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What is Value Proposition?

In this type of question, you have to give out characteristics or attributes that certain entities value the most in particular situations.

Ok, that was confusing. Let’s look at a simple example:

The client is a hotel in New York City. The major customers are foreign tourists. What are some factors that those customers look for from hotels? In other words, what factors affect their decisions on which hotel to stay at?

Answer:

Location/ Attractions

Price

Room, hotel quality

Safety

Availability

.

Value Added Services

(main purpose of tourists is to visit attractions)

(for lower-end customers)

(for higher-end customers)

(NYC has a reputation of being an unsafe city)

(sometimes tourists just book whatever hotel that has rooms available)

(Foreign tourists are often not familiar with the city. Ex of VAS: tourist guides, interpreters, transportation …)

Tips for answering Value Proposition questions

Put yourself in their shoes

In this example, imagine yourself being a foreign tourist, what would you think…?

Know who you are (when you imagine you are X, Y, or Z)

In this example, you are a tourist from abroad, not a businessman from Boston. If you are a businessman from Boston, you will not value the VAS that much, Room-hotel quality will be emphasized, the location will need to be close to the downtown district instead…

Know the situation

In this example, if the location was a highly peaceful city such as Sydney, Australia instead, would you still worry that much about safety?

Be aware that sometimes you need to segment. The needs and the values of each segment can be different. In the example above, you may segment tourists into two groups: high-end customers and low-end customers. High-end tourists value Room quality and services while low-end tourists value Price.

Practice

Remember to try doing it yourselves first before looking at Value Proposition answer keys! Also, please email me if you have extra ideas or solutions to be added!

Situation 1

A McKinsey Partner from the Tokyo Office has to attend a last-minute appointment with a potential client in Seoul, Korea. What are things that he looks for when he chooses which airlines to fly with?

Situation 1 Solution

  • Flight Quality: In flight services, ground services, meals, internet …
  • Punctuality: low delay rate
  • Convenient Flight Time
  • Convenient Airports (reduce commuting time)
  • Availability (this is a last minute flight, it is likely that the assistant will just book whichever flight has a seat available)

Situation 2

ABC is a newly start-up outsourcing company. It is considering where (what city and what building in that city) to establish its office. What are things ABC will look for in different cities and buildings to make the final decision?

Situation 2 Solution

City:

  • Cheap and abundant source of labor (remember this is an outsourcing company)
  • Quality of life – climate, population, culture, entertainments… (will my employees be happy to be there?)
  • Politically stable (we and our client don’t want to have our business be interrupted)

Office Building:

  • Cheap – This a newly start-up firm Location
  • Convenient for Employees and other business partners to commute and meet Safe and Stable

* * *

If you’re ready to go deeper, our website has plenty of resources for you to explore, and you can also subscribe to our YouTube channel or our emailing list!


 

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  • Siu Cheung Tam

    Hello are there any quick ways to improve my business intuition? I am an engineering student endeavouring to get into management consulting but I feel that my business sense are not really sharp and quick compared to my peers.

  • vipul jhamnani

    Hello Cheng,

    Is there a reason we’re not using MECE way for Value Proposition problems?

    I’m asking this because when a problem is presented during an interview it’s hard to categorise it into Value Proposition category.