value-proposition

What Is a Value Proposition? Value Proposition Canvas Explained

A value proposition is about how you create value for customers. Value Proposition Canvas is a methodology which integrated with the business model canvas can help you design a value proposition for your business model.

In fact, the value proposition canvas starts from understanding the customer profile and creating a value map to achieve a fit and draft a compelling value proposition to plug into your business model canvas. 

In this article, we’ll see step by step how to draft your value proposition with the value proposition canvas.

Breaking Down Value Proposition In Business

A value proposition can be defined as the promise of value to be delivered and a belief from the customer that value will be experienced.

Creating a value proposition is a part of business strategy. Kaplan and Norton say “Strategy is based on a differentiated customer value proposition. Satisfying customers is the source of sustainable value creation.”

As Ash Maurya points out business model describes three things: 

  • value creation,
  • value delivery,
  • and value capture.

And they are all related to customers. For that matter an entrepreneur becomes a business designer:

business-design
A business designer is a person that helps organizations to find and test a business model that can be tested and iterated so that value can be captured by the organization in the long run. Business design is the discipline, set of tools and processes that help entrepreneurs prototype business models and test them in the marketplace.

One of the most used, yet most confusing concepts in the business world is “value proposition.” Many believe they know what they’re talking about, yet you’ll be surprised to discover that what they call value proposition is either a value proposition statement or a distorted version of what it is.

The problem with this kind of distortion are multiple:

  • Lack of alignments
  • Lack of clarity
  • Inability to design a proper value proposition

To have a deep understanding of how value proposition works, we’ll look at the prevailing theories of values available to entrepreneurs.

Jobs-To-Be-Done Theory of value

Theodore Levitt said, “people do not want a quarter-inch drill, they want a quarter-inch hole.”

Therefore, this theory focuses on the jobs-to-be-done by the potential customer. A jobs-to-be-done analysis allows switching the focus toward

  • The “job” the customer is trying to get done. This is the unit of the analysis
  • Groups of people trying to get a job done define the market, rather than focusing on a product, or features of a product
  • Customers become job executors
  • This implies that you can group customers’ demographics and psychographics based on the struggles they experience in getting the job done

A job is defined as:

A “job” is not a description of what the customer is doing, the solution they are using, or the steps they are taking to get a job done. Rather, the “job” statement embodies what the customer is ultimately trying to accomplish.

jobs-to-be-done-canvas

Source: jobs-to-be-done.com

According to the jobs-to-be-done theory, which also informs the value proposition canvas, those jobs can be summarized as:

  • Functional jobs
  • Social jobs
  • Emotional jobs
  • Supporting jobs

But is this theory all that is when it comes to value proposition? This, of course, is one model available.

Value proposition: tell me why I should buy from you

Kotler – in his book “Kotler on Marketing” – defines a value proposition as to answer a key question for your potential customer: “why should I buy from you?”

According to Kotler, a value proposition is critical as it helps define the context in which the product needs to be positioned. More precisely the value proposition development has to go through four steps:

  • Band positioning
  • Specific positioning
  • Value positioning
  • Total value positioning

In the brand positioning, for instance, Michael Porter advised a company should be focused on achieving an advantage either as a product differentiator, a low-cost leader or a niche.

Other frameworks, like the three-way framework from Treacy and Wiersema, proposed the value disciplines, or becoming the product leader, the operational leader, or achieve customer intimacy.

In all those cases, focus is key.

And just to be sure, it isn’t like being competitive in all those aspects can’t be possible. It is that for that to happen, you need such a budget that a few organizations would make it.

The specific positioning is about – in many cases – choosing a single major benefit that ranges across possibilities such as best quality, best performance, least expensive, easiest to use and more.

More precisely, according to Kotler, the specific positioning could be

  • Attribute positioning
  • Benefit positioning
  • Use/application positioning
  • User positioning
  • Computer positioning
  • Category positioning
  • Quality/price positioning

In choosing a value proposition, Kotler argues that buyers think in terms of “value for money: or what they get for what they pay.”

This implies:

  • More for more
  • More for the same
  • The same for less
  • Less for much less
  • More for less
If we go with this definition of value proposition it becomes easier to understand how to deliver value to our customers.

It all starts with a profitable and scalable business model

A value proposition design is critical for the success of a company. Yet it is important to insert it in but to make it work you need to insert it in the context of a scalable and profitable business model.

Thus, before jumping into the value proposition design, you can deeply understand what a business model is and how it works.

Once you understand what a business model is you can start designing it. There are several methodologies to do it, I’d suggest you start with the business model canvas.

As you will notice, while the business model canvas is a great tool at “hindsight” to analyze and understand other organizations’ business models, you might want to use the lean startup canvas to draft your startup business model.

The value proposition canvas

The value proposition canvas is among the most used tools to design and draft a value that customers can get from your product or service. The value proposition canvas leverages on the jobs-to-be-done theory of value.

