Reference no: EM131428995
Respond 101
In order to understand my thought process behind this discussion, I must define my understanding of value proposition, so my definition is convincing a consumer to purchase a product you are selling and/or promoting. For example, I am a basketball coach and I will need to provide parents the reasoning of why their child should play for me than for someone else.
I would elaborate on my experience, past players that have played under me and who has gone on to greater success in their life, resulting in my ability to produce superstars.
The internet has defined value added as describing the enhancement a company gives its product or service before offering the product to customers (Investopedia, 2017) and value proposition is a business or marketing statement that a company uses to summarize why a consumer should buy a product or use a service. (Investopedia, 2017 ).
Respond 102
Adding value and value proposition are interdependent. Companies can add value by filling a gap that competitors in the market have not addressed. Value proposition has to do with the strategy that the company uses to communicate and market the added value of the service or product.
If a company presents a strong value proposition for a product which does not truly add value, then consumers won't purchase the product and the reputation of the company brand may be damaged. On the contrary, if a company identifies a product or service that adds value but is not propositioned effectively, consumers may not be sure why they should purchase the product or service that fills the gap.
One of my company's competitors recently created an individually offered insurance plan that pays providers similar to the Medicaid fee schedule. The competitor's provider payment model pays around a 120% of the fee schedule. This helps to keep member premium payments very low while subsidized by the Affordable Care Act. This is an example of adding value.
The competitor identified that there is a market for health insurance that costs a low premium and they were able to fill this gap by modeling the benefits and fee schedule off of Medicaid.
Because the competitor is much smaller than my company, they have not presented a strong value proposition. The popularity of the plan has spread largely by word of mouth and now my company is concerned that this may cut into our existing business. So we are working to create a similar model so that we can offer an alternative in the market to consumers.
What is the cost of external common equity
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