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Creating a Value Proposition

In: Redefining Financial Services

Author

Listed:
  • Joseph A. DiVanna

Abstract

In the previous chapters, we focused on the value propositions for customers in the financial services industry. Here we would like to analyse the shareholder value. As seen in Figure 29.1, a value proposition is composed of a two-sided equation of value, a differentiated customer value and an incremental shareholder value. The delta between the two is the performance of the financial services firm and its ability to seize market opportunities. Half of the equation is defined as the utility of the product to a consumer, which determines the value of the product offering (customer value). This value is market-driven and often is not based on costs-plus accounting, but on market forces. The second component is shareholder value, described as the difference between the value of a firm’s output realized in total revenues, attributed to selling the financial services product offerings, and the cost of the input of raw materials, components or services that the firm adds to its bought-in material to produce the output. In other words, the efforts of the organization must result in supplying a financial product offering that the market needs at a cost that delivers a reasonable return to those who invested in the organization.

Suggested Citation

  • Joseph A. DiVanna, 2002. "Creating a Value Proposition," Palgrave Macmillan Books, in: Redefining Financial Services, chapter 0, pages 229-232, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-4039-0721-9_30
    DOI: 10.1057/9781403907219_30
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