Value Proposition (Business Modeling Course- Part 3)

Part 3: Value Proposition

In this part, we discuss with some depth the Value Proposition Component, in addition to the services and products of a Business. This part also introduces the Value Proposition Canvas.

The full lecture is now available as a video recording for a step-by-step process with explanation and examples. Make sure that subtitles in English are set for best results.

The Value Proposition is simply helping customers get jobs done

This value intended is highly linked to the customer, and aims to solve the customer problem/ pain defined in the avatar(s). The term “Value Proposition” sometimes refers to the “products and services offered by a company”; but in reality it entails much more details.
The word “Value” is key: Products and services are part of that value, in addition to other things that the customer sees as valuable.

Nature of products and services

• Physical/ tangible
  Physically manufactured goods
• Intangible
  Products such as a management class, services such as after-sales customer service.
• Digital
  Products such as online courses, services such as online coaching.
• Financial
  Products such as safe boxes in banks, services such as financial portfolio management.

As mentioned, a value proposition is not just about products and services. Customers also value Design, Brand/Status, Price, Cost reduction, Risk reduction, Accessibility, and Convenience.

Design is very important to get right, but it is also difficult to measure as people have different tastes and preferences.  It can go from the cover design in a magazine to setting the layout of an elevator panel. Take a look at how confusing the panel of the elevator looks.

Design can help products standout from the competition, even if they are less functional or innovative.

Surely you have seen people show off their new designer bags or laptop or even phone from a well known brand.

The “brand” is a powerful element to that needs work and time to build; but with the right amount of work and recognition, a brand can start to take off.

Setting a lower price for a value is one of the oldest tricks in the book but it still works.

Note that it is not easy to balance the low price offered with a healthy income for the business (especially for emerging startups) due to narrow margins.

It means reducing the cost of getting the job done for the customer.

For example, an IT company may offer an HR solution for business to save on getting a full HR department set in place.

Customers value reducing risk, especially business customers. A value can help customers reduce a certain risk by using mitigation or failsafe measures.

A good example is an Antivirus software to reduce the risk of the computer catching a mal-ware or losing important data.

Sometimes, customers need a service that is functionally or geographically difficult to attain. Offering accessibility is allowing customers overcome this difficulty.

For example, Amazon ships many of its items to selected countries. Forwarding shipment services allow customers outside these countries to get the value then need.

Customers seek convenience and ease of use. The more convenient the value, the more they are likely to buy.

For instance, compare the modern-day small mp3 players with the older bulky cassette tape players.

Finding the right VP

How can we try and find the value proposition we need for our customer segment?

We can try and guess what each segment wants, but is there a more structured way to find what the value that customers are really after?

Solution: The Value Proposition Canvas

As a complementary canvas to the Business Model, the Value Proposition Canvas has two main maps: Customer Map (right) focusing on the Customer and Value Map (left) the Value Proposition itself.

In order to start working on the canvas, you will have to start from either end, depending on the nature of your business idea.

-When you have a clear idea on the customer needs and need to address them, go from right to left.

-When you have a product or service you are trying to sell, go from left to right.

Since we have already defined our customers, we will go right to left.

The Customer Map- Jobs:

Outlining what the customer is trying to do.

Some of these jobs will be critical to the livelihood of the customer while others will be less critical. It is important to know how important each “job” is.

Here are some pointers to help draft customer jobs

• Functional jobs?
  Actions that need to be done. For example, writing a report.
• Social jobs?
  Improving status or social standing. Be perceived as a professional, for instance.
• Personal jobs?
  Seeking a personal or emotional state. For example, feeling secure with oneself
• Other kinds of supporting jobs

The Customer Map- Pains:

Outlining what the annoys the customer. It drills down into the customer problem to find out details about the pain that the customer is suffering from.

It is important to note the difference with the jobs. In the jobs section we were interested in the tasks and functional changes the customer wants to do. In the pains section, we outline the current problems that a customer currently suffers from.

Here are some pointers to help draft customer pains

• Functional pains?
  What causes the customer to feel pain. Like when a customer can’t do a certain task and needs help that isn’t available.
• Obstacles?
  What prevents a customer from doing a task, like when one doesn’t have access to online payments to purchase online.
• Risks?
  Undesired potential outcomes, like the risk of losing important data.

The Customer Map- Gains:

After defining what the customer wants and what they are suffering from, we get to what a customer wants. The gains describe a state where the pain is relieved and the job is done.

It is important to note the difference with the jobs. In the jobs section we were interested in the tasks and functional changes the customer wants to do. In the gains section, we outline the state that a customer wants to be in.

Here are some pointers to help draft customer gains

• Meets the bare minimum customer needs that otherwise the solution wouldn’t work?
• Meets expectation of quality and functionality?
• Exceeds expectations and offers nice to have gains?
• Offers unconventional new gains that the customer didn’t expect?

Example 1

Let’s apply on our example for Riable started previously. Revising our three avatars, we came up with the following:

The Value Map- Products and Services:

A list of the products and/or services that the business will offer.

For early idea stages, try and keep things simple by the least number of offerings.

The Value Map- Pain Relievers:

Looking at the pains that the customer is suffering, what can be done to address each correctly? Here are some pointers:

• Limit losses?
• Make customers feel better?
• Eliminate obstacles?
• Eliminate risks?
• End social difficulties?

The Value Map- Gain Creators

Looking at the gains that the customer wants, what can be done to address each correctly? Here are some pointers:

• Produce savings?
• Make their work/life easier?
• Create social benefit?
• Fulfill a wish or desire?
• Doing what customer is looking for?

Example 2

Now mapping the products and services with their features on the value map:

Linking the VP to your Business Model

Check the course slide below for free to see how to embed the Value Map into your Business Model

Files for this lecture:

Download Presentation

Business Model and Value Proposition Canvases here

In the forth part, we will discuss another two essential customer-facing components: Customer Relations and Channels. We will understand how to utilize the knowledge gained so far to linkup the Customer with the Value in the Value Proposition Canvas.

Ready? Click on the link below for the next part.

Next(Part 4): Channels, Customer Relations

Previous(Part 2): Customer Segments

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