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.
|Value Proposition||– Value Proposition is one of the key components of the Business Model Canvas, which is a strategic tool used for designing, describing, and analyzing business models. It focuses on defining the unique value a product or service offers to its customers.|
|Importance||– Defining a clear and compelling value proposition is essential for attracting and retaining customers. It answers the critical question: “Why should customers choose your product or service over alternatives?”|
|Customer Segment||– The Value Proposition is intimately connected to the Customer Segment. A business must understand its target customers’ needs, pain points, and preferences to create a value proposition that resonates with them.|
|Customer Jobs||– In the Value Proposition Canvas, you identify the Customer Jobs, which are the tasks or problems your customers are trying to solve. Understanding these jobs is key to crafting a value proposition that addresses their needs.|
|Pains and Gains||– The canvas also involves capturing the Pains (customer frustrations and challenges) and Gains (desired outcomes and benefits) experienced by your customers. These insights help tailor the value proposition effectively.|
|Fit and Alignment||– A successful value proposition aligns with the specific jobs, pains, and gains of your target customer segment. Achieving this fit ensures that your product or service addresses real customer needs, creating value.|
|Unique Differentiators||– The value proposition should highlight what sets your offering apart from competitors. Unique Differentiators are elements that make your product or service distinctive and appealing to customers.|
|Features and Benefits||– The canvas helps in mapping out the key Features of your offering and the corresponding Benefits they provide to customers. Clear communication of these features and benefits is crucial for customer understanding.|
|Testing and Iteration||– Value propositions are not set in stone. Businesses should be open to Testing their value propositions with real customers and be willing to Iterate based on feedback and changing market dynamics.|
|Cost vs. Value||– Balancing the Costs of delivering the value proposition with the perceived Value it provides to customers is critical. Businesses must ensure that the cost-to-value ratio remains attractive to customers.|
|Segment Fit||– A business may have multiple customer segments, each with its unique value proposition. Ensuring that the value proposition fits each segment’s needs and preferences is important for market relevance.|
|Clear Communication||– Effectively communicating the value proposition through marketing and messaging is vital. Customers should quickly grasp why your product or service is the best solution to their problems or needs.|
|Conclusion||– The Value Proposition Canvas helps businesses articulate the value they offer to customers and tailor it to specific segments. Achieving a strong fit between the value proposition and customer needs is key to success.|
Understanding the Value Proposition Canvas
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?
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
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.
Examples Using the Value Proposition Canvas Framework:
- Jobs: Users need to access files across multiple devices.
- Gains: Seamless access, ease of file sharing, no need for physical storage.
- Pains: Loss of physical storage, inability to share large files.
- Products and Services: Cloud storage.
- Pain Relievers: Easy sharing, data backup.
- Gain Creators: File sync across devices, collaboration tools.
- Jobs: Find affordable, unique accommodations.
- Gains: Experience local culture, cost savings.
- Pains: Expensive hotels, lack of local experiences.
- Products and Services: Platform for home rentals.
- Pain Relievers: Affordable lodging, unique experiences.
- Gain Creators: Local experiences, variety of choices.
- Jobs: Need a device for communication, entertainment, work.
- Gains: Efficient multitasking, status symbol.
- Pains: Carrying multiple devices, low-quality user experience.
- Products and Services: iPhone with diverse apps.
- Pain Relievers: One device for multiple tasks.
- Gain Creators: High-quality design, brand status.
Nike (Custom Shoes):
- Jobs: Wear comfortable, stylish shoes.
- Gains: Unique design, personal expression.
- Pains: Generic designs, lack of uniqueness.
- Products and Services: Customizable shoe designs.
- Pain Relievers: Ability to choose unique colors and materials.
- Gain Creators: Self-expression, brand status.
- Jobs: Listen to a variety of music on-the-go.
- Gains: Discover new music, create playlists.
- Pains: Buying individual albums, lack of music discovery.
- Products and Services: Music streaming platform.
- Pain Relievers: Unlimited music access, curated playlists.
- Gain Creators: Music recommendations, offline listening.
- Jobs: Want a luxury accessory.
- Gains: Status symbol, luxury feel.
- Pains: Cheap watches, lack of durability.
- Products and Services: Luxury watches.
- Pain Relievers: Durability, time accuracy.
- Gain Creators: Brand status, investment.
Ryanair (Budget Airlines):
- Jobs: Travel at an affordable price.
- Gains: Save money, more frequent travels.
- Pains: Expensive flights, less frequent vacations.
- Products and Services: Low-cost flights.
- Pain Relievers: Affordable fares, frequent deals.
- Gain Creators: More travel opportunities, no-frills service.
- 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.
- Importance of the Value Proposition: The Value Proposition Canvas is a crucial tool within the Business Model Canvas framework. It ensures that a product or service aligns with customer values and needs, ultimately driving customer choice and revenue generation.
- Problem-Solution Alignment: A central focus of the value proposition is aligning the solution (product or service) with the customer’s problem or need. It prompts businesses to ask questions like, “What problem am I solving?” and “Why would the customer want this problem solved?” This problem-solution fit is vital for success.
- Maslow’s Hierarchy of Needs: Understanding customer problems in the context of Maslow’s Hierarchy of Needs can be beneficial. It helps identify whether the problems relate to safety, status, belonging, self-esteem, or other levels of need. This understanding guides product development toward addressing tangible customer needs rather than vague ideas.
- Two Building Blocks: The Value Proposition Canvas comprises two foundational building blocks:
- Customer Profile: This block delves into the customer’s perspective and includes three key elements:
- Jobs: The tasks and goals the customer seeks to accomplish, which can be emotional, social, or functional in nature.
- Gains: The benefits the customer expects or desires after completing a job. These gains may pertain to status, wealth, efficiency, functionality, or other factors.
- Pains: The negative emotions, risks, or experiences associated with performing a job, which can be functional (e.g., lack of time or money) or emotional/social (e.g., feelings of shame).
- Value Map: This block explores how the organization’s products and services provide value to the customer. It includes:
- Products and Services: A description of what the business offers or is developing.
- Pain Relievers: How the products and services alleviate pain, frustration, or risk for the customer. Common pain relievers include time and cost savings, enhanced well-being, and error reduction.
- Gain Creators: How the organization makes the customer’s life easier or better. This can relate to quality, performance, features, usability, accessibility, social impact, guarantees, and cost-effectiveness.
- Customer Profile: This block delves into the customer’s perspective and includes three key elements:
- Value Proposition Types: Value propositions can take various forms, catering to different customer segments and preferences. Some common types include:
- Novelty: Often found in tech products, novelty creates value by offering something new and exciting. For example, the mass adoption of smartphones was driven by their novelty.
- Customization: Customization adds value by allowing customers to tailor products to their individual needs, fulfilling higher-level needs such as self-esteem and self-actualization.
- Design: Superior design, as seen in companies like Apple and Prada, creates value by enhancing the product’s aesthetics and functionality.
- Brand: Value is derived from the status associated with wearing or using a particular brand, aligning with consumers’ higher-level needs for status and belonging.
- Price: Low-cost offerings, as seen in budget airlines and products like Tata Nano, create value in price-sensitive customer segments.
- Qualitative and Quantitative Value: Value propositions can be qualitative (emphasizing design, brand, etc.) or quantitative (focused on price). Many businesses use a combination of both to target different customer segments effectively.
Alternatives to the Business Model Canvas
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.
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.
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.
Connected Strategy Frameworks