“I provide exercises that get students out of the building. Nothing shapes a student’s perception about their idea or market better than talking with a customer. Most students are uncomfortable when they start a conversation with a potential customer. Once they are comfortable with the skill, it transforms them and their way of thinking.” -Rodney Boehm, Texas A&M University
What does your startup/company do? Who does it serve, and how is it different or unique?
These are questions startups need to answer clearly, effectively and quickly. If not, your target audiences move on. They are time-strapped, and there are so many competitive options. Building a strong value proposition means to start to gain customer perspective, even before you start thinking about the product or service. This leads us to start thinking about the customers’ needs in terms of jobs or tasks they are trying to get done in their daily life. Customers find and experience problems or have an expectation before getting their job done, in the middle of the process and even after the job is done. This kind of challenges and expectations are not only functional.
There are two different and integrated answers to the question above that are related to a different starting approach:
- Why a customer should buy my product? – product development
- What differentiates my product from that of my competitors? – customer approach
The customer value proposition is the keystone for effective product marketing activities. It brings together what customer needs, competitive insight and product valuation. It delivers a concise, supportable statement of the product’s value. It quantifies how this value is based on all possible experiences of the user of the product. The customer value proposition provides a focused approach to understand the target user in the context of your product.
To develop a useful product is necessary to measure the degree of coherence between the values and expectations of the customer and the value proposition of the company. It is strategic to make changes to adjust and customise the product based on the client’s suggestions or point to different types of customers.
The value of a product is not just a question of money, but it incorporates many positive and negative variables that the client should consider when he/she pays to satisfy his/her needs. So the first step is to focus on customer needs (or job to be done). What do we offer to our customer to complete a job or a task? How can we help them to get those things done? Can we make it better than our competitors?
A good value proposition analysis starts by getting into customers job and activities. Customers are human beings or institutions made by rational people that try every day to getting something done. The best things are starting with the tasks they are trying to perform and complete, the problems they are trying to solve, or the needs they are trying to satisfy. What functional jobs is your customer trying to get done? (e.g. perform or complete a specific task, solve a particular problem, …). What social jobs is your customer trying to get done? (e.g. trying to look good, gain power or status, …). What emotional jobs is your customer trying to get done? (e.g. esthetics, feel good, security, …). What basic needs is your customer trying to satisfy? (e.g. communication, sex, …).
Two aspects should be taken into account: 1) Try not to think at your solution or the current ones; 2) try not to think at a specific or specified customer.
The aim is to come up with the most exhaustive list of pains and gains related to activities, jobs and needs. This will be helpful for two reasons: 1) it broadens our chances of differentiation and makes positioning easier; 2) it helps to understand the market and our competitors in particular because it allows us to understand better the type of needs we are serving with our product.
The critical part of this process widens the comprehension of your customers by focusing not only on functional jobs but also on social and emotional. This could lead to sketch out the pains and the gains related to this type of jobs. (e.g. Big Ben in UK, Rolex and Patek Philippe watches).
Pains and Gains will become the core of the Value Proposition Canvas. They expressed the bouquet of expectations, fears, problems and obstacles a customer experienced in getting his job done. It’s always better to consider (where possible) the three types of jobs (emotional, social and functional) because it helps to understand the pains and the gains better.
Depending on the person you sketched for your customers, and how the problems are ranked, you can find the perfect fit for every type of customers, using only its socioeconomic outlines. Even if you satisfying a basic need, customers are social and emotional beings, who are trying to affirm themselves among others and to find a specific emotional state. Mapping all these things in the customers’ segment of your value proposition canvas, it can lead to widen the comprehension of customers and find more space to compete, a better value proposition and maybe a better business model.
Once we explain the customer’s needs, and pains and gains outlined in the broadest way possible, we should rank them: the pains and the gains should be classified by sorting the intensity and the urgency with which each of the pains affects the customer’s map. This will help us in understanding what gain creator or a pain reliever is to be built or invest on. In doing so, we have to start with a question: Who are the people who are trying to get this particular activity done?
To better understand which is the best target customer you should focus on, it is critical and vital to segment the market and understands how to direct its communications. Start defining client based on their work, their hobbies or their role/involvement in society (sports associations, volunteer work, parishes, scouts, nightclubbing).
Supporting evidence and practices
To better understand the implications and the ratio between product/services and customers, we can use a tool, called The Value Proposition Canvas (VPC), a useful visual tool that zooms in on two important blocks of the Business Model Canvas: Value proposition (the central block on the BMC and the left side, “the square”, in the VPC) and the customers segment. This tool can help you brainstorm, make a hypothesis and even drive your market test and pivot decisions.
It is divided into two sides: on the right side is the customer segment. Customers are intended to try to complete job or tasks that can be 1) functional; 2) emotional or 3) social. In doing so, they experienced problems (or pains) and have expectations (gains), that can be functional, emotional, or social or everything at the same time.
On the left side is the “The value proposition” which is also divided into three: 1) products and services (your future product and services or the ones already on the market), 2) gain creators; 3) pain reliever.
Most small companies cannot afford the complex and costly consumer tracking studies used by larger, more sophisticated competitors, but they can conduct low-cost or free qualitative research and collection of feedback:
Talk to buyers and consumers about product satisfaction and purchases. From a marketing research standpoint, this is biased, qualitative research without standard interview controls. But it is timely information and may be actionable. And it puts you at point-of-purchase, closer to your buyers (e.g., retailers) and final users.
Conduct a test for levels of advertising spend on different test markets or, with just one business in one location, over different periods. It is relatively easy to vary introductory spending in each market if you are testing many geographical markets. However, there should be significant spend differences of at least +/- 50 per cent in each market for each spending variable. Small companies (e.g., one store) may need to change spending levels overmatched periods and compare sales results. For example, try increasing your local newspaper advertising spend by 50 per cent in the same quarter of the previous year.
Examine weekly company sales receipts for new account sales, compared to receipts for reorders. This is an indirect, but freeway to measure initial purchase vs. reorder sales.
Books
Value Proposition Design: How to Create Products and Services Customers Want, Alexander Osterwalder
Additional resources and links
- Pamela Hudadoff, The Customer Value Proposition Differentiation through the Eyes of Your Customer
- http://www.engr.colostate.edu/~marchese/stese/reading2.pdf
- http://www.entrepreneurial-insights.com/business-model-canvas-creating-value-proposition/
- Marketing Audit for Knowledge-Intensive Business Services Ettore Bolisani and Enrico Scarso Department of Management and Engineering, University of Padua, Vicenza, Italy
- Improving Customer Participation in Knowledge-Intensive Business Services Mekhail Mustak Turku School of Economics, University of Turku, Finland