Value Proposition How Would You Define YOUR Value Proposition? F - - PowerPoint PPT Presentation

Value Proposition

How Would You Define YOUR Value Proposition?

VALUE

Problem Solution Target market

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• c us c ome s

fr

• m c le ar

ly unde r standing the value of your ide a

What is a Values Proposition?

A value proposition has four parts:

A value proposition is a promise of value to be delivered and acknowledged and a belief from the customer that value will be appealed and experienced.

Uber – The Smartest Way to Get Around

Uber’s Value Proposition

• One tap and a car comes directly to you
• Your driver knows exactly where to go
• Payment is completely cashless
• Everything about this directly contrasts the typical

experience of getting a taxi – no phone calls to disinterested dispatchers, no painful conversations trying to explain to a stressed-out cabbie about where you need to be, and no fumbling for change or worrying you’ve got enough bills in your wallet.

• Just a fast, efficient way to get where you’re going. This is

reinforced by the aspirational messaging toward the top of the Uber homepage, which states that “Your day belongs to you.”

Digit – Save Money Without Thinking About It

• The world of personal finance is ruthlessly

competitive space, and there are tens of thousands of apps designed to help people manage their money more effectively.

• However, few have as good a value proposition

as Digit, a relatively new service that helps users “save money, without thinking about it.”

Digit's value proposition,

• ffering hands-off savings

Digit’s Value Proposition

• Digit allows users to securely connect their bank accounts to the Digit

service, which then algorithmically examines users’ spending habits and regular expenses. It then begins to “optimize” users’ accounts to squirrel a little money away here and there into an FDIC-guaranteed savings account, from which users can withdraw their savings at any time.

• The key differentiator of Digit from other savings apps is that the process

is entirely automated. Users literally don’t have to do a thing for Digit to start putting money into a saving account; a few bucks here, a few bucks there, and before you know it, you’ve got a decent amount put away for a rainy day, all the while maintaining sufficient funds for regular outgoing expenses to be taken care of. It’s actually kind of amazing.

• Saving can be a major financial hurdle for many people, especially those
• n reduced or limited incomes. By automating the entire process, Digit
• ffers users a completely hands-off solution to saving. It’s not for

everyone – but then again, no product, service, or app is – but it is unique, and its value proposition makes this clear.

Value Proposition Definition

• Your Value Proposition is: a statement that includes your

important customer and market

• Need along with your new, compelling, and defensible
• Approach to address that need with superior
• Benefits per costs when compared to the
• Competition and/or other alternatives
• Successful Value Propositions are quantitative and easy to

understand and remember

• The four parts of your value proposition are the

fundamentals: they must always be answered

Improve Your Value Proposition, Be Quantitative

Need

• Not: The market is growing fast
• Rather: Our market segment is $2B/yr and growing at 20%/yr

Approach

• Not: We have a clever design
• Rather: We have created a patent-protected, one-step process that replaces the current two-

step process with the same quality

Benefits

• Not: The ROI is excellent
• Rather: Our one-step process reduces costs by 50% and results in an expected ROI of 50% per

year with a profit of $30M in year 3

Competition

• Not: We are better than our competitors
• Rather: Our competitors are Evergreen Corporation and Bigway, which use the current two-

step process

Qualitative statements are not persuasive!

Creating a Value Proposition Communicating the Benefits of Your Product, Service or Idea, Simply and Clearly

