The Value Proposition Canvas, part of the Business Model Canvas, is a tool used to ensure a product or service is positioned around customer values and needs.
The Value Proposition Canvas enables businesses to list products or services that create value for a particular customer segment. In exchange for solving a problem or addressing a core need, the customer pays the business money.
The value proposition is fundamental to the success of any company since it is the main determinant of a customer choosing one product over a competing product. It encourages businesses to ask themselves:
What is the problem I am solving?
What is the underlying motivator?
Why would the consumer want this problem solved?
In clarifying the answers to these questions, it can be helpful to look at customer problems in the context of Maslow’s Hierarchy of Needs. That is, are the problems related to safety, status, belonging, or self-esteem?
Product development with a focus on value proposition and tangible customer needs helps the organization avoid launching products based on intangible ideas or innovation for the sake of innovation.
The two building blocks of the Value Proposition Canvas
Central to the Value Proposition Canvas is two foundational concepts. Each concept in turn comprises three parts.
1 – Customer profile
The customer profile consists of:
Jobs – these are the tasks and goals the customer tries to satisfy. They may be emotional, social, or functional.
Gains – or the benefits the consumer expects, wants, or needs, or would be delighted with receiving after completing a job. Gains may be related to status, wealth, efficiency, societal contributions, functionality, or quality, among other things.
Pains – these are emotions, risks, and other negative experiences associated with carrying out the job. These pains can be functional and prevent the consumer from accomplishing the task, such as a lack of time or money. They can also be emotional and social, resulting in feelings of shame or foolishness.
2 – Value map
The value map consists of:
Products and services – simply, the products and services being offered or under development.
Pain relievers – or how those products and services alleviate pain, eliminate frustrations or avoid risk. Common pain relievers include saving time and money, making consumers feel better, eliminating negative social consequences, and limiting or eradicating mistakes associated with product usage.
Gain creators – how can the organization make life easier for its customers? Gains may be related to quality, performance, features, usability, accessibility, social consequences, guarantees, and lower cost.
Value proposition types
Value may be qualitative (design, brand) or quantitative (price) with some businesses using a combination of both to target customer segments.
With that said, here is a non-exhaustive list of some common value proposition types:
Novelty – a form of value proposition commonly seen in tech products. Novelty was (and continues to be) a key ingredient in mass smartphone uptake around the world.
Customization – value proposition built around customization takes advantage of Maslow’s individual needs around self-esteem and self-actualization. With many buying products as extensions of themselves, value is created by allowing the customer to tailor the product to their individual needs. For example, Nike fans can design a completely original pair of shoes online by altering the color palette and even the size and placement of the swoosh.
Design – companies like Apple and Prada create value amongst consumers because they are perceived to add value through superior design.
Brand – value is also created via the status some people achieve by wearing a particular brand. Consumers who buy and wear Rolex watches want others to know they are wealthy enough to afford them. Brand value can also be explained by Maslow since status and belonging are higher-level consumer needs.
Price – a common way to create value in price-sensitive customer segments. Budget airlines have business models devoted entirely to low-cost air travel. Indian vehicle manufacturer Tata also released the Nano, which was so cheap that it became accessible to a vast and untapped segment of the national car market.
Key takeaways:
The Value Proposition Canvas is a tool used to ensure a product or service is positioned around customer values and needs.
The Value Proposition Canvas is based on two foundational concepts: the customer profile and the value map. Each consists of three parts that help businesses clarify how their products and services address consumer pains and add value to their lives.
Value proposition may be qualitative, quantitative, or a mixture of both. Common value types include novelty, customization, design, brand, and price.
This framework has been thought for any type of business model, be it digital or not. It’s a framework to start mind mapping the key components of your business or how it might look as it grows. Here, as usual, what matters is not the framework itself (let’s prevent to fall trap of the Maslow’s Hammer), what matters is to have a framework that enables you to hold the key components of your business in your mind, and execute fast to prevent running the business on too many untested assumptions, especially about what customers really want. Any framework that helps us test fast, it’s welcomed in our business strategy.
An effective business model has to focus on two dimensions: the people dimension and the financial dimension. The people dimension will allow you to build a product or service that is 10X better than existing ones and a solid brand. The financial dimension will help you develop proper distribution channels by identifying the people that are willing to pay for your product or service and make it financially sustainable in the long run.
This framework is well suited for all these cases where technology plays a key role in enhancing the value proposition for the users and customers. In short, when the company you’re building, analyzing, or looking at is a tech or platform business model, the template below is perfect for the job.
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This framework is well suited to analyze and understand blockchain-based business models. Here, the underlying blockchain protocol, and the token economics behind it play a key role in aligning incentives and also in creating disincentives for the community of developers, individual contributors, entrepreneurs, and investors that enable the whole business model. The blockchain-based model is similar to a platform-based business model, but with an important twist, decentralization should be the key element enabling both decision-making and how incentives are distributed across the network.
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A SWOT Analysis is a framework used for evaluating the business’s Strengths, Weaknesses, Opportunities, and Threats. It can aid in identifying the problematic areas of your business so that you can maximize your opportunities. It will also alert you to the challenges your organization might face in the future.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
