In 2016, Joey Zwillinger, an industrial engineer with a San Francisco biotech company, and Tim Brown, a former professional soccer player, blended their tech and sporting knowledge to form Allbirds. Being from New Zealand, Tim was well aware of the benefits of Merino wool, a great sustainable resource that up to that point had never been used in manufacturing shoes. Tim teamed up with Joey an engineer who specialize in renewables. Together, they use the raw material to develop a revolutionary wool fabric made specifically for footwear. The result, a category of shoes inspired by natural materials and focused on comfort and sustainability. Benefits are up until 2015, had not been provided by athletic shoe manufacturers. The Allbirds brand is a darling of the tech industry. They are ultra comfortable and the company's mantra of creating better things in a better way has resonated with many customers. Allbirds has a great value proposition and this is a critical aspect of a company's overall marketing strategy. I can't wait to give these a try. What is the company's value proposition? We will dive into this concept in this upcoming lecture. A value proposition is part of a company's overall marketing strategy. Companies must define the job to be done for the customer. This is a job to be done that solves an important problem or fulfills an important need for the target customer. A company must identify the specific benefits that are able to satisfy this need. This is a company's value proposition. A complete value proposition contains the following. What are the specific benefits your customers will experience should they choose to do business with you? What makes your product or service uniquely better than all others in the market? What is the precise problem your product or service solves? Also, who is your ideal customer? Then, why should customers do business with you rather than a competitor? You must answer all these questions in your value proposition. One short, clear statement that explains precisely what your brand offers that no other competitor can, and how your product or service fulfills a need that no other company is able to fulfill. Value propositions dictate how firms differentiate themselves from competitors and which position in the market they choose to occupy and are integral to the long-term profitability of any firm. This set of benefits for Allbirds was comfort, durability, quality, and sustainability. What drew so many shoppers to the product initially wasn't just the sustainability, but the experience of wearing it. These shoes were high-quality and very comfortable. An interesting value proposition is the one proposed by the company Slack. Slack is a collaboration tool for teams with a simple, easy to use platform and instant message capability. Slack is the fastest-growing Software as a Service startup ever and it's used by 77 percent of fortune 500 companies. Although now they're facing a lot of competition from Microsoft Teams. The platform is well-liked by both enterprise teams and small startups since it allows their employees to keep work flowing no matter the everyday barriers or the complexity of a project. Everything that the company does hinges on their value proposition. Slack saves time by tearing down communication and system silos, making it much easier to communicate. This product aspires to take the pain out of working together online and maybe even make it fun. That's something no other product has tried or claimed to do. Ultimately, Slack makes its customers more productive without it feeling effortful. Since they have been such a powerful value proposition, Slack is perceived as an enjoyable communication and collaboration alternative to your email inbox and other tools that you may use. I know it delivers on that value proposition, I have used it. Uber's value proposition is different since the company exists in a two-sided market. This business model facilitates direct interaction between suppliers and customers, creating value through an intermediary platform. Value is given and received by both the consumer and the service provider. Uber's value proposition must include the value provided for both the drivers and the riders. For drivers, Uber gives them the flexibility to decide when and how often they want to drive. Also, Uber drivers could earn more per hour compared to industry standards. For riders, Uber provides the opportunity to choose the type of ride they want, an SUV, a Sedan at an affordable price. You get the convenience of being picked up where and when you want and not having to use cash. Also, Uber brings the reliability provided by knowing a ride will be coming for you and is available on-demand. Uber is certainly the smartest way to get around, if not the most convenient. We've discussed the concept of value propositions, which are the sum total of benefits provided by a brand. In order to be successful however, a brand must choose to position itself on the benefit that differentiates it the most from the competition. This concept of differentiation was examined by Theodore Levitt. Levitt immigrated to the US from Germany in 1925. He and his family settled in Ohio in the Midwest. He later earned a doctorate in economics and eventually joined the faculty at the prestigious Harvard Business School. In 1960, he published his memorable article titled Marketing Myopia. It was groundbreaking at the time. It was a call to companies to define themselves by their customers needs and not by the goods they produced. No other academic had yet made such a compelling case for companies to focus their attention on customers and the benefits that they could provide them. Levitt believed that businesses needed to identify customers. But more importantly, he believed that companies needed to differentiate their offerings in order to keep these customers. Levitt felt that businesses need to focus on groups of customers whose needs they could satisfy. He recognized how key identifying these customer segments and differentiating your product offering would to business success. In Levitt's words, if you're not thinking segments, you are not thinking. One company that has been successful in differentiating itself is Ulta Beauty. They have been called one of the best growth stories in retail. During the past decade, Ulta has seen year over year growth of 20 percent in almost every year. Ulta competes for female beauty enthusiast. However, like Levitt said, they have differentiated what they do and how they operate. Traditionally, stores in the beauty industry have sold mass and prestige beauty products through different channels. For example, high versus low-end channels. However, consumers tend to shop for both types of beauty products. When shopping, 77 percent of consumers purchase both mass and prestige items. Ulta satisfies this consumer need for flexibility and greater variety by setting both mass and prestige products in their stores. In addition, Ulta sets itself apart with its first service in-store salons. Ulta salons offer a comprehensive range of hair, makeup, nails, and brow services, plus skin treatment from Dermalogica. With these points of differentiation, it is no surprise that Ulta has see more growth than any other stores in the category. They have truly differentiated themselves.