Step 1: Know your customer Thinking from the perspective of your customer, ask the following: Who is he or she? What does s/he do and need? What problems does s/he need to solve? What improvements does s/he look for? What does s/he value? Tip: If you don't know, ask! It's easy to try to second guess what your customers want. And very easy to get it wrong. So do some market research: This could be a simple matter of asking customers directly, or organizing a focus group or surveys. 'Market research' is not just for external customers, it works for other 'markets' too: Depending on your product or idea, your 'market' could be employees, colleagues, or even your spouse. Step 2: Know your product, service or idea From your customer view point: How does the product, service or idea solve the problem or offer improvement? What value and hard results does it offer the customer? Tip: Include numbers and percentages To grab your customer's attention even faster in this financially-oriented world, your value proposition should also speak percentages and numbers: How much will your customer gain, save or improve? How much more efficient will he or she become? How much safer, smarter, faster, brighter will the solution be? And so on. Step 3: Know your competitors Keep on thinking from the perspective of your customer, and ask: How does your product or idea create more value than competing ones? Tip: This can be quite difficult. See our articles on USP Analysis , Core Competence Analysis and SWOT Analysis for useful tools for doing this. Step 4: Distill the customer-oriented proposition The final step is to pull it all together and answer, in 2 or 3 sentence: "Why should I buy this specific product or idea?" Try writing from the customer viewpoint by completing the following, (also include the numbers and percentages that matter!): "I want to buy this product or idea because it will..." "The things I value most about the offer are..." "It is better than competing products or ideas because..." Step 5: Pull it all together Now, turn around your customers 'answer' from step 4 into a value proposition statement.

Creating a Value Proposition Communicating the Benefits of Your Product, Service or Idea, Simply and Clearly

Example Here's a simple example. Let's say that you sell lawn mowers, and your customer is someone with a large back yard. Step 1: Know your customer Your customer is a businessman with quite a large house, who likes the "meditative feeling" of cutting his own lawn, but gets bored by the job when it takes too long. He's looking for a good quality of cut, for the job to be done quickly and enjoyably. Step 2: Know your product or idea The product is a ride-on mower with a 25 horsepower (powerful) engine and 45 inch (wide) cutting blades. Step 3: Know your competitors The mower goes faster and cuts wider than the competition. Step 4: Distill the customer-oriented proposition "Our mower cuts your grass in 50% of the time of 'big brand' mowers in its class. And it leaves the lawn looking beautiful too!”

DEFINITION - VALUE PROPOSITION

• A value proposition describes why a

customer should buy a product or service

• It targets a well defined customer segment
• It convinces prospective customers that a

particular product or service will add more value or better solve a problem than competitive products or services

Map Customer to Value Proposition

Value Proposition Customer Segment

JOB To Be DONE Gains Pains Products Services Features Pain Killers Wins Results

Getting The Customer Value Proposition Right Is Critical To Success

FIT

Explore Customer Pain

What does your customer find too costly? (e.g., too much time, too much money, requires substantial effort, …) What makes your customer feel bad? (e.g., frustrations, annoyances, . . .) How are current solutions underperforming for your customer? (e.g., lack of features, performance, malfunctioning, accuracy…) What negative social consequences does your customer encounter or fear? (e.g., loss of face, trust, power, status . . .) What’s keeping your customer awake at night? (e.g., big issues, concerns, worries . . .) What common mistakes does your customer make? (e.g., usage mistakes, inappropriate priorities . . .) What barriers are keeping your customers from adopting solutions? (e.g., upfront investment, learning curve, resistance to change . . .)

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Explore Customer Gains

Which savings would make your customer happy? (e.g., time, money, effort, risk . . .) What outcomes does the customer expect and what would go beyond expectations? (e.g., quality level, more or less or something . . .) How do current solutions delight your customer? (e.g., specific features, performance, quality . . .) How would you make your customer’s job or life easier? (e.g., flatter learning curve, more services, lower cost of ownership . . .) What positive social consequences does your customer desire? (e.g., makes them look good, increase in power or status . . .) What are customers looking for? (e.g., good design, guarantees, specific or more features . . .) What do customers dream about? (e.g., big achievements, big reliefs . . . ) How does your customer measure success or failure? (e.g., performance, cost . . .) What would increase the likelihood of adopting a solution? (e.g., lower cost, less investment, lower risk, better quality . . .)

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Create Value  Observe Customer

• Create Value: The set of value proposition benefits

that you design to attract customers.

• Observe Customers: The set of customer

characteristics that you assume, observe, and verify in the market.

• VALUE PROPOSITION: Describes the benefits

customers can expect from your products and services.

• Osterwalder, Alexander; Pigneur, Yves; Bernarda, Gregory; Smith, Alan (2015-01-23). Value Proposition Design: How to

Create Products and Services Customers Want (Strategyzer) (Kindle Locations 282-284). Wiley. Kindle Edition.

