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8 min read

What is a value proposition?

8 min read

What is a value proposition?

Many companies are clear about their promise to their customers; some even know why the client wants them since they maintain good communication with them even after the sale. Despite this, it is rare for organizations to have a formal document containing a detailed description of their value proposition.

The problem arises when the business does not grow since there is no simple analysis tool. In addition, strategic decisions can also become less agile as they require information that has yet to be studied in the past. A value proposition is a simple, concise, and effective tool for these purposes, as well as for identifying the factors that make customers prefer a business over its competitors. Understanding these elements is vital for designing our products and services around something desirable to the market and learning how to communicate our value and differentiation to our employees and customers.

>> What is the Value Proposition Canvas and what is it for? <<

 

In this blog, we will review the concept of value proposition, and we will exemplify each of its components to learn how to build a canvas that will facilitate the understanding and communication of this.

Index

What is a value proposition?

The value proposition should not be understood only as the list of products or services offered to customers. Nor is it a phrase or slogan that compares to the mission or vision of a business. When we explain that this is the promise made to a customer and that it is also what differentiates us from our competitors, it may need to be clarified what this means. For this reason, when we have conducted diagnostics in several companies and asked what their value proposition is, almost no one is clear about it.

If we have built a business model canvas, we have indeed identified that there are several types of value propositions: I provide something new and innovative, my product has a better performance than those that exist in the market, I deliver value through customization or my brand, my solutions are key-in-hand, my services are less costly, etc. However, identifying this is only half of it and does not imply that we know how or why we bring value to our customers.

Knowing how to answer these two questions is critical to say that our promise is aligned with our customer's needs and that we are clear about our differentiator. NO TWO VALUE PROPOSALS ARE EQUAL, so they must be unique. In this sense, to understand our value proposition, we have to study two perspectives: the customer and our value map.

Difference_value proposition

The customer

If we seek to improve our customers' experience, which is a differentiating element that marks a competitive advantage today, the first thing to do is to get to know them. This is only possible if we can empathize with them, so methodologies and tools have already been developed to help us get closer to learning what their needs, frustrations, and expectations are. Read Buyer Personas and Customer Journeys.

For a business to sustain itself over time, the first requirement of our value proposition is that it is desirable for customers; this can be guaranteed if we understand the three elements that make up this part of the value proposition:

Jobs to be done

These are the tasks that a product or service performs for a customer. Clayton Christensen also explains it by describing that we all have a job to be done, such as, for example, decorating a space, moving from point "A" to point "B," or satisfying hunger; for which we hire a product or a service to do that job for us: a piece of furniture, Uber or food.

It is essential to understand well what the task is and not to confuse it with the need of the product, i.e., my client does not want to book a room in a hotel, they want an extraordinary experience in a place where they can relax and enjoy his vacation from work; my client does not want a robot vacuum cleaner, they need to pick up the dust that accumulates on the floor in hard to reach areas, such as in corners and under furniture.

It is also important to know that Jobs to be done are composed of three dimensions: functional, emotional, and social. Depending on the predominant dimension of our customer's jobs, they will decide on one product or another for a supplier or their competitor. While functions have to do with the work, emotions are those reactions to stimuli in our customer's environment. On the other hand, social jobs have to do with the confirmation of belonging to a group.

The best way to explain these concepts is through an example. Let us propose that the task is to get from point "A" to point "B."

From the point of view of a functional task, a pair of shoes, a bicycle, or a car fulfill this function. From the point of view of an emotional task, our customer has an environmental conscience that needs to be satisfied, so shoes made from sustainable processes, an electric car, or the same bicycle could work. Finally, from the perspective of the social task, let's think that our customer belongs to the segment that loves outdoor activities. In this case, the customer will change the traditional shoes for ones more suitable for hiking; the bicycle will indeed have to have gears and tires for the mountain, while the car will have to be off-road to overcome the obstacles of the road and take us to the hill, the beach or anywhere we want to visit.

So, what is the importance of knowing the Jobs to be done? Understanding and communicating that our value proposition is aimed at a market segment with a need, we have a solution that adapts according to the functional, emotional, and social jobs it wants to complete.

Pains

Pains are the barriers that prevent us from achieving our functional, emotional and social Jobs to be done, as well as the adverse effects of not being able to complete them. Knowing the pains is vital because it gives insight into why a customer will prefer one product over the other or, perhaps, why they can't find one they like well enough.

Continuing with the example of getting from one point to another, if the central pain is the amount of time it takes to get from the house to the office, a bicycle may not necessarily be the best option. The customer may choose a motorcycle or car if city traffic is not another pain.

In the case of emotional tasks, one of the pains may be that vehicles emit greenhouse gases when they burn or pollute with the waste they generate. For this case, there is an excellent opportunity in the development of cars that run on hydrogen as an alternative proposal to electric vehicles that, to top it off, use lithium batteries so that, although they do not generate emissions on the road, their manufacturing processes and the recycling of their components do contribute to the carbon footprint.

