be spotted first by the potential customers and most likely, the ones that will be quickly remembered.

    But you are also right in saying that the challenge a business will immediately face when trying to achieve this is that most of their competitors might be attempting the very same thing.

    The solution most likely lies in innovation. Only by coming with completely new and highly useful solutions that make customers life’s easier a business can truly stand out from their competitors. This however can lead to a constant race a business might find itself having to take part in.

    That’s probably something for a completely different post though 🙂

    Thank you for your comment again Jose!

    Reply
  3. Theo

    Great article. It’s very true it can be difficult to differentiate yourself in business when Many other online stores may be doing the same thing. Innovation is key.

    Reply

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