Customer Jobs

Customer Jobs describe the things your customers are trying

to get done in their work or in their life. A customer job could be the tasks they are trying to perform and complete, the problems they are trying to solve, or the needs they are trying to satisfy. Make sure you take the customer’s perspective when investigating jobs.

 Functional jobs  Social Jobs  Personal/ emotional jobs

Job Contexts

3 Main Job Types:

Supporting jobs Customers also perform supporting jobs in the context of purchasing and consuming value either as consumers or as professionals.

• Buyers of Value
• Co-Creator of Value
• Transferor of Value

Job Importance

Customer Pains

Customer Pains describe anything that annoys your

customers before, during, and after trying to get a job done or simply prevents them from getting a job done. Pains also describe risks, that is, potential bad outcomes, related to getting a job done badly or not at all. Seek to identify three types of customer pains and how severe customers find them:

– Undesired outcomes, problems, and characteristics – Obstacles – Risks (undesired potential outcomes)

To clearly differentiate jobs, pains, and gains, describe them as concretely as possible.

Pain Severity

Customer Gains

Customer Gains describe the outcomes and benefits your customers want. Some gains are required, expected, or desired by customers, and some would surprise them. Gains include functional utility, social gains, positive emotions, and cost savings. – Required Gain – Expected Gain – Desired Gain – Unexpected Gain

Gain Relevance

Create and Prioritize Customer Profile

• Select customer segment that you want to

profile.

• Create a list of jobs, pains, and gains (related to

your potential value propositions???).

• Prioritize jobs, pains, and gains.

Map out all your (potential) customers’ important jobs, extreme pains, and essential gains.

Ground Rules for Interviewing

Rule 1 Adopt a beginner’s mind

Listen with a “fresh pair of ears” and avoid interpretation. Explore unexpected jobs, pains, and gains in particular.

Rule 2 Listen more than you talk

Your goal is to listen and learn, not to inform, impress, or convince your customer of

• anything. Avoid wasting time talking about your own beliefs, because it’s at the

expense of learning about your customer.

Rule 3 Get facts, not opinions

Don’t ask, “Would you...?” Ask, “When is the last time you have...?”

Rule 4

Ask “why” to get real motivations Ask, “Why do you need to do…?” Ask, “Why is ___ important to you?” Ask, “Why is ___ such a pain?”

Ground Rules for Interviewing

Rule 5 The goal of customer insight interviews is not selling (even if a sale is involved); it’s about learning

Don’t ask, “Would you buy our solution?” Ask “what are your decision criteria when you make a purchase of…?”

Rule 6 Don’t mention solutions (i.e., your prototype value proposition) too early

Don’t explain, “Our solution does…” Ask, “What are the most important things you are struggling with?”

Rule 7 Follow up

Get permission to keep your interviewee’s contact information to come back for more questions and answers or testing prototypes.

Rule 8 Always open doors at the end

Ask, “Who else should I talk to?”

SEGWAY: WHAT HAPPENED?

Cover more ground. Be more productive. Move more intelligently.

• Revolutionary/disruptive transportation

device with serious “cool factor” never reaches its expected potential

• It’s value proposition didn’t resonate:
• Failure to properly segment the market:

they targeted basically everyone

• The problem they were solving was vague:

“need” was missing

• The product couldn’t change behavior: We

are hooked on cars

• At $5,000 priced too high for most

Which Customers?

• Consumer markets can

be segmented by:

• Demographics
• Geography
• Psychographics
• Behavioral
• Sociocultural
• Hybrids of the above
• B2B markets by:
• Type of business

(manufacturer, retailer, wholesaler, service provider)

• Size of Business
• Financial Strength
• Number of Employees
• Location
• Sales Level

Customer Needs Examples

• E

nte r pr ise –Re nting c ar s me e ts diffe r e nt ne e ds at diffe r e nt time s

• F

air ly- pr ic e d c onve nie nt, home c ity r e ntals pr imar ily for non busine ss pur pose s

