Value Proposition (Part 1)

OUTCOME

APPLICATION

Introduction 

We begin with an overview of what a Value Proposition is and what it's not. A clear understanding of the value proposition definition will help you to craft the right message. The first element to consider is exclusivity: is your product, feature, or brand unique compared to what the market offers? It should also be pain-focused to solve customers' problems or improve their lives. Last but not least, the benefits should be specific. A simple "Our product is great" does not cut it. 

Take a digital product that helps commuters find the most efficient route to avoid traffic. "We are a navigation app that shares digital maps and routes" isn't a value proposition. "We cut your average commute in half so you can focus on what really matters" is. (Slide 2)

Context 

This Spectrum diagram shows how value proposition works in context. The central value proposition is the core and answers why your ideal prospect should buy from you rather than your competition? For the navigation app, it's because it has the best algorithm that saves commuters 50% off their commute time. 

The prospect level defines three ideal prospects and what most appeals to them about your offer. Execs can position their key value against their top competition. The product level is meant to answer a deeper question: why the prospect should buy this product over another option from the company's product line. 

The process level investigates what makes these ads, marketing tactics, or first impressions more attractive than others. What is the key message or tactic that attracts consumers to download your app instead of a competitor? (Slide 3)

Create the effective value prop 

So how do you actually create a value prop? First, identify your target, then the problem they are struggling with, followed by the scope that your product addresses, the solution it offers, and the benefit(s) users ultimately receive. In our example, the target is commuters. Their problem is sitting in traffic for hours at a time on workdays, or worse, being late for work because of traffic. The scope is navigational ease. The solution is an app that offers real-time data on the least-congested routes that take users to their intended destination. The benefit is hours saved each week and no more tardiness. (Slide 6) 

A winning value prop should be the intersection of three components: the product or service offered, what the customer needs, and other offerings in the marketplace. When it comes to the marketplace component, it's important to establish market validation. This doesn't mean your idea is only validated because other companies offer similar services. But you do need to prove there's existing demand in the market. So even if other navigation apps don't exist, you would still need to identify there are enough commuters to meet market demand. (Slide 7)

3 elements of a value proposition 

The table visualization below is a more formulaic approach to determine whether your value prop is up to par. Customer perception of how valuable, differentiated, and substantiated a product is can be ranked from low to high. With these results, determine where these three elements can be improved to convince more customers to buy. 

If the core value prop is considered low value, easy to substitute, or not able to be substantiated, then your customers will be skeptical and not want to risk their money on your product. If it has a strong value but is easy to substitute, you could get customers interested but find they want to bargain your price down because they can do without you. And if it's difficult to substitute and able to substantiate but has low value, then customers will decide they just don't need it at all. If all three are done well, however, it creates a recipe for lead conversion success that translates into brand loyalty and premium pricing power. (Slide 9)

Customer value map 

A customer value map charts a product's price against customer satisfaction and perception of quality to determine the customer value proposition. In this visualization, the fair value line remains steady across perceptions of quality and price. If customers perceive a product as low cost relative to quality, it will be considered excellent value, whereas a product with a high price but lower customer satisfaction is considered poor value. 

Let's say the navigation app provides high quality and satisfaction to customers. While there might be a temptation to charge a fair value price, consider an even lower price so the product lands in the excellent value range. In this scenario, the excellent value range could lead to higher user adoption. The closer a product or service is to the excellent value range, the stronger the value proposition is, and the more likely to achieve brand loyalty among customers and maximize growth through word of mouth. (Slide 10)

Value proposition canvas 

A value proposition canvas is an industry-standard visualization to communicate your unique value proposition. On the left, list product information. What is your product or service? What does the customer gain? What element relieves customer pains? On the right, fill out the same pains, gains, and tasks (or "Jobs") from the customer's perspective. 

For our example, the customer pain would be hour-long commutes that waste time and affect health, and the gain would be hours of time saved, a more elevated mood, and more energy to be productive. The job the customer needs to accomplish is to get to work on time every morning and return home safely after work. 

At the bottom of this canvas, add more details to provide additional context for key stakeholders. On the customer side, list any substitute products that could be used as alternatives. These are crucial to know, as your value proposition should address what differentiates your offer from these alternatives to stand out to the customer. (Slide 13)