Value Proposition In A Nutshell

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 outbusiness 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 confused 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.

Value proposition canvas

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.
As such it also has some limitations.
What other approaches can you use?

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.

Published by

Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which he brought to reach over half a million business students, professionals, and entrepreneurs in the last year | Gennaro is also Head of Business Development at a tech startup, 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