• ZipCar – Pe ople who c hoose

not to own a c ar but who

• c c asionally ne e d to use one
• Also base d on home c ity,

but for diffe r e nt ne e ds

Relative Price Examples

• Ne tJe ts – Se r

ve s an “unde r se r ve d” c lie nte le who want e nhanc e d se r vic e vs flying fir st c lass

• Ste e p, ste e p pr

e mium

• Southwe st – Se r

ve s an “ove r se r ve d” c ustome r base who pr e fe r s le ss fr ills and lowe r far e s with a side

• r

de r

• f c onve nie nc e

Create Possibilities Quickly with Ad-Libs

OBJECTIVE: Quickly shape potential value proposition directions OUTCOME: Alternative prototypes in the form of “pitchable” sentences

Summary

• Your

value pr

• position must…
• Be base d on what the c ustome r pe r

c e ive s will add value

• T

he fir m’s value c hain must be spe c ific ally tailor e d to de live r the value pr

• position
• i.e . Ac tivitie s that a fir

m pe r for ms in or de r to de live r some thing of value (pr

• duc t or

se r vic e )

• It must be base d on tr

uth, not “mar ke ting spin”

• Must addr

e ss a spe c ific c ustome r se gme nt

• It most c ase s will addr

e ss r e lative pr ic e

Designing and delivering a value proposition requires three steps:

Which Needs are Highest Priority? Decide which needs are most important to the individual What Value Proposition can Meet the Needs? Craft an offering that directly addresses those needs How to Communicate? Refine into a concise, 30-second statement

1 2 3

“Go o g le is the

world’s la rg e st se a rc h e ng ine

tha t a llo ws

Inte rne t use rs to

find re le va nt info rma tio n

quic kly a nd e a sily.”

“Goog le use s a

pa te nte d pa g e - ra nking a lg orithm to ma ke mone y throug h a d pla c e me nt.”

What is it? Who is it for ? Why is it valuable ?

Whic h Va lue Proposition Is More E ffe c tive ?

Value Proposition Canvas & Business Model Canvas

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Three Kinds of Fit

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New Value Equation: The Four Actions Framework

A Day In The Life Of Your Customers

Question Customer 1___________ Customer n____________

• 1. How Is Your Customer

Currently Dealing With This Task/Problem?

• 2. What Are They Trying To

Accomplish? Desired Outcome? Wish They Could Do?

• 3. What Approach Are They

Attempting

• 4. What Are The Interfering

Factors?

• 5. What Are The Economic

Consequences? –Costs?

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A Day In The Life . . .

Question Customer 1___________ Customer n____________

• 6. Your New

Approach . . .

• 7. Enabling

Factors? 8 Economic Rewards?

• 9. Is Our Price

Consistent With Budget? – Problem Solved?

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Value Proposition

CHANNELS RELATIONSHIPS

Customers

REVENUE STREAMS COST CENTRES KEY PARTNER KEY RESOURCES KEY ACTIVITIES

Business Model

Revenue Sources?

• One, Multiple?
• Sustainable?

How do we reach

• ur clients?

Economics?

• Break-even Volume
• Cash Required?

How do we acquire customers? What is Cost To acquire a customer

• r donor?

What unique resources do we need/have?

• IP
• Information
• Access
• Skills

What must we do:

• Better than comp.

–Extremely well

• vs. outsource

Who?

• Jobs to get done
• Pains relieved
• Gains sought

What?

• Pain Killers
• Gains given

Who do we need to partner with? What do they bring to the table?

• Access?
• Efficiency?
• Capabilities?
• Credibility?

Cost Structure?

• Fixed
• Variable

Sustainable?

• On-going full costs covered?
• Adequate cash flow (cigar box)

10 Characteristics of Great Value Propositions

1 Are embedded in great business models 2 Focus on the jobs, pains, and gains that matter most to customers 3 Focus on unsatisfied jobs, unresolved pains, and unrealized gains 4 Target few jobs, pains, and gains, but do so extremely well 5 Go beyond functional jobs and address emotional and social jobs 6 Align with how customers measure success 7 Focus on jobs, pains, and gains that a lot of people have or that some will pay a lot of money for 8 Differentiate from competition on jobs, pains, and gains that customers care about 9 Outperform competition substantially on at least one dimension 10 Are difficult to copy