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.
- value creation,
- value delivery,
- and value capture.
And they are all related to customers. For that matter an entrepreneur becomes a business designer:
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.
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.”
- More for more
- More for the same
- The same for less
- Less for much less
- More for less
Value proposition canvas