Once you get through those resources you’re ready to dive into the value proposition canvas.

In fact, the value proposition canvas is like a plug-in to the business model canvas.

In fact, the value proposition canvas focuses on two segments of the business model canvas: “value propositions” and “customer segments.”

business-model-canvas-value-proposition-canvas

What is a value proposition? The value proposition is about how you create value for customers.

In short, it describes the benefits customers can expect from your products and service, and how it can help them solve pain points and generate short and long-term gains.

What is a value in the value proposition canvas?

overall-business-models

The value proposition is really about understanding your customer’s problems and needs.

In short, this is the primary reason that makes you unique compared to others.

You don’t need a thousand words to communicate your value proposition. You need a line:

duckduckgo-value-proposition

In this blog, we analyzed several aspects of DuckDuckGo business model and how DuckDuckGo challenged Google with a compelling value proposition “the search engine that doesn’t track you.

In fact, today one of the most critical drivers for DuckDuckGo growth is privacy.

Where Google has built its business model on the data of its users, DuckDuckGo throws that data away to make the search experience as private as possible.

Thus, with a single line, DuckDuckGo is communicating what makes it unique compared to other search engines, what issue can it solve (privacy) and what gains a user has (avoid tracking from Google).

As pointed out on strategyzer.uservoice.com there are several elements of the product or service that help craft a compelling value proposition:

  • Newness
  • Performance
  • Customization
  • “Getting the job done”
  • Design
  • Brand/status
  • Price
  • Cost reduction
  • Risk reduction
  • Accessibility
  • Convenience/usability

Those elements are critical to putting together a value proposition which comprises two main aspects: customer profile and a value map.

The customer profile

A customer profile needs to be understood in the function of the market in which the customer is served.

In other words, it doesn’t make sense to make grandiose plans or assumptions about your customers.

Those need to be tested and validated by looking at three aspects.

Understand what’s important and what’s insignificant about customer jobs

Understanding customer jobs might comprise the set of tasks your customers are trying to perform what problems they are encountering and what needs they’re trying to satisfy.

The aim is to prioritize and find what’s important and what’s insignificant. There are several types of jobs to take into account as explained by strategyzer.uservoice.com:

  • Functional jobs
  • Social jobs
  • Emotional jobs
  • Supporting jobs

Understand what extreme and what’s moderate about customer pains

One of the most valuable aspects of a product or service is its ability to relieve customers from a pain point, a problem they have, the obstacle that prevents them from getting the job done.

Thus, this process is really about understanding customers frustrations, problems, and pain points.

The main aim is to understand the intensity of those problems as a sort of thermometer that tells you what issues are extreme and what are moderate.

For instance, with the team at WordLift, we’ve been having dozens of interactions with potential customers (SEO experts and publishers), and they were all reporting similar issues, related to technical SEO stuff, such as structured data creation.

Understand what’s essential and what’s nice to have by generating customer gains

Those comprise the gains that customers required, expects, and desire within the product or service to make them come back.

Also, there is another critical aspect which is about unexpected gains that can be a powerful lever to hook your customers.

Once profiles the customer it is essential to create a value map.

The value map

Once understood the customer profile, the value map is the tool to fill in the blanks and make the customer profile reflected in the product or service.

In short, the value map allows you to be clear and structured on what specific steps to take to make your customers happy, avoid the pain and what particular features will help.

Thus you want to focus on three aspects:

  • products and services
  • pain relievers
  • gain creators

It’s all about product-market fit!

The goal of the Value Proposition Canvas is about designing the value proposition that can make you reach the so-called product-market fit. 

Have you reached it yet? If not, it’s time to design your value proposition with the value proposition canvas:

Value-proposition-canvas

Sourcebusinessmodelsinc.com

Alternatives to the value proposition canvas

Guerric de Ternay, the author of The Value Mix, suggested alternative approaches to the value proposition canvas. For instance, in his value mix, he sees value as the encounter between your proposition and your audience:
value-proposition-design
Value can be defined as the perception of the benefits that a customer gets from buying, using, or consuming a specific product or service in comparison with available alternatives.
He suggests using two alternative approaches, such as the mapping of the customer journey or drafting a value proposition statement.
As he explains, one way to map the customer journey is to really imagine all the steps a customer might take. You can read more on the alternatives here.

Key takeaway

Small businesses and startups need tools to get clear about their business models and how to create value for their customers.

The value proposition canvas is a great tool any entrepreneur can leverage on to understand the needs deeply, wants and pains of customers to craft and design a compelling value proposition to plug into a scalable and profitable business model.

That is how you build long-term success for your business!

Handpicked business models:

Business model case studies:

Published by

Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which he brought to reach about a million business students, professionals, and entrepreneurs in 2019 alone | Gennaro is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate and become profitable | Gennaro is an International MBA with emphasis on Corporate Finance | Subscribe to the FourWeekMBA Newsletter | Or Get in touch with Gennaro here

Leave a Reply