Business owners often work hard to improve their company’s products or services constantly. Yet, customers’ needs and wants are as important as product features or service details. A value proposition serves as the bridge between these two aspects, uniting the two halves of the whole business.
What is a value proposition?
A value proposition is
“a short statement that communicates why buyers should choose your product or services instead of one of your competitors”.
It goes further than a plain product or service description. It is the unique solution your business provides and the specific value your customers can expect your business to deliver compared to competitors in the market.
In short, a value proposition summarises how your product or service benefits your customers. It solved the question “What are the benefits of your product?”
Types of a value proposition
A strong value proposition is critical to successfully selling your product or service. The value your business delivers can impact your clients on three distinct levels- technical, business, and personal:
1) Technical value
Technical value is the benefits and improvements your product or service offers in comparison to your competitors. This can be related to processes, systems, and people.
Examples of delivering value at the technical level are:
- Helping a business save time by automating manual tasks
- Improving the performance of processes, systems, or people
- Improving the reliability of processes, systems, or people
Questions to ask:
How does your product/service help to improve any processes, systems, or people?
How does your product/service make things work better?
How does your product/service make things easier?
How does your product/service make things more reliable?
How does your product/service save time?
How does your product/service reduce the effort needed to do a task?
How does your product/service automate company processes?
2) Business Value
Business value is the benefits and improvements your product or service offers for another business in areas like revenue, costs, and services.
Examples of delivering value at the technical level are:
- Market share growth
- Increase in revenue
- Decrease in product delivery time
- Improvement in customer satisfaction
Questions to ask:
How does your product/service help to decrease any costs?
How does your product/service help to increase revenue?
How does your product/service help to improve visibility?
How does your product/service help to improve decision-making?
How does your product/service help to decrease risk?
How does your product/service help to improve the quality of your customers’ services or products?
How does your product/service help to improve customer satisfaction?
3) Personal value
When a business positively impacts a person, this is called personal value. This can be related to career, income, and work environment.
Examples of delivering value at the personal level are:
- Improved work/life balance
- Increase of bonus or commission
- Decrease in workload and stress level
- Recognition of employees’ performance
Questions to ask:
How does your product/service help to increase personal income?
How does your product/service help to decrease individual costs?
How does your product/service help to improve the opportunity for work recognition?
How does your product/service help to improve work/life balance?
How does your product/service help to decrease stress or workload?
How does your product/service help to improve the workplace atmosphere?
Why is a Value Proposition important?
A value proposition is essential to:
gain customers loyalty
position the company in the market
boost its sales
create a competitive advantage.
An excellent value proposition will differentiate the company and its product or service in the marketplace among a target audience. It summarizes why the company can best meet the customer’s needs or solve their problems in an easy format that customers will remember.
How to create a Value Proposition (Example)?
You can create a Value Proposition for your company’s business or product by focusing on the following formula:
We help [target audience] to [insert technical, business, or personal value].
The Value Proposition Canvas Explained
In 1988, Michael Lanning and Edward Michaels first used the term “value proposition” in the paper “A business is a value delivery system” for the consulting firm McKinsey & Co.
In this staff paper, the authors define a value proposition as “A clear, simple statement of the benefits, both tangible and intangible, that the company will provide, along with the approximate price it will charge each customer segment for those benefits.” (McKinsey & Co, 1988).
Many people know the value proposition as the Value Proposition Canvas from the book “Value Proposition Design: How to Create Products and Services Customers Want” created by author Alex Osterwalder (2014). This is a detailed tool to explain the relationship between two parts of the broader Business Model Canvas method.
The Value Proposition Canvas is
“a framework to ensure a fit between a company’s product or service and the market”.
It can be used to refine an existing product or service offering or develop a new offering from scratch. The value proposition canvas consists of two building blocks- a customer profile and a company’s value proposition map:
1) Customer Profile
The Customer Profile consists of:
Gains- the benefits the customer expects and needs from the product/service.
Pains- the negative experiences, emotions and risks a customer experiences, when a job needs to be done.
Customer Jobs- the functional, social, and emotional tasks customers try to perform, the problems they are trying to solve and the needs they wish to satisfy.
2) Value Proposition Map
The Value Proposition Map consists of:
Gain Creators- how the product/service creates customer gains and how it offers added value to the customer.
Pain relievers- a clear description of how the product/service alleviates customer pains.
Products and services- the products and services which create gain and relieve pain and create value for the customer.
Prioritize customer needs
When filling out the Value Proposition Canvas on paper, a business gets insights into the gain creators, pain relievers, products, and services. The next step is to rank the priority of these points from “nice to have” to “essential” in terms of customer value. The products and services of the value proposition that address the most significant pains and gains from the customer profile are what the business needs to focus on. Now the value proposition is defined on paper, it is time for the next step.
Validate customer feedback
The next step is to ask the customers what is most important to them and to get their feedback on the value proposition. Also, further market research and insights are needed to refine the business value proposition.
Change the market
The last step is to use the value proposition canvas to identify opportunities to make a change in the market. Combine each part of the value proposition with the value to the target customers and the competitive advantage the company has to offer its product or service.
How to make a unique value proposition?
Most companies know the importance of having a short, concise value proposition: “64% of businesses have established value propositions”- HubSpot (2022).
Knowing why a customer should buy from your company instead of a competitor is essential, as a value proposition can give a business a competitive advantage over its competitors if done correctly.
Yet, creating a compelling value proposition is not as simple as it sounds. When a visitor arrives on your website, your value proposition needs to clearly tell them what you offer quickly, while you have their attention. Their attention span is often as short as a few seconds.
What does an excellent value proposition consist of? How to make a unique value proposition that convinces your visitors to stay longer on your website and investigate your product or services, you need to answer the following questions:
PROBLEM -What are your customers’ prominent?
BENEFITS -What benefits does your product/service offer to the customer?
VALUE -What makes these benefits valuable for your customers?
CONNECTION -Connect these values to your customer’s buyer’s problem. Why do these differences matter to your customer?
WHY- Why are you the preferred provider of this specific value?
and convert them into the below:
Headline: a clear statement that explains what your product/service is about.
Sub-headline: a short sub-headline or short sentences explaining your products' benefits.
Bullet points: what separates your business from your competitors in a maximum of three bullet points.
Visual: a clear picture of your business product or service in action or your target audience.
Need help creating an effective value proposition for your business?
Xplore Digital helps your business to create a new value proposition or optimize an existing one. Contact our team of experts to help you write an effective value proposition for your business.