So the pains not only give us clues on how to communicate the benefits of what we have in our catalog but also give us ideas for designing new products and services for particular customers with particular pains whose solutions are complex and require ingenuity and innovation. If we succeed, we will be at the forefront of the market for a novel product, provided there is at least a niche willing to pay the price.

Pain_value proposition

Benefits

The customer expects the product or service to help them achieve benefits, and the solution is useless, meaningless, or undesirable without the expected benefits.

For the solution to help me get around, it goes without saying that I need the product or service to perform the transportation function; this is obvious. However, what can be an expected benefit is the fact that the action is comfortable. No one expects to arrive at the destination after half an hour with numb or sore legs.

Also, as with the aches and pains, there are benefits to be considered that come from fulfilling emotional and social jobs. A hydrogen vehicle, designed under a life cycle analysis focused on the circular economy, could ensure that its components can be recovered, reused, recycled, or remanufactured after fulfilling their useful life. Thanks to this, the amount of waste would be minimized, generating less negative impact on the environment and giving peace of mind, security, and confidence (emotional benefits) to a customer with a strong sense of environmental responsibility.

>>
How to improve the customer experience with the value proposition?<<

On the other hand, an off-road vehicle must guarantee travel to the mountains, the beach, the desert, the forest, or other difficult-to-access places; this is not a benefit of fulfilling a social task on the part of those who seek to belong to this group of people with these particular tastes, however, a benefit could be that the design of the car allows it to be adapted to function as a comfortable and warm bed for the night. Differentiation helps make multi-day trips possible without becoming uncomfortable or exploration a more manageable task, adding to my sense of belonging to this group.

There may be confusion as to whether an idea counts as a benefit or a pain. For example, if I consider time a nuisance, the benefit may be transportation in less time. Contemplating one or both ideas is valid; there is no right or wrong way to see them. It is essential to remember that a value proposition must be easy to understand and communicate, so filling it with elements can make it very complex. Therefore, we will place the idea only once on one of the two sides.

expectancy_value proposition

The value map

While the customer profile helps us understand what work needs to be done, what the obstacles are, and what the expectations are, the value map describes how our business takes these elements to build a robust and focused approach to the expected pains and benefits.

For this perspective, consider the following three elements.

Products and services

This refers to one or more of the solutions we offer so our customers can hire us to do their jobs. On many occasions, companies have a great diversity of SKUs, so we have a couple of options. We choose the product families that satisfy the Jobs to be done, or we narrow the scope of our value proposition; this does not mean that we do not communicate the totality of our products or services, but instead, to facilitate the understanding of our promise and differentiator, we need a simple way to convey the essence of our business.

There is no limit to what we can and should put here, but it is advisable to keep the proposal simple and concise so that those who will analyze it can do so quickly and effectively. In addition, the proposal is not only for the external client, but internally it must be appropriate for the collaborators, which implies that they can know it and repeat it easily.

Tesla

Pain relievers

These are everything that the proposal must contain to overcome obstacles and reduce customer frustrations. We must also identify how our products and services alleviate pain.

In the case of time, in the example we have been using, one way in which a vehicle copes with frustration is that it gives the ability to move at a higher speed. In the case of automobiles, this does not imply a differentiating element concerning others. However, if we are talking about crossing states or countries, evaluating this capacity against that of an airplane, a train, or a tourist bus will surely tip the balance.

In the case of the pain of gas emissions and environmental pollution, with a product such as a hydrogen car, the gas emitted as a result of the chemical processes is water vapor, which is not a long-lasting greenhouse gas, so that can represent a relief, contrary to the emissions from the combustion of traditional vehicles.

Benefit generators

Finally, benefit generators are how our business, products, or services will generate the benefits to meet customer expectations. It is worth mentioning that, as with pains and benefits, relievers and benefit generators can be intertwined.

As an example, let's look at Tesla's cars. Suppose a potential customer has pain regarding fuel availability. In that case, this company's value proposition offers a reliever which is the existence of 40,000 superchargers along the most popular routes around the world. Additionally, as an unexpected benefit generator, some time ago, it allowed free charging for all its cars, which still applies today for the first 10,000 kilometers if the customer received one of its cars between December 15 and 31, 2022. This action generates unexpected benefits, which the value proposition should also contemplate.

Benefit

In summary, the value proposition does contemplate the list of products and services that a company offers; however, these must fulfill one or several of the jobs that the customer wants to perform, and they must have functional and auxiliary characteristics that alleviate pains and generate benefits both expected and unexpected by customers. Once we have identified all this, we can easily understand how and why we generate value for our customers. A visual tool such as the Value Proposition Canvas helps to internalize this exercise, allowing a more agile and straightforward analysis, evaluation, updating, and communication. Finally, the differentiating element will depend on how well we know our customers and how capable we are of designing for them, keeping in mind their needs, frustrations, and expectations to generate a product, service, process, or experience of value.

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